<PAGE> 1
[Ivy Funds Logo]
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 1, 2000, as supplemented on June 30, 2000 U.S. EQUITY FUNDS
IVY GROWTH FUND
IVY US BLUE CHIP FUND
IVY US EMERGING GROWTH FUND
Ivy Fund is a registered open-end investment company consisting of 18 separate
portfolios. This Prospectus relates to the Class A, Class B and Class C shares
of the three funds listed above (the "Funds"), and the Class I shares of Ivy US
Blue Chip Fund. The Funds also offer Advisor Class shares, which are described
in a separate prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are not federally
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
-- CONTENTS
2 Ivy Growth Fund
4 Ivy US Blue Chip Fund
6 Ivy US Emerging Growth Fund
8 Additional information
about principal investment
strategies and risks
9 Management
10 Shareholder information
16 Financial highlights
21 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts AUDITORS
CUSTODIAN PricewaterhouseCoopers LLP
Brown Brothers Harriman & Co. Fort Lauderdale, Florida
Boston, Massachusetts INVESTMENT MANAGER
TRANSFER AGENT Ivy Management, Inc.
Ivy Mackenzie Services Corp. 700 South Federal Highway, Ste.
PO Box 3022 300
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[Ivy Mackenzie Logo]
<PAGE> 2
[IVY LEAF LOGO]
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IVY GROWTH FUND
--------------------------------------------------------------------------------
(GLOBE ARTWORK)
2
IVY GROWTH FUND
-- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
-- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in the equity securities (including common stock,
preferred stock and securities convertible into common stock) of U.S. companies
of any size.
The Fund's portfolio is divided into two segments, each of which is managed
according to the investment style of its portfolio manager (such as growth or
value). Some of the Fund's investments may produce income (such as dividends),
although it is expected that any income realized would be incidental.
-- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Equity securities typically represent a proportionate ownership
interest in a company. As a result, the value of equity securities rises and
falls with a company's success or failure. The market value of equity securities
can fluctuate significantly even where "management risk" is not a factor. You
could lose money if you redeem your Fund shares at a time when the Fund's
portfolio is not performing as well as expected.
SMALL- AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of larger
more established companies, since smaller companies tend to be thinly traded and
because they are subject to greater business risk. Transaction costs in smaller
company stocks may also be higher than those of larger companies.
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
<PAGE> 3
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
since its inception on January 12, 1960 compare with those of a broad
measure of market performance. The Fund's past performance is not
necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES(1) December 31
-------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 22.79%
Worst quarter Q3 '98: (17.04%)
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
-----------------------------------------------------------
S&P 500
CLASS A CLASS B CLASS C INDEX
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year....................... 24.28% 25.63% 29.43% 21.10%
Past 5 years.................... 18.77% 18.85% n/a 28.97%
Past 10 years................... 13.05% n/a n/a 18.38%
Since inception:
Class B(2)...................... -- 14.80% -- 23.36%
Class C(2)...................... -- -- 15.74% 27.27%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) The inception dates for the Fund's Class B and Class C shares were
October 22, 1993 and April 30, 1996, respectively.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
-----------------------------------------------------
CLASS A CLASS B CLASS C
----------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................ 5.75% none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price)................ none(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested
dividends............. none none none
Redemption fee(2)..... none none none
Exchange fee.......... none none none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
----------------------------------------------------
CLASS A CLASS B CLASS C
----------------------------------------------------
<S> <C> <C> <C>
Management fees(3).... 0.85% 0.85% 0.85%
Distribution and/or
service (12b-1)
fees.................. 0.25% 1.00% 1.00%
Other expenses........ 0.28% 0.49% 0.62%
Total annual Fund
operating expenses.... 1.38% 2.34% 2.47%
</TABLE>
(1) A CDSC of 1.00% may apply to Class A shares that are redeemed
within two years of the end of the month in which they were
purchased.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3) Management Fees are reduced to 0.75% for net assets over $350
million.
-------------------------------------------------------------------------
-- EXAMPLE The following example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods (with additional information shown for Class B and Class C shares
based on the assumption that you do not redeem your shares at that time).
The example also assumes that your investment has a 5% return each year and
that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 707 $ 737 $ 237 $ 350 $ 250
3rd 987 1,030 730 770 770
5th 1,287 1,450 1,250 1,316 1,316
10th 2,137 2,436 2,436 2,806 2,806
</TABLE>
<PAGE> 4
[IVY LEAF LOGO]
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IVY US BLUE CHIP FUND
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4
(GLOBE ARTWORK)
IVY US BLUE
CHIP FUND
-- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
-- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in the equity securities (including common stock,
preferred stock and securities convertible into common stock) of U.S. companies
occupying major market positions that are expected to be maintained or enhanced
over time (commonly known as "Blue Chip" companies).
The Fund's manager uses an equity style that focuses on both growth and value.
The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
-- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's portfolio is not
performing as well as expected.
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
<PAGE> 5
5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the Fund
for the first full calendar year since its commencement on November 2, 1998
with a broad measure of market performance. The Fund's past performance is
not necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR CLASS A SHARES* December 31
------------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 12.62%
Worst quarter Q3 '99: (6.94%)
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
------------------------------------------------------------------
S&P
CLASS A CLASS B CLASS C CLASS I(2) 500 INDEX
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year............ 8.71% 9.74% 13.84% n/a 21.10%
Since inception(3)... 14.29% 13.28% 16.76% n/a 28.47%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) The Fund had no Class I shares outstanding.
(3) The inception date for Class A was November 2, 1998. The inception date
for Class B and Class C was November 6, 1998. Index performance is
calculated from October 31, 1998.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price)................... 5.75% none none none
Maximum deferred sales
charge (load) (as a
percentage of original
purchase price).......... none(1) 5.00% 1.00% none
Maximum sales charge
(load) imposed on
reinvested dividends..... none none none none
Redemption fee(2)........ none none none none
Exchange fee............. none none none none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
-----------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I(3)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees........ 0.75% 0.75% 0.75% 0.75%
Distribution and/or
service (12b-1) fees... 0.25% 1.00% 1.00% none
Other expenses......... 2.49% 2.43% 2.36% 2.40%
Total annual Fund
operating expenses..... 3.49% 4.18% 4.11% 3.15%
Expenses
reimbursed(4).......... 1.84% 1.84% 1.84% 1.84%
Net Fund operating
expenses(4)............ 1.65% 2.34% 2.27% 1.31%
</TABLE>
(1) A CDSC of 1.00% may apply to Class A shares that are redeemed
within two years of the end of the month in which they were
purchased.
(2) If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
(3) The Fund has no Class I shares outstanding. Percentages shown
are estimates based on expenses for Class A shares.
(4) The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000 to the extent necessary to ensure that the
Fund's Annual Fund Operating Expenses, when calculated at the
Fund level, do not exceed 1.34% of the Fund's average net assets
(excluding Rule 12b-1 fees and certain other expenses). For each
of the following nine years, the Investment Manager has
contractually agreed to ensure that these expenses do not exceed
2.50% of the Fund's average net assets. The expense information
shown above has been restated to reflect current fees.
-------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ 733 $ 737 $ 237 $ 330 $ 230 $ 133
3rd 1,293 1,267 967 946 946 659
5th 1,877 1,918 1,718 1,684 1,684 1,211
10th 3,453 3,542 3,542 3,635 3,635 2,718
</TABLE>
<PAGE> 6
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
--------------------------------------------------------------------------------
6
(GLOBE ARTWORK)
IVY US EMERGING
GROWTH FUND
-- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
-- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities (including
common stock, preferred stock and securities convertible into common stock) of
small- and medium-sized U.S. companies that are in the early stages of their
life cycles and that the Fund's manager believes have the potential to increase
their sales and earnings at above-average rates.
The Fund's manager uses a growth strategy of investing.
Companies typically are selected from within the technology, heath care,
entertainment, and business and consumer services sectors, and may include
companies engaged in initial public offerings.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
-- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not perform as well as the
securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's portfolio is not
performing as well as expected.
SMALL- AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of larger
more established companies, since smaller companies tend to be thinly traded and
because they are subject to greater business risk. Transaction costs in smaller
company stocks may also be higher than those of larger companies.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table (see next page) provides some
indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and how the Fund's average annual returns
compare with those of a broad measure of market performance. The Fund's past
performance is not necessarily an indication of how the Fund will perform in the
future.
<PAGE> 7
7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the years ending
FOR CLASS A SHARES* December 31
------------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 51.31%
Worst quarter Q3 '98: (17.82%)
*Any applicable sales charges and account fees are not reflected, and if
they were the returns shown above would be lower. The returns for the
Fund's other classes of shares during these periods were different from
those of Class A because of variations in their respective expense
structures.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS(1) December 31, 1999
------------------------------------------------------------------
RUSSELL
2000
GROWTH
CLASS A CLASS B CLASS C INDEX
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Past year............. 53.13% 56.27% 60.32% 43.09%
Past 5 years.......... 25.97% 26.39% n/a 18.99%
Since inception:
Class A(2)............ 26.36% -- -- 16.53%
Class B(3)............ -- 21.40% -- 14.58%
Class C(4)............ -- -- 18.60% 13.64%
</TABLE>
(1) Performance figures reflect any applicable sales charges.
(2) The inception date for the Fund's Class A shares was March 3, 1993
(performance is calculated based on the date the Fund first became
available for sale to the public, April 30, 1993.) Index performance is
calculated from April 30, 1993.
(3) The inception date for the Fund's Class B shares was October 22, 1993.
Index performance is calculated from October 31, 1993.
(4) The inception date for the Fund's Class C shares was April 30, 1996.
Index performance is calculated accordingly.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a percentage
of offering price)........ 5.75% none none
Maximum deferred sales
charge (load) (as a
percentage of purchase
price).................... none(1) 5.00% 1.00%
Maximum sales charge
(load) imposed on
reinvested dividends...... none none none
Redemption fee(2)......... none none none
Exchange fee.............. none none none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
-----------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------------------------------------------
<S> <C> <C> <C>
Management fees........... 0.85% 0.85% 0.85%
Distribution and/or
service (12b-1) fees...... 0.25% 1.00% 1.00%
Other expenses............ 0.59% 0.58% 0.54%
Total annual Fund
operating expenses........ 1.69% 2.43% 2.39%
</TABLE>
(1) A CDSC of 1.00% may apply to Class A share that are redeemed within two
years of the end of the month in which they were purchased.
(2) If you choose to receive your redemption proceeds via Federal Funds wire, a
$10 wire fee will be charged to your account.
-------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods (with
additional information shown for Class B and Class C shares based on the
assumption that you do not redeem your shares at that time). The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
(no redemption) (no redemption)
YEAR CLASS A CLASS B CLASS B CLASS C CLASS C
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st $ 737 $ 746 $ 246 $ 342 $ 242
3rd 1,077 1,058 758 745 745
5th 1,440 1,496 1,296 1,275 1,275
10th 2,458 2,583 2,583 2,726 2,726
</TABLE>
<PAGE> 8
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
US EQUITY FUNDS
--------------------------------------------------------------------------------
8
ADDITIONAL INFORMATION
ABOUT PRINCIPAL INVESTMENT
STRATEGIES AND RISKS
-- PRINCIPAL STRATEGIES
IVY GROWTH FUND: The Fund seeks to achieve its principal objective of long-term
capital growth by investing primarily in mid- and large-cap U.S. stocks, and
seeks to provide additional diversification by investing a portion of its assets
in small-cap U.S. stocks and large-cap international stocks.
The Fund is managed using a combination of investment styles. Approximately one
half of the Fund's portfolio is comprised of companies that have had a proven
and consistent record of earnings, but whose prices appear to be low relative to
their underlying profitability. The other half of the Fund's portfolio is
invested in equity securities of small- and medium-sized U.S. companies that are
in the early stages of their life cycles and that are believed to have the
potential to increase their sales and earnings at above average rates.
IVY US BLUE CHIP FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the common stock of U.S.
companies occupying leading market positions that are expected to be maintained
or enhanced over time (commonly known as "Blue Chip" companies). Blue Chip
companies tend to have a lengthy history of profit growth and dividend payment,
and a reputation for quality management structure, products and services.
Securities of Blue Chip companies are generally considered to be highly liquid,
since they are well supplied in the marketplace relative to their
smaller-capitalized counterparts and because their trading volume tends to be
higher. The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
IVY US EMERGING GROWTH FUND: The Fund seeks to achieve its principal objective
of long-term capital growth by investing primarily in the equity securities of
domestic corporations that are small and medium sized. Companies targeted for
investment typically are in the early stages of their life cycles and are
believed by the Fund's manager to have the potential to increase their sales and
earnings at above-average rates. These companies typically are selected from
within the technology, health care, entertainment, and business and consumer
services sectors, which have presented attractive growth opportunities in recent
years. Portfolio holdings are reviewed regularly for valuation, relative
strength and changes in earnings estimates.
ALL FUNDS: Each Fund may from time to time take a temporary defensive position
and invest without limit in U.S. Government securities, investment-grade debt
securities (which are those rated in the four highest rating categories used by
Moody's and S&P), and cash and cash equivalents such as commercial paper,
short-term notes and other money market securities. When a Fund assumes such a
defensive position it may not achieve its investment objective. Investment in
debt securities also involves both interest rate and credit risk.
-- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption or
exchange.
OTHER RISKS: Following is a description of the general risk characteristics of
the investment techniques that each Fund's manager considers important in
achieving the Fund's investment objective or in managing its exposure to risk
(and that could therefore have a significant effect on the Fund's returns). The
risks of certain portfolio management practices that are not principal
strategies of
<PAGE> 9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
the Funds (such as borrowing) are also described below. Other investment methods
that the Funds may use (such as derivative investments), but that are not likely
to play a key role in their overall investment strategies, are described in the
Funds' Statement of Additional Information (see back cover page for information
on how you can receive a free copy).
RISK CHARACTERISTICS:
- EQUITY SECURITIES: Equity securities typically represent a proportionate
ownership interest in a company. As a result, the value of equity securities
rises and falls with a company's success or failure. The market value of
equity securities can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in smaller-company
securities may also be higher than those of larger companies. Investors in Ivy
US Emerging Growth Fund should note that these risks are heightened in the
case of securities issued through IPOs.
- BORROWING: For temporary purposes, each Fund may borrow up to 10% of the value
of its total assets from qualified banks. Borrowing may exaggerate the effect
on the Fund's share value of any increase or decrease in the value of the
securities it holds. Money borrowed will also be subject to interest costs.
MANAGEMENT
-- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Funds.
IMI is an SEC-registered investment advisor with over $6.2 billion in assets
under management, and provides similar services to the other 15 series of Ivy
Fund. For the fiscal year ended December 31, 1999, the Funds paid IMI a fee that
was equal to the following percentages of the Funds' respective average net
assets:
- Ivy Growth Fund, 0.85%;
- Ivy US Blue Chip Fund, 0.75%; and
- Ivy US Emerging Growth Fund, 0.85%.
-- PORTFOLIO MANAGEMENT
IVY GROWTH FUND: The Fund's portfolio is divided into two different segments,
which are managed by the following individuals:
- James W. Broadfoot, President of IMI and of Ivy Fund, manages the U.S.
emerging growth segment of the Fund's portfolio. Before joining IMI in 1990,
Mr. Broadfoot was the principal in an investment counsel firm specializing in
emerging growth companies. He has over 26 years of professional investment
experience, holds an MBA from the Wharton School of Business and is a
Chartered Financial Analyst.
- Paul P. Baran, a Senior Vice President of IMI, manages the core growth segment
of the Fund's portfolio. Before joining IMI, Mr. Baran was Senior Vice
President/Chief Investment Officer of Central Fidelity National Bank. He has
25 years of professional investment experience and is a Chartered Financial
Analyst. He has an MBA from Wayne State University.
IVY US BLUE CHIP FUND: The Fund is managed by Paul P. Baran (see "Ivy Growth
Fund," above).
IVY US EMERGING GROWTH FUND: The Fund is managed by James W. Broadfoot (see "Ivy
Growth Fund," above).
<PAGE> 10
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US EQUITY FUNDS
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10
SHAREHOLDER
INFORMATION
-- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last quoted sale price on the exchange on which it
is principally traded.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund at a time in an attempt to profit from short term
market movements. When such fair-value pricing occurs, there may be some period
of time during which a Fund's share price and/or performance information is not
available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on a
Fund's net asset value ("NAV") next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's
transfer agent) or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge (see "Choosing the
appropriate class of shares").
-- HOW TO BUY SHARES
Please read these sections below carefully before investing.
CHOOSING THE APPROPRIATE CLASS OF SHARES:
If you do not specify on your Account Application which class of shares you are
purchasing, it will be assumed that you are purchasing Class A shares.
Each Fund has adopted separate distribution plans pursuant to Rule 12b-1 under
the 1940 Act for their Class A, B and C shares that allow the Fund to pay
distribution and other fees for the sale and distribution of its shares and for
services provided to shareholders. Because these fees are paid out of the Fund's
assets on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than paying other types of sales charges.
The following table displays the various investment minimums, sales charges and
expenses that apply to each class.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum initial
investment*.......... $1,000 $1,000 $1,000 $5,000,000
Minimum subsequent
investment*.......... $100 $100 $100 $10,000
Initial sales
charge............... Maximum None None None
5.75%, with
options for a
reduction or
waiver
CDSC................. None, except Maximum 1.00% for the None
on certain 5.00%, first year
NAV purchases declines over
six years
Service and
distribution fees.... 0.25% service 0.75% 0.75% None
fee distribution distribution
fee and 0.25% fee and 0.25%
service fee service fee
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
-- ADDITIONAL PURCHASE INFORMATION
CLASS A SHARES: Class A shares are sold at a public offering price equal to
their net asset value per share plus an initial sales charge, as set forth below
<PAGE> 11
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
(which is reduced as the amount invested increases):
<TABLE>
<CAPTION>
---------------------------------------------------------------
SALES SALES PORTION OF
CHARGE AS A CHARGE AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED BY
AMOUNT INVESTED PRICE INVESTED DEALER
---------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000..... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000.............. 5.25% 5.54% 4.50%
$100,000 but less than
$250,000.............. 4.50% 4.71% 3.75%
$250,000 but less than
$500,000.............. 3.00% 3.09% 2.50%
$500,000 or over*..... 0.00% 0.00% 0.00%
</TABLE>
*A CDSC of 1.00% may apply to Class A shares that are redeemed within two years
of the end of the month in which they were purchased.
Class A shares that are acquired through reinvestment of dividends or
distributions are not subject to any sales charges.
HOW TO REDUCE YOUR INITIAL SALES CHARGE:
- "Rights of Accumulation" permits you to pay the sales charge that applies to
the cost or value (whichever is higher) of all Ivy Fund Class A shares you
own.
- A "Letter of Intent" permits you to pay the sales charge that would apply to
your cumulative purchase of Fund shares over a 13-month period (certain
restrictions apply).
HOW TO ELIMINATE YOUR INITIAL SALES CHARGE: You may purchase Class A shares at
NAV (without an initial sales charge or a CDSC) through any one of the following
methods:
- through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services;
- under certain qualified retirement plans;
- as an employee or director of Mackenzie Investment Management Inc. or its
affiliates;
- as an employee of a selected dealer; or
- through the Merrill Lynch Daily K Plan (the "Plan"), provided the Plan has at
least $3 million in assets or over 500 or more eligible employees. Class B
shares of the Funds are made available to Plan participants at NAV without a
CDSC if the Plan has less than $3 million in assets or fewer than 500 eligible
employees. For further information see "Group Systematic Investment Program"
in the SAI.
Certain trust companies, bank trust departments, credit unions, savings and
loans and other similar organizations may also be exempt from the initial sales
charge on Class A shares.
You may also purchase Class A shares at NAV if you are investing at least
$500,000 through a dealer or agent. A CDSC of 1.00% may apply to shares redeemed
within two years of the end of the month in which they were purchased. Ivy
Mackenzie Distributors, Inc. ("IMDI"), the Fund's distributor, may pay the
dealer or agent (out of IMDI's own resources) for its distribution assistance
according to the following schedule:
<TABLE>
<CAPTION>
--------------------------------------------------
PURCHASE AMOUNT COMMISSION
--------------------------------------------------
<S> <C>
First $3,000,000...................... 1.00%
Next $2,000,000....................... 0.50%
Over $5,000,000....................... 0.25%
</TABLE>
IMDI may from time to time pay a bonus or other cash incentive to dealers (other
than IMDI), including those that employ a registered representative who during a
specified time period sells a minimum dollar amount of the shares of a Fund
and/or other funds distributed by IMDI.
Each Fund may, from time to time, waive the initial sales charge on its Class A
shares sold to clients of certain dealers meeting criteria established by IMDI.
This privilege will apply only to Class A shares of a Fund that are purchased
using proceeds obtained by such clients through redemption of another mutual
fund's shares on which a sales charge was paid. Purchases must be made within 60
days of redemption from the other fund, and the Class A shares purchased are
subject to a 1.00% CDSC on shares redeemed within two years after purchase.
With respect solely to Ivy US Emerging Growth Fund, former Class N shareholders
of Hudson Capital Appreciation Fund are exempt from the initial sales charge on
the Fund's Class A shares.
CLASS B AND CLASS C SHARES: Class B and Class C shares are not subject to an
initial sales charge but are subject to a CDSC. If you redeem your Class C
shares within one year of purchase they will be subject to a CDSC of 1%, and
Class B shares
<PAGE> 12
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US EQUITY FUNDS
--------------------------------------------------------------------------------
12
redeemed within six years of purchase will be subject to a CDSC at the following
rates:
<TABLE>
<CAPTION>
----------------------------------------------------
CDSC AS A PERCENTAGE OF
YEAR SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
----------------------------------------------------
<S> <C>
First...................... 5.00%
Second..................... 4.00%
Third...................... 3.00%
Fourth..................... 3.00%
Fifth...................... 2.00%
Sixth...................... 1.00%
Seventh and thereafter..... 0.00%
</TABLE>
The CDSC for both Class B and Class C shares will be assessed on an amount equal
to the lesser of the current market value or the original purchase cost of the
shares being redeemed. No charge will be assessed on reinvested dividends or
distributions, or on shares held over six years. If your shares have appreciated
in value, each share redeemed will include both your original cost (subject to
the above CDSC schedule) and any proportional increase in market value (not
subject to a CDSC). If your shares have depreciated in value, the CDSC will be
assessed on the market value of the shares being redeemed. At the time of
redemption, the calculation is performed on a share-by-share basis as described
below.
Shares will be redeemed in the following order:
- Shares held more than six years;
- Shares acquired through reinvestment of dividends and distributions;
- Shares subject to the lowest CDSC percentage, on a first-in, first-out basis
(1) with the portion of the lot attributable to capital appreciation which is
not subject to a CDSC, redeemed first; then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
The CDSC for Class B shares is waived for:
- Certain post-retirement withdrawals from an IRA or other retirement plan if
you are over 59 1/2 years old.
- Redemptions by certain eligible 401(a) and 401(k) plans and certain retirement
plan rollovers.
- Redemptions resulting from a tax-free return of excess contribution to an IRA.
- Withdrawals resulting from shareholder death or disability provided that the
redemption is requested within one year of death or disability.
- Withdrawals through the Systematic Withdrawal Plan of up to 12.00% per year of
your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing service and
distribution fee at a combined annual rate of up to 1.00% of the portfolio's
average net assets attributable to its Class B or Class C shares. The ongoing
distribution fees will cause these shares to have a higher expense ratio than
that of Class A and Class I shares. IMDI uses the money that it receives from
the deferred sales charge and the distribution fees to cover various promotional
and sales related expenses, as well as expenses related to providing
distributions services, such as compensating selected dealers and agents for
selling these shares.
Approximately eight years after the original date of purchase, your Class B
shares will be converted automatically to Class A shares. Class A shares are
subject to lower annual expenses than Class B shares. The conversion from Class
B shares to Class A shares is not considered a taxable event for federal income
tax purposes. Class C shares do not have a similar conversion privilege.
CLASS I SHARES: Class I shares are offered only to institutions and certain
individuals, and are not subject to an initial sales charge or a CDSC, nor to
ongoing service or distribution fees. Class I shares also bear lower fees than
Class A, Class B and Class C shares.
-- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the Fund in which you wish to
invest. You should note on the check the class of shares you wish to purchase.
(see page 10 for minimum initial investments.) Deliver your application
materials to your registered representative or selling broker, or send them to
one of the addresses below:
- BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
- BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Hwy., Ste. 300
Boca Raton, FL 33432-6114
<PAGE> 13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13
-- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in a Fund:
- BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail to one of the
addresses on page 12.
- THROUGH YOUR BROKER: Deliver to your registered representative or selling
broker the investment slip attached to your statement, or written
instructions, along with your payment.
- BY WIRE: Purchases may also be made by wiring money from your bank account to
your Ivy account. Your bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 800.777.6472. Wiring instructions are as
follows:
First Union National Bank of Florida
Jacksonville, FL
ABA #063000021
Account #2090002063833
For further credit to:
Your Account Registration
Your Fund Number and Account Number
- BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
-- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
transmitting redemption orders in proper form and in a timely manner. If you
choose to redeem directly through IMSC, you have several ways to submit your
request:
- BY MAIL: Send your written redemption request to IMSC at one of the addresses
at left. Be sure that all registered owners listed on the account sign the
request. Medallion signature guarantees and supporting legal documentation may
be required.
- BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC employs reasonable
procedures that require personal identification prior to acting on redemption
instructions communicated by telephone to confirm that such instructions are
genuine. In the absence of such procedures, the Fund or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
- BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
IMPORTANT REDEMPTION INFORMATION:
- A CDSC may apply to certain Class A share redemptions, to Class B shares
redeemed within six years of purchase, and to Class C shares that are redeemed
within one year of purchase.
- If you own shares of more than one class of a Fund, the Fund will redeem first
the shares
<PAGE> 14
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
US EQUITY FUNDS
--------------------------------------------------------------------------------
14
having the highest 12b-1 fees, unless you instruct otherwise.
- Any shares subject to a CDSC will be redeemed last unless you elect otherwise.
- Shares will be redeemed in the order described under "Additional Purchase
Information -- Class B and Class C Shares".
- A Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- A Fund may make payment for redeemed shares in the form of securities of the
Fund taken at current values.
-- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy Fund, subject to
certain restrictions (see "Important exchange information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 12 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC employs reasonable procedures that require
personal identification prior to acting on exchange instructions communicated
by telephone to confirm that such instructions are genuine. In the absence of
such procedures, the Fund or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
IMPORTANT EXCHANGE INFORMATION:
- You must exchange into the same share class you currently own.
- Exchanges are considered taxable events and may result in a capital gain or a
capital loss for tax purposes.
- It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain funds), or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
-- DIVIDENDS, DISTRIBUTIONS AND TAXES
- The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- Reinvested dividends and distributions are added to your account at NAV and
are not subject to a sales charge regardless of which share class you own.
- Cash dividends and distributions can be sent to you:
- BY MAIL: A check will be mailed to the address of record unless otherwise
instructed.
- BY ELECTRONIC FUNDS TRANSFER: Your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. Each Fund intends to
declare and pay dividends annually. The Funds will distribute net investment
income and net realized capital gains, if any, at least once a year. The Funds
may make an additional distribution of net investment income and net realized
capital gains to comply with the calendar year distribution requirement under
the excise tax provisions of Section 4982 of the Internal Revenue Code of 1986,
as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you as
ordinary income. If a portion of a Fund's income consists of dividends paid by
U.S. corporations, a 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
<PAGE> 15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
15
the same manner whether received in cash or reinvested in additional Fund
shares. While the Funds' managers may at times pursue strategies that result in
tax efficient outcomes for Fund shareholders, they do not generally manage the
Funds to optimize tax efficiencies.
If shares of the Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid by the Fund during January of the
following calendar year.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
The Fund may be required to withhold U.S. Federal income tax at the rate of 31%
of all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service ("IRS") that you are
subject to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund
under applicable state or local law.
<PAGE> 16
16
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Fund's financial performance for the past five years (or less if a Fund
has a shorter operating history), and reflects results for a single Fund
share. The total returns in the table represent the rate an investor
would have earned (or lost) each year on an investment in a Fund
(assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose
report, along with each Fund's financial statements, is included in each
Fund's Annual Report to shareholders (which is available upon request).
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------
IVY GROWTH FUND for the years ended December 31,
-----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 19.88 $ 17.80 $ 17.76 $ 16.75 $ 13.91
--------------------------------------------------------------------------
Income from investment operations
Net investment (loss) income................. (.32) .01 .02 .02(a) .05(a)
Net gains on securities (both realized and
unrealized)................................ 6.61 2.49 1.98 2.86 3.73
--------------------------------------------------------------------------
Total from investment operations............. 6.29 2.50 2.00 2.88 3.78
Less distributions
Dividends
From net investment income................. -- .02 .02 .02 .02
In excess of net investment income......... -- -- .13 .11 --
Distributions
From capital gains......................... 4.02 .40 1.81 1.74 .89
In excess of capital gains................. -- -- -- -- .03
--------------------------------------------------------------------------
Total distributions........................ 4.02 .42 1.96 1.87 .94
--------------------------------------------------------------------------
Net asset value, end of period................. $ 22.15 $ 19.88 $ 17.80 $ 17.76 $ 16.75
==========================================================================
Total return (%)(b)............................ 31.87 14.05 11.69 17.22 27.33
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $363,723 $318,444 $320,000 $314,908 $289,954
Ratio of expenses to average net assets
With expense reimbursement (%)............... -- -- -- 1.45 1.59
Without expense reimbursement (%)............ 1.38 1.38 1.38 1.45 1.60
Ratio of net investment (loss) income to
average net assets (%)....................... (.13) .03 .13 .13(a) .32(a)
Portfolio turnover rate (%).................... 51 59 39 72 41
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
CLASS B
--------------------------------------------------------------------------
for the years ended December 31,
-----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 19.60 $ 17.72 $ 17.69 $ 16.75 $ 13.91
--------------------------------------------------------------------------
Income from investment operations
Net investment loss.......................... (.21) (.16) (.14) (.13)(a) (.08)(a)
Net gains on securities (both realized and
unrealized)................................ 6.17 2.46 1.96 2.81 3.71
--------------------------------------------------------------------------
Total from investment operations............. 5.96 2.30 1.82 2.68 3.63
--------------------------------------------------------------------------
Less distributions
Dividends
From net investment income................. -- .02 -- -- --
In excess of net investment income......... -- -- .07 -- --
Distributions
From capital gains......................... 3.84 .40 1.72 1.74 .73
In excess of capital gains................. -- -- -- -- .06
--------------------------------------------------------------------------
Total distributions........................ 3.84 .42 1.79 1.74 .79
--------------------------------------------------------------------------
Net asset value, end of period................. $ 21.72 $ 19.60 $ 17.72 $ 17.69 $ 16.75
==========================================================================
Total return (%)(b)............................ 30.63 12.99 10.69 16.02 26.13
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $ 8,070 $ 4,889 $ 4,433 $ 3,850 $ 2,699
Ratio of expenses to average net assets
With expense reimbursement (%)............... -- -- -- 2.37 2.55
Without expense reimbursement (%)............ 2.34 2.32 2.30 2.37 2.56
Ratio of net investment loss to average net
assets (%)................................... (1.09) (.90) (.79) (.79)(a) (.64)(a)
Portfolio turnover rate (%).................... 51 59 39 72 41
</TABLE>
<PAGE> 17
17
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
CLASS C
IVY GROWTH FUND -----------------------------------------------------
for the period
April 30, 1996
for the years (commencement)
ended December 31, to December 31,
---------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $19.27 $17.47 $17.59 $18.46
----------------------------------------------------
Income from investment operations
Net investment loss....................................... (.25) (.16) (.07) (.06)(a)
Net gains on securities (both realized and unrealized).... 6.08 2.38 1.86 1.02
----------------------------------------------------
Total from investment operations.......................... 5.83 2.22 1.79 .96
----------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- .02 -- --
In excess of net investment income...................... -- -- .13 .09
Distributions from capital gains.......................... 3.82 .40 1.78 1.74
----------------------------------------------------
Total distributions..................................... 3.82 .42 1.91 1.83
----------------------------------------------------
Net asset value, end of period.............................. $21.28 $19.27 $17.47 $17.59
====================================================
Total return (%)............................................ 30.43 12.72(b) 10.58(b) 5.20(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 576 $ 263 $ 400 $ 90
Ratio of expenses to average net assets
With expense reimbursement (%)............................ -- -- -- 2.44(d)
Without expense reimbursement (%)......................... 2.47 2.53 2.33 2.44(d)
Ratio of net investment loss to average net assets (%)...... (1.22) (1.11) (.82) (.86)(a)(d)
Portfolio turnover rate (%)................................. 51 59 39 72
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not reflect a sales
charge.
(d) Annualized
<PAGE> 18
18
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IVY US BLUE CLASS A CLASS B CLASS C
CHIP FUND for the period for the period for the period
for the year November 2, 1998 for the year November 6, 1998 for the year November 6, 1998
ended (commencement) ended (commencement) ended (commencement)
December 31, to December 31, December 31, to December 31, December 31, to December 31,
---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............... $10.74 $10.00 $10.72 $10.30 $10.72 $10.30
-----------------------------------------------------------------------------------------------------
Income from investment
operations
Net investment loss
(a)................... (.01) --(b) (.07) (.01)(b) (.07) (.01)(b)
Net gains on securities
(both realized and
unrealized)........... 1.66 .74(b) 1.65 .43(b) 1.66 .43(b)
-----------------------------------------------------------------------------------------------------
Total from investment
operations............ 1.65 .74 1.58 .42 1.59 .42
-----------------------------------------------------------------------------------------------------
Less distributions
Dividends from net
investment income..... .07 -- .01 -- .01 --
-----------------------------------------------------------------------------------------------------
Total distributions... .07 -- .01 -- .01 --
-----------------------------------------------------------------------------------------------------
Net asset value, end of
period.................. $12.32 $10.74 $12.29 $10.72 $12.30 $10.72
=====================================================================================================
Total return (%).......... 15.35(c) 7.40(d) 14.74(c) 4.08(d) 14.84(c) 4.08(d)
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period
(in thousands).......... $3,353 $ 726 $8,742 $1,047 $2,497 $ 110
Ratio of expenses to
average net assets (%)
With expense
reimbursement (%)..... 1.46 1.43(e) 2.15 2.13(e) 2.08 2.22(e)
Without expense
reimbursement (%)..... 3.49 6.34(e) 4.18 7.04(e) 4.11 7.13(e)
Ratio of net investment
loss to average net
assets (%)(a)........... (.12) .02(e) (.81) (.68)(e) (.74) (.77)(e)
Portfolio turnover rate
(%)..................... 80 3 80 3 80 3
</TABLE>
(a) Net investment loss is net of expenses reimbursed by Manager.
(b) Based on average shares outstanding.
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not reflect a sales
charge.
(e) Annualized
<PAGE> 19
19
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
CLASS A
-------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND for the years ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 32.65 $ 27.67 $ 26.54 $ 24.12 $ 18.38
-------------------------------------------------------------------------
Income from investment operations
Net investment loss............................... (.49) (.44)(a) (.41)(a) (.35) (.24)
Net gains on securities (both realized and
unrealized)..................................... 20.70 5.42(a) 1.54(a) 4.84 7.90
-------------------------------------------------------------------------
Total from investment operations.................. 20.21 4.98 1.13 4.49 7.66
-------------------------------------------------------------------------
Less distributions
Distributions from capital gains.................. 5.57 -- -- 2.07 1.92
-------------------------------------------------------------------------
Total distributions............................... 5.57 -- -- 2.07 1.92
-------------------------------------------------------------------------
Net asset value, end of period...................... $ 47.29 $ 32.65 $ 27.67 $ 26.54 $ 24.12
=========================================================================
Total return (%)(b)................................. 62.47 18.00 4.26 18.52 42.07
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $101,798 $62,961 $64,910 $55,944 $39,456
Ratio of expenses to average net assets (%)......... 1.69 1.70 1.67 1.76 1.95
Ratio of net investment loss to average net assets
(%)............................................... (1.53) (1.48) (1.37) (1.31) (1.39)
Portfolio turnover rate (%)......................... 107 67 65 68 86
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
CLASS B
-------------------------------------------------------------------------
for the years ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 31.93 $ 27.26 $ 26.33 $ 24.12 $ 18.38
-------------------------------------------------------------------------
Income from investment operations
Net investment loss............................... (.77) (.65)(a) (.33)(a) (.40) (.35)
Net gains on securities (both realized and
unrealized)..................................... 20.15 5.32(a) 1.26(a) 4.68 7.85
-------------------------------------------------------------------------
Total from investment operations.................. 19.38 4.67 .93 4.28 7.50
-------------------------------------------------------------------------
Less distributions
Distributions from capital gains.................. 5.30 -- -- 2.07 1.76
-------------------------------------------------------------------------
Total distributions............................... 5.30 -- -- 2.07 1.76
-------------------------------------------------------------------------
Net asset value, end of period...................... $ 46.01 $ 31.93 $ 27.26 $ 26.33 $ 24.12
=========================================================================
Total return (%)(b)................................. 61.27 17.13 3.53 17.65 41.03
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 79,659 $52,940 $47,789 $35,321 $13,985
Ratio of expenses to average net assets (%)......... 2.43 2.45 2.43 2.52 2.70
Ratio of net investment loss to average net assets
(%)............................................... (2.27) (2.23) (2.13) (2.07) (2.14)
Portfolio turnover rate (%)......................... 107 67 65 68 86
</TABLE>
<PAGE> 20
20
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
CLASS C
IVY US EMERGING GROWTH FUND ----------------------------------------------------
for the period
April 30, 1996
for the years (commencement)
ended December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 31.91 $27.23 $26.29 $29.69
---------------------------------------------------
Income (loss) from investment operations
Net investment loss....................................... (.80) (.63)(a) (.34)(a) (.14)
Net gains or losses on securities (both realized and
unrealized)............................................. 20.19 5.31(a) 1.28(a) (1.19)
---------------------------------------------------
Total from investment operations.......................... 19.39 4.68 .94 (1.33)
---------------------------------------------------
Less distributions
Distributions from capital gains.......................... 5.32 -- -- 2.07
---------------------------------------------------
Total distributions....................................... 5.32 -- -- 2.07
---------------------------------------------------
Net asset value, end of period.............................. $ 45.98 $31.91 $27.23 $26.29
===================================================
Total return (%)............................................ 61.32(b) 17.19(b) 3.58(b) (4.48)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $15,438 $9,664 $9,484 $4,018
Ratio of expenses to average net assets (%)................. 2.39 2.40 2.39 2.52(d)
Ratio of net investment loss to average net assets (%)...... (2.23) (2.18) (2.09) (2.07)(d)
Portfolio turnover rate (%)................................. 107 67 65 68
</TABLE>
(a) Based on average shares outstanding.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not reflect a sales
charge.
(d) Annualized
<PAGE> 21
Account
Application
FUND USE ONLY
___________________
Account Number
___________________
Dealer/Branch/Rep
___________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
USE FOR ADVISOR
Ivy Mackenzie Services Corp., CLASS ONLY
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
1 REGISTRATION
Name ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Address__________________________________________________________________
City _________________________________________ State _______ Zip ________
Phone # (day) (___)_________________ Phone # (evening) (__)_____________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust ________________ Minor's state of residence ______________
2 TAX I.D.
Citizenship: __ U.S. __ Other (please specify): __________________
Social security # _____-____-_______ or Tax identification # ____________
Under penalties of perjury, I certify by signing in Section 8 that: (1)
the number shown in this section is my correct taxpayer identification
number (TIN), and (2) I am not subject to backup withholding because: (a)
I have not been notified by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure to report all
interest or dividends, or (b) the IRS has notified me that I am no longer
subject to backup withholding. (Cross out item (2) if you have been
notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return.)
Please see the "Dividends, distributions and taxes" section of the
Prospectus for additional information on completing this section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable provisions in this
Application, guarantees the signature and legal capacity of the
Shareholder, and agrees to notify IMSC of any purchases made under a
Letter of Intent or Rights of Accumulation.
Dealer name _____________________________________________________________
Branch office address ___________________________________________________
City ______________________________ State _______________ Zip _________
Representative's name ___________________________________________________
Representative's # _________________ Representative's phone #____________
Authorized signature of dealer __________________________________________
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum) for $__________ made payable to
the appropriate fund. Please invest it in Advisor Class Shares of the
following fund(s):
<TABLE>
<S> <C>
$ _______________ Ivy Growth Fund $ _______________ Ivy US Emerging Growth Fund
$ _______________ Ivy US Blue Chip Fund
</TABLE>
B. FOR DEALER USE ONLY
Confirmed trade orders: _____________ ________________ ____________
Confirm Number Number of Shares Trade Date
<PAGE> 22
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into additional
shares in this account at net asset value unless a different option is
checked below.
A. ___ Reinvest all dividends and capital gains into additional shares
of the same class of a different Ivy fund account.
Fund name: ___________________________________________________
Account #: ___________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares of the same class in this account or a
different Ivy fund account.
Fund name: ___________________________________________________
Account #: ___________________________________________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $______________________________________________________
for each time period indicated below and invest my
bank proceeds into the following Ivy fund:
Fund name: ____________________
Share class: __ Class A __ Class B __ Class C
Account #: ____________________
2. Debit my bank account:
___ Annually (on the ___ day of the month of
_______________________).
___ Semiannually (on the ___ day of the months of
___ and ___).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ____ days
___ 4 times per month on the ____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($50 minimum) $_____ for each time period indicated
below from the following Ivy Fund account:
Fund name: ____________________
Share class: __ Class A __ Class B __ Class C
Account #: ____________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the _____ day of the month of
__________).
___Semiannually (on the _____ day of the months of
_____ and _____).
___ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional shares of the same class of a
different Ivy fund:
Fund name: ___________________________________________________
Account #: ___________________________________________________
Note: A minimum balance of $5,000 is required to establish a SWP.
6 OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC to honor telephone
instructions for the redemption of Fund shares up to $50,000. Proceeds may
be wire transferred to the bank account designated ($1,000 minimum).
(COMPLETE SECTION 7B).
D. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy funds upon instructions from any person as more fully
described in the Prospectus. To change this option once established,
written instructions must be received from the shareholder of record or
the current registered representative.
If neither box is checked, the telephone exchange privilege will be
provided automatically.
E. TELEPHONIC REDEMPTIONS** ___ yes ___ no
By checking "yes" immediately above, the Fund or its agents are authorized
to honor telephone instructions from any person as more fully described in
the Prospectus for the redemption of Fund shares. The amount of the
redemption shall not exceed $50,000 and the proceeds are to be payable to
the shareholder of record and mailed to the address of record. To change
this option once established, written instructions must be received from
the shareholder of record or the current registered representative.
If neither box is checked, the telephone redemption privilege will be
provided automatically.
* There must be a period of at least seven calendar days between each
investment (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _______________________________________________
Account # (if applicable) ________________________________________________
Street ___________________________________________________________________
City ___________________________ State ______ Zip _____
B. FED WIRE/EFT INFORMATION
Financial institution ____________________________________________________
ABA # ____________________________________________________________________
Account # ________________________________________________________________
Street ___________________________________________________________________
City _________________________ State _____ Zip _____
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under
Section 6D or 6E above means that the Telephone Exchange/Redemption
Privileges will be provided. The Fund employs reasonable procedures that
require personal identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that such instructions
are genuine. In the absence of such procedures, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone instructions.
Please see "How to exchange shares" and "How to redeem shares" in the
Prospectus for more information on these privileges.
I certify to my legal capacity to purchase or redeem shares of the
Fund for my own account or for the account of the organization named in
Section 1. I have received a current Prospectus and understand its terms
are incorporated in this application by reference. I am certifying my
taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID
BACKUP WITHHOLDING.
________________________________________ ____________________
Signature of Owner, Custodian, Trustee or Date
Corporate Officer
________________________________________ ____________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
(Remember to sign Section 8)
DETACH ON PERFORATION TO MAIL
<PAGE> 23
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Growth Fund Class A IVYFX 466002102
Ivy Growth Fund Class B IVYBX 466002201
Ivy Growth Fund Class C IVYCX 465897627
Ivy US Blue Chip Fund Class A * 465898609
Ivy US Blue Chip Fund Class B * 465898708
Ivy US Blue Chip Fund Class C * 465898807
Ivy US Blue Chip Fund Class I * 465898872
Ivy US Emerging Growth Fund Class A IVEGX 465897106
Ivy US Emerging Growth Fund Class B IVEBX 465897205
Ivy US Emerging Growth Fund Class C IVGEX 465897635
----------------------------------------------------------------------------------------
</TABLE>
* Symbol not assigned as of this printing.
<PAGE> 24
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
1, 2000, as supplemented on June 30, 2000 (the "SAI"), which is
incorporated by reference into this Prospectus, and each Fund's annual
and semiannual reports to shareholders. Each Fund's annual report
includes a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during
its most recent fiscal year. The SAI and the Funds' annual and
semiannual reports are available upon request and without charge from
the Distributor at the following address and phone number:
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and the Funds' annual
and semiannual reports) may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. (please call 1-202-942-8090
for further details). Reports and other information about the Funds are
also available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01IUSXX0600
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivyfunds.com.
<PAGE> 25
[IVY FUNDS LOGO]
This is your prospectus from
IVY MACKENZIE
DISTRIBUTORS, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
800.456.5111
May 1, 2000, as supplemented on June 30, 2000
U.S. EQUITY FUNDS ADVISOR CLASS SHARES
IVY GROWTH FUND
IVY US BLUE CHIP FUND
IVY US EMERGING GROWTH FUND
Ivy Fund is a registered open-end investment company consisting of
18 separate portfolios. This Prospectus relates to the Advisor
Class shares of the three funds listed above (the "Funds"). The
Funds also offer Class A, Class B, and Class C shares (and Class I
shares, in the case of Ivy US Blue Chip Fund), which are described
in a separate prospectus.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy or
accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
Investments in the Funds are not deposits of any bank and are not
federally insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
-- CONTENTS
2 Ivy Growth Fund
4 Ivy US Blue Chip Fund
6 Ivy US Emerging Growth Fund
8 Additional information
about principal investment
strategies and risks
9 Management
10 Shareholder information
14 Financial highlights
17 Account application
<TABLE>
<S> <C>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway, Ste. 300
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
</TABLE>
[IVY MACKENZIE LOGO]
<PAGE> 26
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GROWTH FUND
--------------------------------------------------------------------------------
(GLOBE ARTWORK)
2
IVY GROWTH FUND
-- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
-- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in the equity securities (including common stock,
preferred stock and securities convertible into common stock) of U.S. companies
of any size.
The Fund's portfolio is divided into two segments, each of which is managed
according to the investment style of its portfolio manager (such as growth or
value). Some of the Fund's investments may produce income (such as dividends),
although it is expected that any income realized would be incidental.
-- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Equity securities typically represent a proportionate ownership
interest in a company. As a result, the value of equity securities rises and
falls with a company's success or failure. The market value of equity securities
can fluctuate significantly even where "management risk" is not a factor. You
could lose money if you redeem your Fund shares at a time when the Fund's
portfolio is not performing as well as expected.
SMALL- AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of larger
more established companies, since smaller companies tend to be thinly traded and
because they are subject to greater business risk. Transaction costs in smaller
company stocks may also be higher than those of larger companies.
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
<PAGE> 27
3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on April 30, 1998 with a broad measure of market performance.
The Fund's past performance is not necessarily an indication of how the
Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 22.78%
Worst quarter Q3 '99: (0.93%)
* Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
ADVISOR S&P 500
CLASS INDEX
---------------------------------------------------------
<S> <C> <C>
Past year............................ 31.78% 21.10%
Since Inception*..................... 17.86% 20.13%
</TABLE>
*The inception date for Advisor Class shares was April 30, 1998.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
-----------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)....................................... none
Maximum deferred sales charge (load)(as a
percentage of purchase price)................ none
Maximum sales charge (load) imposed on
reinvested dividends......................... none
Redemption fee*.............................. none
Exchange fee................................. none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
----------------------------------------------------
<S> <C>
Management fees**.......................... 0.85%
Distribution and/or service
(12b-1) fees............................... none
Other expenses............................. 0.57%
Total annual Fund
operating expenses......................... 1.42%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**Management fees are reduced to 0.75% for net assets over $350
million.
-------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
-----------------------------
YEAR
-----------------------------
<S> <C>
1st $ 145
3rd 449
5th 776
10th 1,702
</TABLE>
<PAGE> 28
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
--------------------------------------------------------------------------------
4
(GLOBE ARTWORK)
IVY US BLUE
CHIP FUND
-- INVESTMENT OBJECTIVE
The Fund seeks long term growth, with current income being a secondary
consideration.
-- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in the equity securities (including common stock,
preferred stock and securities convertible into common stock) of U.S. companies
occupying major market positions that are expected to be maintained or enhanced
over time (commonly known as "Blue Chip" companies).
The Fund's manager uses an equity style that focuses on both growth and value.
The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
-- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's portfolio is not
performing as well as expected.
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept moderate fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
<PAGE> 29
5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on November 2, 1998 with a broad measure of market
performance. The Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
[CHART]
Best quarter Q4 '99: 12.64%
Worst quarter Q3 '99: (6.83%)
*Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
ADVISOR S&P 500
CLASS INDEX
---------------------------------------------------------
<S> <C> <C>
Past year............................. 15.89% 21.10%
Since Inception*...................... 20.95% 28.47%
</TABLE>
*The inception date for Advisor Class shares was November 2, 1998. Index
performance is calculated from October 31, 1998.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
-----------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)....................................... none
Maximum deferred sales charge (load) (as a
percentage of purchase price)................ none
Maximum sales charge (load) imposed on
reinvested dividends......................... none
Redemption fee*.............................. none
Exchange fee................................. none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
-----------------------------------------------------
<S> <C>
Management fees............................ 0.75%
Distribution and/or service
(12b-1) fees............................... none
Other expenses............................. 2.38%
Total annual Fund
operating expenses......................... 3.13%
Expenses reimbursed**...................... 1.84%
Net Fund operating expenses**.............. 1.29%
</TABLE>
*If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
**The Fund's Investment Manager has contractually agreed to
reimburse the Fund's expenses for the current fiscal year ending
December 31, 2000, to the extent necessary to ensure that the
Fund's Annual Fund Operating Expenses, when calculated at the Fund
level, do not exceed 1.34% of the Fund's average net assets
(excluding Rule 12b-1 fees and certain other expenses). For each
of the following nine years, the Investment Manager has
contractually agreed to ensure that these expenses do not exceed
2.50% of the Fund's average net assets. The expense information
shown above has been restated to reflect current fees.
-------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
-----------------------------
YEAR
-----------------------------
<S> <C>
1st $ 131
3rd 653
5th 1,201
10th 2,698
</TABLE>
<PAGE> 30
[IVY LEAF LOGO]
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IVY US EMERGING GROWTH FUND
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6
(GLOBE ARTWORK)
IVY US EMERGING
GROWTH FUND
-- INVESTMENT OBJECTIVE
The Fund seeks long-term growth, with current income being a secondary
consideration.
-- PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 65% of its assets in the equity securities (including
common stock, preferred stock and securities convertible into common stock) of
small- and medium-sized U.S. companies that are in the early stages of their
life cycles and that the Fund's manager believes have the potential to increase
their sales and earnings at above-average rates.
The Fund's manager uses a growth strategy of investing.
Companies typically are selected from within the technology, health care,
entertainment, and business and consumer services sectors, and may include
companies engaged in initial public offerings.
Some of the Fund's investments may produce income (such as dividends), although
it is expected that any income realized would be incidental.
-- PRINCIPAL RISKS
The main risks to which the Fund is exposed in carrying out its investment
strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund might not perform as well as
the securities held by other mutual funds with investment objectives that are
similar to those of the Fund.
MARKET RISK: Equity securities typically represent a proportionate ownership
interest in a company. The market value of equity securities can fluctuate
significantly even where "management risk" is not a factor. You could lose money
if you redeem your Fund shares at a time when the Fund's portfolio is not
performing as well as expected.
SMALL- AND MEDIUM-SIZED COMPANY RISK: Securities of smaller companies may be
subject to more abrupt or erratic market movements than the securities of larger
more established companies, since small companies tend to be thinly traded and
because they are subject to greater business risk. Transaction costs in smaller
company stocks may also be higher than those of larger companies.
IPO RISK: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is also
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
-- WHO SHOULD INVEST*
The Fund may be appropriate for investors seeking long-term growth potential,
but who can accept fluctuations in capital value in the short term.
*You should consult with your financial advisor before deciding whether the Fund
is an appropriate investment choice in light of your particular financial needs
and risk tolerance.
<PAGE> 31
7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-- PERFORMANCE BAR CHART AND TABLE
The information in the following chart and table gives some indication of
the risks of investing in the Fund by comparing the performance of the
Fund's Advisor Class shares for the first full calendar year since its
commencement on February 18, 1998 with a broad measure of market
performance. The Fund's past performance is not necessarily an indication
of how the Fund will perform in the future.
<TABLE>
<S> <C>
ANNUAL TOTAL RETURNS for the year ending
FOR ADVISOR CLASS SHARES* December 31
-------------------------------------------------------------
</TABLE>
(CHART)
Best quarter Q4 '99: 51.40%
Worst quarter Q1 '99: (5.58%)
* Any applicable account fees are not reflected, and if they were the
returns shown above would be lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL for the periods ending
TOTAL RETURNS December 31, 1999
-----------------------------------------------------------
ADVISOR RUSSELL 2000
CLASS GROWTH INDEX
-----------------------------------------------------------
<S> <C> <C>
Past year.......................... 62.85% 43.09%
Since inception*................... 39.17% 17.77%
</TABLE>
* The Inception date for Advisor Class shares was February 18, 1998. Index
performance is calculated from February 28, 1998.
-- FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay
if you buy and hold shares of the Fund:
<TABLE>
<CAPTION>
fees paid directly from
SHAREHOLDER FEES your investment
-----------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)....................................... none
Maximum deferred sales charge (load)(as a
percentage of purchase price)................ none
Maximum sales charge (load) imposed on
reinvested dividends......................... none
Redemption fee*.............................. none
Exchange fee................................. none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND expenses that are
OPERATING EXPENSES deducted from Fund assets
----------------------------------------------------
<S> <C>
Management fees............................ 0.85%
Distribution and/or service
(12b-1) fees............................... none
Other expenses............................. 0.61%
Total annual Fund
operating expenses......................... 1.46%
</TABLE>
* If you choose to receive your redemption proceeds via Federal
Funds wire, a $10 wire fee will be charged to your account.
-------------------------------------------------------------------------
-- EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be as
follows:
<TABLE>
<CAPTION>
-----------------------------
YEAR
-----------------------------
<S> <C>
1st $ 149
3rd 462
5th 797
10th 1,746
</TABLE>
<PAGE> 32
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US EQUITY FUNDS
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8
ADDITIONAL INFORMATION
ABOUT PRINCIPAL INVESTMENT
STRATEGIES AND RISKS
-- PRINCIPAL STRATEGIES
IVY GROWTH FUND: The Fund seeks to achieve its principal objective of long-term
capital growth by investing primarily in mid- and large-cap U.S. stocks, and
seeks to provide additional diversification by investing a portion of its assets
in small-cap U.S. stocks and large-cap international stocks.
The Fund is managed using a combination of investment styles. Approximately one
half of the Fund's portfolio is comprised of companies that have had a proven
and consistent record of earnings, but whose prices appear to be low relative to
their underlying profitability. The other half of the Fund's portfolio is
invested in equity securities of small- and medium-sized U.S. companies that are
in the early stages of their life cycles and that are believed to have the
potential to increase their sales and earnings at above average rates.
IVY US BLUE CHIP FUND: The Fund seeks to achieve its principal objective of
long-term capital growth by investing primarily in the common stock of U.S.
companies occupying leading market positions that are expected to be maintained
or enhanced over time (commonly known as "Blue Chip" companies). Blue Chip
companies tend to have a lengthy history of profit growth and dividend payment,
and a reputation for quality management structure, products and services.
Securities of Blue Chip companies are generally considered to be highly liquid,
since they are well supplied in the marketplace relative to their
smaller-capitalized counterparts and because their trading volume tends to be
higher. The median market capitalization of companies targeted for investment is
expected to be at least $5 billion.
IVY US EMERGING GROWTH FUND: The Fund seeks to achieve its principal objective
of long term capital growth by investing primarily in the equity securities of
domestic corporations that are small and medium sized. Companies targeted for
investment typically are in the early stages of their life cycles and are
believed by the Fund's manager to have the potential to increase their sales and
earnings at above-average rates. These companies typically are selected from
within the technology, health care, entertainment, and business and consumer
services sectors, which have presented attractive growth opportunities in recent
years. Portfolio holdings are reviewed regularly for valuation, relative
strength and changes in earnings estimates.
ALL FUNDS: Each Fund may from time to time take a temporary defensive position
and invest without limit in U.S. Government securities, investment-grade debt
securities (which are those rated in the four highest rating categories used by
Moody's and S&P), and cash and cash equivalents such as commercial paper,
short-term notes and other money market securities. When a Fund assumes such a
defensive position it may not achieve its investment objective. Investing in
debt securities also involves both interest rate and credit risk.
-- PRINCIPAL RISKS
GENERAL MARKET RISK:
As with any mutual fund, the value of a Fund's investments and the income they
generate will vary daily and generally reflect market conditions, interest
rates and other issuer-specific, political or economic developments.
Each Fund's share value will decrease at any time during which its security
holdings or other investment techniques are not performing as well as
anticipated, and you could therefore lose money by investing in a Fund depending
upon the timing of your initial purchase and any subsequent redemption or
exchange.
OTHER RISKS: Following is a description of the general risk characteristics of
the investment techniques that each Fund's manager considers important in
achieving the Fund's investment objective or in managing its exposure to risk
(and that could therefore have a significant effect on the Fund's returns). The
risks of certain portfolio manage-
<PAGE> 33
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
ment practices that are not principal strategies of the Funds (such as
borrowing) are also described below. Other investment methods that the Funds may
use (such as derivative investments), but that are not likely to play a key role
in their overall investment strategies, are described in the Funds' Statement of
Additional Information (see back cover page for information on how you can
receive a free copy).
RISK CHARACTERISTICS:
- EQUITY SECURITIES: Equity securities typically represent a proportionate
ownership interest in a company. As a result, the value of equity securities
rises and falls with a company's success or failure. The market value of
equity securities can fluctuate significantly, with smaller companies being
particularly susceptible to price swings. Transaction costs in smaller company
securities may also be higher than those of larger companies. Investors in Ivy
US Emerging Growth Fund should note that these risks are heightened in the
case of securities issued through IPOs.
- BORROWING: For temporary purposes, each Fund may borrow up to 10% of the value
of its total assets from qualified banks. Borrowing may exaggerate the effect
on the Fund's share value of any increase or decrease in the value of the
securities it holds. Money borrowed will also be subject to interest costs.
MANAGEMENT
-- INVESTMENT ADVISOR
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, Florida 33432
IMI provides investment advisory and business management services to the Fund.
IMI is an SEC-registered investment advisor with over $6.2 billion in assets
under management, and provides similar services to the other 15 series of Ivy
Fund. For the fiscal year ended December 31, 1999, the Funds paid IMI a fee that
was equal to the following percentages of the Funds' respective average net
assets:
- Ivy Growth Fund, 0.85%;
- Ivy US Blue Chip Fund, 0.75%; and
- Ivy US Emerging Growth Fund, 0.85%.
-- PORTFOLIO MANAGEMENT
IVY GROWTH FUND: The Fund's portfolio is divided into two different segments,
which are managed by the following individuals:
- James W. Broadfoot, President of IMI and of Ivy Fund, manages the U.S.
Emerging Growth segment of the Fund's portfolio. Before joining IMI in 1990,
Mr. Broadfoot was the principal in an investment counsel firm specializing in
emerging growth companies. He has over 26 years of professional investment
experience, holds an MBA from the Wharton School of Business and is a
Chartered Financial Analyst.
- Paul P. Baran, a Senior Vice President of IMI, manages the core growth segment
of the Fund's portfolio. Before joining IMI, Mr. Baran was Senior Vice
President/Chief Investment Officer of Central Fidelity National Bank. He has
25 years of professional investment experience and is a Chartered Financial
Analyst. He has an MBA from Wayne State University.
IVY US BLUE CHIP FUND: The Fund is managed by Paul P. Baran (see "Ivy Growth
Fund," above).
IVY US EMERGING GROWTH FUND: The Fund is managed by James W. Broadfoot (see "Ivy
Growth Fund," above).
<PAGE> 34
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--------------------------------------------------------------------------------
US EQUITY FUNDS
--------------------------------------------------------------------------------
10
SHAREHOLDER
INFORMATION
-- PRICING OF FUND SHARES
Each Fund calculates its share price by dividing the value of the Fund's net
assets by the total number of its shares outstanding as of the close of regular
trading (usually 4:00 p.m. Eastern time) on the New York Stock Exchange on each
day the Exchange is open for trading (normally any weekday that is not a
national holiday).
Each portfolio security that is listed or traded on a recognized stock exchange
is valued at the security's last quoted sale price on the exchange on which it
is principally traded.
If no sale is reported at that time, the average between the last bid and asked
prices is used. Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by IMI in
accordance with procedures approved by the Funds' Board of Trustees. IMI may
also price a foreign security at its fair value if events materially affecting
the estimated value of the security occur between the close of the foreign
exchange on which the security is principally traded and the time as of which a
Fund prices its shares. Fair-value pricing under these circumstances is designed
to protect existing shareholders from the actions of short-term investors
trading into and out of a Fund in an attempt to profit from short-term market
movements. When such fair-value pricing occurs, there may be some period of time
during which a Fund's share price and/or performance information is not
available.
The number of shares you receive when you place a purchase or exchange order,
and the payment you receive after submitting a redemption request, is based on a
Fund's net asset value ("NAV") next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the Fund's
transfer agent) or by your registered securities dealer.
-- HOW TO BUY SHARES
Please read the sections below carefully before investing.
Advisor Class shares are offered through this Prospectus only to the following
investors:
- trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
- any account with assets of at least $10,000 if (a) a financial planner, trust
company, bank trust department or registered investment adviser has investment
discretion, and where the investor pays such person as compensation for his
advice and other services an annual fee of at least 0.50% on the assets in the
account, or (b) such account is established under a "wrap fee" program and the
account holder pays the sponsor of the program an annual fee of at least 0.50%
on the assets in the account;
- officers and Trustees of Ivy Fund (and their relatives);
- directors or employees of Mackenzie Investment Management Inc. or its
affiliates; and
- directors, officers, partners, registered representatives, employees and
retired employees (and their relatives) of dealers having a sales agreement
with IMDI (or trustees or custodians of any qualified retirement plan or IRA
established for the benefit of any such person.
The following investment minimums, sales charges and expenses apply.
<TABLE>
<S> <C>
Minimum initial investment*.............. $10,000
Minimum subsequent investment*........... $ 250
Initial sales charge..................... none
CDSC..................................... none
Service and distribution fees............ none
</TABLE>
*Minimum initial and subsequent investments for retirement plans are $25.
<PAGE> 35
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
-- SUBMITTING YOUR PURCHASE ORDER
INITIAL INVESTMENTS: Complete and sign the Account Application appearing at the
end of this Prospectus. Enclose a check payable to the Fund you wish to invest
in. You should note on the check that you wish to purchase Advisor Class shares
(see page 10 for minimum initial investments.) Deliver your application
materials to your registered representative or selling broker, or send them to
one of the addresses below:
- BY REGULAR MAIL:
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
- BY COURIER:
Ivy Mackenzie Services Corp.
700 South Federal Highway, Ste. 300
Boca Raton, FL 33432-6114
-- BUYING ADDITIONAL SHARES
There are several ways to increase your investment in the Fund:
- BY MAIL: Send your check with a completed investment slip (attached to your
account statement) or written instructions indicating the account
registration, Fund number or name, and account number. Mail to one of the
addresses above.
- THROUGH YOUR BROKER: Deliver to your registered representative or selling
broker the investment slip attached to your statement, or written
instructions, along with your payment.
- BY WIRE: Purchases may also be made by wiring money from your bank account to
your Ivy account. Your bank may charge a fee for wiring funds. Before wiring
any funds, please call IMSC at 800.777.6472. Wiring instructions are as
follows:
First Union National Bank of Florida
Jacksonville, FL
ABA #063000021
Account #2090002063833
For further credit to:
Your Account Registration
Your Fund Number and Account Number
- BY AUTOMATIC INVESTMENT METHOD: You can authorize to have funds electronically
drawn each month from your bank account and invested as a purchase of shares
into your Ivy Fund account. Complete sections 6A and 7B of the Account
Application.
-- HOW TO REDEEM SHARES
SUBMITTING YOUR REDEMPTION ORDER: You may redeem your Fund shares through your
registered securities dealer or directly through IMSC. If you choose to redeem
through your registered securities dealer, the dealer is responsible for
transmitting redemption orders in proper form and in a timely manner. If you
choose to redeem directly through IMSC, you have several ways to submit your
request:
- BY MAIL: Send your written redemption request to IMSC at one of the addresses
at left. Be sure that all registered owners listed on the account sign the
request. Medallion signature guarantees and supporting legal documentation may
be required.
- BY TELEPHONE: Call IMSC at 800.777.6472 to redeem from your individual, joint
or custodial account. To process your redemption order by telephone, you must
have telephone redemption privileges on your account. IMSC employs reasonable
procedures that require personal identification prior to acting on redemption
instructions communicated by telephone to confirm that such instructions are
genuine. In the absence of such procedures, the Fund or IMSC may be liable for
any losses due to unauthorized or fraudulent telephone instructions. Requests
by telephone can only be accepted for amounts up to $50,000.
- BY SYSTEMATIC WITHDRAWAL PLAN ("SWP"): You can authorize to have funds
electronically drawn each month from your Ivy Fund account and deposited
directly into your bank account. Certain minimum balances and minimum
distributions apply. Complete section 6B of the Account Application to add
this feature to your account.
RECEIVING YOUR REDEMPTION PROCEEDS: You can receive redemption proceeds through
a variety of payment methods:
<PAGE> 36
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
US EQUITY FUNDS
--------------------------------------------------------------------------------
12
- BY CHECK: Unless otherwise instructed in writing, checks will be made payable
to the current account registration and sent to the address of record.
- BY FEDERAL FUNDS WIRE: Proceeds will be wired on the next business day to a
pre-designated bank account. Your account will be charged $10 each time
redemption proceeds are wired to your bank, and your bank may also charge you
a fee for receiving a Federal Funds wire.
- BY ELECTRONIC FUNDS TRANSFER ("EFT"): For SWP redemptions only.
OTHER IMPORTANT REDEMPTION INFORMATION:
- If you own shares of more than one class of a Fund, the Fund will redeem first
the shares having the highest 12b-1 fees, unless you instruct otherwise.
- The Fund may (on 60 days' notice) redeem the accounts of shareholders whose
investment, including sales charges paid, has been less than $1,000 for more
than 12 months.
- A Fund may take up to seven days (or longer in the case of shares recently
purchased by check) to send redemption proceeds.
- A Fund may make payment for redeemed shares in the form of securities of the
Fund taken at current values.
-- HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of another Ivy fund, subject to
certain restrictions (see "information").
SUBMITTING YOUR EXCHANGE ORDER: You may submit an exchange request to IMSC as
follows:
- BY MAIL: Send your written exchange request to IMSC at one of the addresses on
page 11 of this Prospectus. Be sure that all registered owners listed on the
account sign the request.
- BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange transaction.
To process your exchange order by telephone, you must have telephone exchange
privileges on your account. IMSC employs reasonable procedures that require
personal identification prior to acting on exchange instructions communicated
by telephone to confirm that such instructions are genuine. In the absence of
such procedures, the Fund or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
OTHER IMPORTANT EXCHANGE INFORMATION:
- You must exchange into the same share class you currently own.
- Exchanges are considered taxable events and may result in a capital gain or a
capital loss for tax purposes.
- It is the policy of the Funds to discourage the use of the exchange privilege
for the purpose of timing short-term market fluctuations. The Funds may
therefore limit the frequency of exchanges by a shareholder, charge a
redemption fee (in the case of certain funds), or cancel a shareholder's
exchange privilege if at any time it appears that such market-timing
strategies are being used. For example, shareholders exchanging more than five
times in a 12-month period may be considered to be using market-timing
strategies.
-- DIVIDENDS, DISTRIBUTIONS AND TAXES
- The Funds generally declare and pay dividends and capital gain distributions
(if any) at least once a year.
- Dividends and distributions are "reinvested" in additional Fund shares unless
you request to receive them in cash.
- Reinvested dividends and distributions are added to your account at NAV and
are not subject to a sales charge regardless of which share class you own.
- Cash dividends and distributions can be sent to you:
- BY MAIL: A check will be mailed to the address of record unless otherwise
instructed.
- BY ELECTRONIC FUNDS TRANSFER: Your proceeds will be directly deposited into
your bank account.
To change your dividend and/or distribution options, call IMSC at 800.777.6472.
Dividends ordinarily will vary from one class to another. The Funds intend to
declare and pay dividends annually. The Funds will distribute net
<PAGE> 37
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13
investment income and net realized capital gains, if any, at least once a year.
The Funds may make an additional distribution of net investment income and net
realized capital gains to comply with the calendar year distribution requirement
under the excise tax provisions of Section 4982 of the Internal Revenue Code of
1986, as amended (the "Code").
Dividends paid out of a Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to you as
ordinary income. If a portion of a Fund's income consists of dividends paid by
U.S. corporations, a portion of the dividends paid by the Fund may be eligible
for the corporate dividends-received deduction. Distributions of net capital
gains (the excess of net long-term capital gains over net short-term capital
losses), if any, are taxable to you as long-term capital gains, regardless of
how long you have held your shares. Dividends are taxable to you in the same
manner whether received in cash or reinvested in additional Fund shares. While
the Funds' managers may at times pursue strategies that result in tax efficient
outcomes for Fund shareholders, they do not generally manage the Funds to
optimize tax efficiencies.
If shares of a Fund are held in a tax-deferred account, such as a retirement
plan, income and gain will not be taxable each year. Instead, the taxable
portion of amounts held in a tax-deferred account generally will be subject to
tax as ordinary income only when distributed from that account.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by a Fund in October, November or December with
a record date in such a month and paid by a Fund during January of the following
calendar year.
Upon the sale or exchange of your Fund shares, you may realize a capital gain or
loss which will be long term or short term, generally depending upon how long
you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate of 31% of
all distributions payable to you if you fail to provide the Fund with your
correct taxpayer identification number or to make required certifications, or if
you have been notified by the Internal Revenue Service ("IRS") that you are
subject to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld may be credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of an
investment in the Funds, including the status of distributions from the Funds
under applicable state or local law.
<PAGE> 38
14
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each Funds'
financial performance for the past five years (or less if a Fund has a shorter
operating history), and reflects results for a single Fund share. The total
returns in the table represent the rate an investor would have earned (or lost)
each year on an investment in a Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with each Fund's financial statements, is included in each
Fund's Annual Report to shareholders (which is available upon request).
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
IVY GROWTH FUND for the period
for the April 30, 1998
year ended (commencement)
December 31, to December 31,
----------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $19.91 $20.36
------------------------------------
Income (loss) from investment operations
Net investment (loss) income.............................. (.04) .03
Net gains or losses on securities (both realized and
unrealized)............................................. 6.33 (.06)
------------------------------------
Total from investment operations........................ 6.29 (.03)
------------------------------------
Less distributions
Dividends from net investment income...................... -- .02
Distributions from capital gains.......................... 4.02 .40
------------------------------------
Total distributions..................................... 4.02 .42
------------------------------------
Net asset value, end of period.............................. $22.18 $19.91
====================================
Total return (%)............................................ 31.78(a) (.14)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 438 $ 347
Ratio of expenses to average net assets (%)................. 1.42 1.18 (c)
Ratio of net investment (loss) income to average net assets
(%)....................................................... (.17) .24 (c)
Portfolio turnover rate (%)................................. 51 59
</TABLE>
(a) Total return does not reflect a sales charge.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Annualized
<PAGE> 39
15
<TABLE>
<CAPTION>
IVY US BLUE CHIP FUND for the period
for the November 2, 1998
year ended (commencement)
December 31, to December 31,
-------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
---------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $10.74 $10.00
---------------------------------
Income from investment operations
Net investment income(a).................................. .02 .01(b)
Net gains on securities (both realized and unrealized).... 1.69 .73(b)
---------------------------------
Total from investment operations........................ 1.71 .74
Less distributions
---------------------------------
Dividends from net investment income...................... .10 --
---------------------------------
Total distributions..................................... .10 --
---------------------------------
Net asset value, end of period.............................. $12.35 $10.74
=================================
Total return (%)............................................ 15.89(c) 7.40(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 920 $ 537
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.10 1.08(e)
Without expense reimbursement (%)......................... 3.13 5.99(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .24 .37(e)
Portfolio turnover rate (%)................................. 80 3
</TABLE>
<TABLE>
<S> <C>
Net investment income is net of expenses reimbursed by
(a) Manager.
(b) Based on average shares outstanding.
(c) Total return does not reflect a sales charge.
Total return represents aggregate total return and does not
(d) reflect a sales charge.
(e) Annualized
</TABLE>
<PAGE> 40
16
[IVY LEAF LOGO]
<TABLE>
<CAPTION>
IVY US EMERGING GROWTH FUND for the period
for the February 18, 1998
year ended (commencement)
December 31, to December 31,
---------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
-----------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $32.79 $28.82
-----------------------------------
Income from investment operations
Net investment loss....................................... (.44) (.23)(a)
Net gains on securities (both realized and unrealized).... 20.85 4.20(a)
-----------------------------------
Total from investment operations........................ 20.41 3.97
-----------------------------------
Less distributions
Distributions from capital gains.......................... 5.63 --
-----------------------------------
Total distributions..................................... 5.63 --
-----------------------------------
Net asset value, end of period.............................. $47.57 $32.79
===================================
Total return (%)............................................ 62.85(b) 13.78(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,432 $ 740
Ratio of expenses to average net assets(%).................. 1.46 1.22(d)
Ratio of net investment loss to average net assets (%)...... (1.30) (1.00)(d)
Portfolio turnover rate (%)................................. 107 67
</TABLE>
<TABLE>
<S> <C>
(a) Based on average shares outstanding.
(b) Total return does not reflect a sales charge.
Total return represents aggregate total return and does not
(c) reflect a sales charge.
(d) Annualized
</TABLE>
<PAGE> 41
Account
Application
FUND USE ONLY
___________________
Account Number
___________________
Dealer/Branch/Rep
___________________
Account Type/Soc Cd
[IVY FUNDS LOGO]
Please mail applications and checks to:
USE FOR ADVISOR
Ivy Mackenzie Services Corp., CLASS ONLY
P.O. Box 3022, Boca Raton, Florida 33431-0922
This application should not be used for retirement accounts for which Ivy
Fund (IBT) is custodian.
1 REGISTRATION
Name ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Address__________________________________________________________________
City _________________________________________ State _______ Zip ________
Phone # (day) (___)_________________ Phone # (evening) (__)_____________
__ Individual __ UGMA/UTMA __ Sole proprietor
__ Joint tenant __ Corporation __ Trust
__ Estate __ Partnership __ Other
Date of trust ________________ Minor's state of residence ______________
2 TAX I.D.
Citizenship: __ U.S. __ Other (please specify): __________________
Social security # _____-____-_______ or Tax identification # ____________
Under penalties of perjury, I certify by signing in Section 8 that: (1)
the number shown in this section is my correct taxpayer identification
number (TIN), and (2) I am not subject to backup withholding because: (a)
I have not been notified by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure to report all
interest or dividends, or (b) the IRS has notified me that I am no longer
subject to backup withholding. (Cross out item (2) if you have been
notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return.)
Please see the "Dividends, distributions and taxes" section of the
Prospectus for additional information on completing this section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable provisions in this
Application, guarantees the signature and legal capacity of the
Shareholder, and agrees to notify IMSC of any purchases made under a
Letter of Intent or Rights of Accumulation.
Dealer name _____________________________________________________________
Branch office address ___________________________________________________
City ______________________________ State _______________ Zip _________
Representative's name ___________________________________________________
Representative's # _________________ Representative's phone #____________
Authorized signature of dealer __________________________________________
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum) for $__________ made payable to
the appropriate fund. Please invest it in Advisor Class Shares of the
following fund(s):
<TABLE>
<S> <C>
$ _______________ Ivy Growth Fund $ _______________ Ivy US Emerging Growth Fund
$ _______________ Ivy US Blue Chip Fund
</TABLE>
B. FOR DEALER USE ONLY
Confirmed trade orders: _____________ ________________ ____________
Confirm Number Number of Shares Trade Date
<PAGE> 42
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into additional
shares in this account at net asset value unless a different option is
checked below.
A. ___ Reinvest all dividends and capital gains into additional shares
of a different Ivy fund account.
Fund name: ______________________________________________________
Account #: ______________________________________________________
B. ___ Pay all dividends in cash and reinvest capital gains into
additional shares in this account or a different Ivy fund
account.
Fund name: ____________________
Account #: ____________________
C. ___ Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE SENT
TO: _____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 OPTIONAL SPECIAL FEATURES
A. AUTOMATIC INVESTMENT METHOD (AIM)
___ I wish to have my bank account listed in section 7B automatically
debited via EFT on a predetermined frequency and invested into my
Ivy Fund account listed below.
1. Withdraw $_____ for each time period indicated below and invest my
bank proceeds in Advisor Class shares of the following Ivy fund:
Fund name: ________________________________________________________
Account #: ________________________________________________________
2. Debit my bank account:
___ Annually (on the ___ day of the month of
_______________).
___ Semiannually (on the ___ day of the months of
__________ and __________).
___ Quarterly (on the ___ day of the first/second/third
month of each calendar quarter). (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
B. SYSTEMATIC WITHDRAWAL PLANS (SWP)**
___ I wish to have my Ivy Fund account automatically debited on a
predetermined frequency and the proceeds sent to me per my
instructions below.
1. Withdraw ($250 minimum) $_____ for each time period indicated
below from the following Ivy Fund account:
Fund name: ________________________________________________________
Account #: ________________________________________________________
2. Withdraw from my Ivy Fund account:
___ Annually (on the _____ day of the month of
__________).
___ Semiannually (on the _____ day of the months of
____________ and __________).
___ Quarterly (on the _____ day of the first/second/third
month of each calendar quarter. (CIRCLE ONE)
___ Monthly*___ once per month on the ___ day
___ twice per month on the _____ days
___ 3 times per month on the _____ days
___ 4 times per month on the _____ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration
___ sent to the special payee listed in section 7A or 7B.
___ invested into additional Advisor Class shares of a
different Ivy Fund:
Fund name: ________________________________________________________
Account #: ________________________________________________________
Note: A minimum balance of $10,000 is required to establish a SWP.
6 OPTIONAL SPECIAL FEATURES (CONT.)
C. FEDERAL FUNDS WIRE
FOR REDEMPTION PROCEEDS** ___ yes ___ no
By checking "yes" immediately above, I authorize IMSC to honor telephone
instructions for the redemption of Fund shares up to $50,000. Proceeds may
be wire transferred to the bank account designated ($1,000 minimum).
(COMPLETE SECTION 7B).
D. TELEPHONE EXCHANGES** ___ yes ___ no
By checking "yes" immediately above, I authorize exchanges by telephone
among the Ivy funds upon instructions from any person as more fully
described in the Prospectus. To change this option once established,
written instructions must be received from the shareholder of record or
the current registered representative.
If neither box is checked, the telephone exchange privilege will be
provided automatically.
E. TELEPHONIC REDEMPTIONS** ___ yes ___ no
By checking "yes" immediately above, the Fund or its agents are authorized
to honor telephone instructions from any person as more fully described in
the Prospectus for the redemption of Fund shares. The amount of the
redemption shall not exceed $50,000 and the proceeds are to be payable to
the shareholder of record and mailed to the address of record. To change
this option once established, written instructions must be received from
the shareholder of record or the current registered representative.
If neither box is checked, the telephone redemption privilege will be
provided automatically.
* There must be a period of at least seven calendar days between each
investment (AIM)/withdrawal (SWP) period.
** This option may not be used if shares are issued in certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS: Please send all disbursements to this payee:
Name of bank or individual _____________________________________________
Account # (if applicable) ______________________________________________
Street _________________________________________________________________
City _____________________________ State ______________Zip _____________
B. FED WIRE/EFT INFORMATION
Financial institution __________________________________________________
ABA # __________________________________________________________________
Account # ______________________________________________________________
Street _________________________________________________________________
City _____________________________ State ______________Zip _____________
(PLEASE ATTACH A VOIDED CHECK.)
8 SIGNATURES
Investors should be aware that the failure to check the "No" under Section
6D or 6E above means that the Telephone Exchange/Redemption Privileges
will be provided. The Fund employs reasonable procedures that require
personal identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that such instructions
are genuine. In the absence of such procedures, the Fund may be liable for
any losses due to unauthorized or fraudulent telephone instructions.
Please see "How to exchange shares" and "How to redeem shares" in the
Prospectus for more information on these privileges.
I certify to my legal capacity to purchase or redeem shares of the
Fund for my own account or for the account of the organization named in
Section 1. I have received a current Prospectus and understand its terms
are incorporated in this application by reference. I am certifying my
taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID
BACKUP WITHHOLDING.
__________________________________________ ____________________________
Signature of Owner, Custodian, Trustee or Date
Corporate Officer
__________________________________________ ____________________________
Signature of Joint Owner, Co-Trustee or Date
Corporate Officer
(Remember to sign Section 8)
DETACH ON PERFORATION TO MAIL
<PAGE> 43
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-- QUOTRON SYMBOLS AND CUSIP NUMBERS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
FUND SYMBOL CUSIP
----------------------------------------------------------------------------------------
<S> <C> <C>
Ivy Growth Fund Advisor Class IVYVX 465897254
Ivy US Blue Chip Fund Advisor Class * 465898864
Ivy US Emerging Growth Fund Advisor Class IVEVX 465897262
----------------------------------------------------------------------------------------
</TABLE>
* Symbol not assigned as of this printing
<PAGE> 44
(Ivy Funds Logo)
-- HOW TO RECEIVE MORE
INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is
contained in the Funds' Statement of Additional Information dated May
1, 2000, as supplemented on June 30, 2000 (the "SAI"), which is
incorporated by reference into this Prospectus, and each Fund's annual
and semiannual reports to shareholders. Each Fund's annual report
includes a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during
its most recent fiscal year. The SAI and each Fund's annual and
semiannual reports are available upon request and without charge from
the Distributor at the following address and phone number:
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway, Ste. 300
Boca Raton, FL 33432
800.456.5111
Information about the Funds (including the SAI and each Fund's annual
and semiannual reports) may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. (please call 1-202-942-8090
for further details). Reports and other information about the Funds are
also available on the EDGAR Database on the SEC's Internet Website
(www.sec.gov), and copies of this information may be obtained, upon
payment of a copying fee, by electronic request at the following e-mail
address: [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
Investment Company Act File No. 811-1028
01IUSADV0600
-- SHAREHOLDER
INQUIRIES
Please call
Ivy Mackenzie
Services Corp.,
the Funds' transfer agent,
regarding any other
inquiries about the Funds
at 800.777.6472,
e-mail us at
[email protected]
or visit our web site at
www.ivyfunds.com.
IVY GROWTH FUND
IVY US BLUE CHIP FUND
IVY US EMERGING GROWTH FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
(as supplemented on June 30, 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 Class A, B and C shares of Ivy Growth Fund
and Ivy US Emerging Growth Fund, and to the Class A, B, C and I shares of Ivy US
Blue Chip Fund (each a "Fund"). The other fifteen portfolios of the Trust are
described in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with the
prospectus for the Funds dated May 1, 2000, as supplemented on June 30, 2000
(the "Prospectus"), which may be obtained upon request and without charge from
the Trust at the Distributor's address and telephone number printed below. The
Funds also offer Advisor Class Shares, which are described in a separate
prospectus and SAI that may also be obtained without charge from the
Distributor.
Each Fund's Annual Report to shareholders dated December 31, 1999
(each, an "Annual Report") is incorporated by reference into this SAI. Each
Fund's Annual Report may be obtained without charge from the Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION...............................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RESTRICTIONS................1
IVY GROWTH FUND..........................................1
IVY US BLUE CHIP FUND....................................4
IVY US EMERGING GROWTH FUND..............................8
RISK CONSIDERATIONS..............................................11
EQUITY SECURITIES.......................................11
CONVERTIBLE SECURITIES..................................11
SMALL COMPANIES.........................................12
INITIAL PUBLIC OFFERINGS................................12
ADJUSTABLE RATE PREFERRED STOCKS........................12
DEBT SECURITIES.........................................13
ILLIQUID SECURITIES.....................................16
FOREIGN SECURITIES......................................17
EMERGING MARKETS........................................18
FOREIGN CURRENCIES......................................19
FOREIGN CURRENCY EXCHANGE TRANSACTIONS..................20
REPURCHASE AGREEMENTS...................................21
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS.......21
COMMERCIAL PAPER........................................21
BORROWING...............................................22
WARRANTS................................................22
REAL ESTATE INVESTMENT TRUSTS (REITS)...................22
OPTIONS TRANSACTIONS....................................22
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS......26
SECURITIES INDEX FUTURES CONTRACTS......................28
COMBINED TRANSACTIONS...................................30
PORTFOLIO TURNOVER...............................................30
TRUSTEES AND OFFICERS............................................31
PRINCIPAL HOLDERS OF SECURITIES..................................36
CLASS A.................................................36
CLASS B.................................................38
CLASS C.................................................39
CLASS I.................................................41
ADVISOR CLASS...........................................41
INVESTMENT ADVISORY AND OTHER SERVICES...........................44
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES....44
DISTRIBUTION SERVICES...................................46
RULE 12b-1 DISTRIBUTION PLANS...........................47
CUSTODIAN...............................................52
FUND ACCOUNTING SERVICES................................52
TRANSFER AGENT AND DIVIDEND PAYING AGENT................52
ADMINISTRATOR...........................................53
AUDITORS................................................53
BROKERAGE ALLOCATION.............................................53
CAPITALIZATION AND VOTING RIGHTS.................................55
SPECIAL RIGHTS AND PRIVILEGES....................................56
AUTOMATIC INVESTMENT METHOD.............................57
EXCHANGE OF SHARES......................................57
LETTER OF INTENT........................................60
RETIREMENT PLANS........................................60
REINVESTMENT PRIVILEGE..................................64
RIGHTS OF ACCUMULATION..................................64
SYSTEMATIC WITHDRAWAL PLAN..............................65
GROUP SYSTEMATIC INVESTMENT PROGRAM.....................65
REDEMPTIONS......................................................67
CONVERSION OF CLASS B SHARES.....................................68
NET ASSET VALUE..................................................68
TAXATION.........................................................70
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS.71
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES..72
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES......72
DEBT SECURITIES ACQUIRED AT A DISCOUNT..................73
DISTRIBUTIONS...........................................73
DISPOSITION OF SHARES...................................74
FOREIGN WITHHOLDING TAXES...............................75
BACKUP WITHHOLDING......................................75
PERFORMANCE INFORMATION..........................................75
FINANCIAL STATEMENTS.............................................84
APPENDIX A.......................................................85
<PAGE>
GENERAL INFORMATION
Each Fund is organized as a separate, diversified portfolio of the
Trust, an open-end management investment company organized as a Massachusetts
business trust on December 21, 1983. Ivy Growth Fund commenced operations (Class
A shares) on March 1, 1984. The inception dates for Ivy Growth Fund's Class B
and Class C shares were October 22, 1993 and April 30, 1996, respectively. Ivy
US Blue Chip Fund commenced operations (Class A, B and C shares) on November 2,
1998. Ivy US Emerging Growth Fund commenced operations (Class A shares) on March
3, 1993. The inception dates for Ivy US Emerging Growth Fund's Class B and Class
C shares were October 22, 1993 and April 30, 1996, respectively.
Descriptions in this SAI of a particular investment practice or
technique in which any Fund may engage or a financial instrument which any Fund
may purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing each Fund's portfolio
assets. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also possible that certain types of financial instruments
or investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in a Fund's overall investment strategy, from time to time
have a material impact on that Fund's performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RESTRICTIONS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
Whenever an investment objective, policy or restriction set forth in
the Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall, unless otherwise
indicated, apply to a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
Fund's control, will not be considered a violation.
IVY GROWTH FUND
Ivy Growth Fund's principal investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund invests at
least 65% of its total assets in common stocks and securities convertible into
common stocks. The Fund invests primarily in equity securities of domestic
corporations with low price-earnings ratios and rising earnings. Approximately
one half of the Fund's portfolio is comprised of companies that have had a
proven and consistent record of earnings, but whose prices appear to be low
relative to their underlying profitability. The other half is invested in equity
securities of small and medium-sized U.S. companies that are in the early stages
of their life cycles and that are believed to have the potential to increase
their sales and earnings at above average rates.
Ivy Growth Fund may invest up to 5% of its net assets in foreign equity
securities, primarily those traded in European, Pacific Basin and Latin American
markets, some of which may be emerging markets involving special risks, as
described below. Individual foreign securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed for fundamental
financial strength.
When circumstances warrant, the Fund may invest without limit in
investment grade debt securities (e.g., U.S. Government securities or other
corporate debt securities rated at least Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poors Ratings Services ("S&P"), or, if unrated,
considered by IMI to be of comparable quality), preferred stocks, or cash or
cash equivalents such as bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and repurchase
agreements.
The Fund may invest up to 5% of its net assets in debt securities rated
Ba or below by Moody's or BB or below by S&P, or if unrated, considered by IMI
to be of comparable quality (commonly referred to as "high yield" or "junk"
bonds). The Fund will not invest in debt securities rated less than C by either
Moody's or S&P.
The Fund may borrow up to 10% of the value of its total assets, but
only for temporary purposes when it would be advantageous to do so from an
investment standpoint. The Fund may invest up to 5% of its net assets in
warrants. The Fund may not invest more than 15% of its net assets in illiquid
securities. The Fund may enter into forward foreign currency contracts and may
also invest in equity real estate investment trusts.
Ivy Growth Fund may write put options, with respect to not more than
10% of the value of its net assets, on securities and stock indices, and may
write covered call options with respect to not more than 25% of the value of its
net assets. The Fund may purchase options, provided the aggregate premium paid
for all options held does not exceed 5% of its net assets. For hedging purposes
only, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY GROWTH FUND
Ivy Growth Fund's investment objectives as set forth in the "Summary"
section of the Prospectus, together with the investment restrictions set forth
below, are fundamental policies of the Fund and may not be changed without the
approval of a majority (as defined in the 1940 Act) of the outstanding voting
shares of the Fund. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by its
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
ADDITIONAL RESTRICTIONS FOR IVY GROWTH FUND
Ivy Growth Fund has adopted the following additional restrictions which
are not fundamental and which may be changed without shareholder approval to the
extent permitted by applicable law, regulation or regulatory policy.
Under these restrictions, the Fund may not:
(i) invest in oil, gas or other mineral leases or exploration or
development programs;
(ii) engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iii) invest in companies for the purpose of exercising control of
management;
(iv) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(v) purchase any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) less than three years
old;
(vi) invest more than 5% of the value of its total assets in the securities
of issuers which are not readily marketable;
(vii) borrow money, except for temporary purposes where investment
transactions might advantageously require it. Any such loan may not be
for a period in excess of 60 days, and the aggregate amount of all
outstanding loans may not at any time exceed 10% of the value of the
total assets of the Fund at the time any such loan is made;
(viii) purchase securities on margin;
(ix) sell securities short;
(x) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than capital stock of the Fund), but such persons or firms may
act as brokers for the Fund for customary commissions to the extent
permitted by the Investment Company Act of 1940; or
(xi) purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidation.
Under the 1940 Act, the Fund is permitted, subject to its investment
restrictions, to borrow money only from banks. The Trust has no current
intention of borrowing amounts in excess of 5% of the Fund's assets. The Fund
will continue to interpret fundamental investment restriction (v) to prohibit
investment in real estate limited partnership interests; this restriction shall
not, however, prohibit investment in readily marketable securities of companies
that invest in real estate or interests therein, including real estate
investment trusts.
IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund's investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund will invest
at least 65% of its total assets in the common stocks of companies determined by
IMI to be "Blue Chip." Generally, the median market capitalization of companies
targeted for investment by the Fund will be greater than $5 billion. For
investment purposes, however, Blue Chip companies are those companies whose
market capitalization is greater than $1 billion at the time of investment.
Blue Chip companies are those which occupy (or in IMI's judgment have
the potential to occupy) leading market positions that are expected to be
maintained or enhanced over time. Such companies tend to have a lengthy history
of profit growth and dividend payment, and a reputation for quality management
structure, products and services. Securities of Blue Chip companies generally
are considered to be highly liquid because, compared to those of
lesser-capitalized companies, more shares of these securities are outstanding in
the marketplace and their trading volume tends to be higher.
When circumstances warrant, Ivy US Blue Chip Fund may invest without
limit in investment grade debt securities (e.g., U.S. Government securities or
other corporate debt securities rated at least Baa by Moody's or BBB by S&P, or,
if unrated, are considered by IMI to be of comparable quality), preferred
stocks, or cash or cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements.
Ivy US Blue Chip Fund may borrow up to 10% of the value of its total
assets, for temporary purposes when it would be advantageous to do so from an
investment standpoint. The Fund may invest up to 5% of its net assets in
warrants. The Fund may not invest more than 15% of its net assets in illiquid
securities. The Fund may also invest in equity real estate investment trusts
("REITs").
The Fund may write put options on securities and stock indices, with
respect to not more than 10% of the value of its net assets, and may write
covered call options with respect to not more than 25% of the value of its net
assets. The Fund may purchase options, provided the aggregate premium paid for
all options held does not exceed 5% of its total assets. The Fund may purchase
interest rate and other financial futures contracts and related options. For
hedging purposes only, the Fund may enter into stock index futures contracts as
a means of regulating its exposure to equity markets. The Fund's equivalent
exposure in stock index futures contracts will not exceed 15% of its total
assets.
INVESTMENT RESTRICTIONS FOR IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund's investment objective, as set forth in the
Prospectus under "Investment Objectives and Policies," and the investment
restrictions set forth below are fundamental policies of the Fund and may not be
changed with respect to the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
ADDITIONAL RESTRICTIONS FOR IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund has adopted the following additional
restrictions, which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, the Fund may not:
(i) purchase any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) less than three years
old;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii) engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iv) invest in companies of the purpose of exercising control of
management;
(v) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(vi) purchase or retain securities of any company if officers and Trustees
of the Trust and officers and directors of IMI, MIMI or Mackenzie
Financial Corporation who individually own more than 1/2 of 1% of the
securities of that company together own beneficially more than 5% of
such securities;
(vii) invest more than 15% of its net assets in "illiquid securities."
Illiquid securities may include securities subject to legal or
contractual restrictions on resale (including private placements),
repurchase agreements maturing in more than seven days, certain
options traded over the counter that the Fund has purchased,
securities being used to cover certain options that the Fund has
written, securities for which market quotations are not readily
available, or other securities which legally or in IMI's opinion,
subject to the Board's supervision, may be deemed illiquid, but shall
not include any such instrument that, due to the existence of a
trading market or to other factors, is liquid;
(viii) purchase securities of another investment company, except in
connection with a merger, consolidation, reorganization or acquisition
or assets, and except that the Fund may (i) invest in securities of
other investment companies subject to the restrictions set forth in
Section 12(d)(1) of the 1940 Act and (ii) acquire any securities of
registered open-end investment companies or registered unit investment
trusts in reliance on subparagraphs (f) and (g) of Section 12(d)(1) of
the 1940 Act;
(ix) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, the deposit or payment by
the Fund of initial or variation margins in connection with futures
contracts or related options transactions is not considered the
purchase of a security on margin;
(x) sell securities short;
(xi) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than shares of the Fund), but such persons or firms may act as
brokers for the Fund for customary commissions to the extent permitted
by the 1940 Act; or
(xii) borrow amounts in excess of 10% of its total assets, taken at the
lower of cost or market value, as a temporary measure for
extraordinary or emergency purposes or where investment transactions
might advantageously require it, or except in connection with reverse
repurchase agreements, provided that the Fund maintains net asset
coverage of at least 300% for all borrowings.
Under the 1940 Act, the Fund is permitted, subject to the Fund's
investment restrictions, to borrow money only from banks. The Trust has no
current intention of borrowing amounts in excess of 5% of the Fund's assets. The
Fund will continue to interpret fundamental investment restriction (v) above to
prohibit investment in real estate limited partnership interests; this
restriction shall not, however, prohibit investment in readily marketable
securities of companies that invest in real estate or interests therein,
including REITs. Despite fundamental investment restriction (vi) above, the Fund
may invest in interest rate and other financial futures contracts and related
options.
IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's principal investment objective is
long-term capital growth primarily through investment in equity securities, with
current income being a secondary consideration. Under normal conditions, the
Fund invests at least 65% of its total assets in common stocks and securities
convertible into common stocks. The Fund invests primarily in equity securities
of small- and medium-sized companies, that are in the early stages of their life
cycles and that IMI believes have the potential to become major enterprises.
These may include securities issued pursuant to initial public offerings
("IPOs"). The Fund may engage in short-term trading.
Ivy US Emerging Growth Fund may invest up to 25% of its net assets in
foreign equity securities, primarily those traded in European, Pacific Basin and
Latin American markets, some of which may be emerging markets involving special
risks, as described below. Individual foreign securities are selected based on
value indicators, such as a low price-earnings ratio, and are reviewed for
fundamental financial strength.
When circumstances warrant, the Fund may invest without limit in
investment grade debt securities (e.g., U.S. Government securities or other
corporate debt securities rated as least Baa by Moody's or BBB by S&P, or, if
unrated, are considered by IMI to be of comparable quality), preferred stocks,
or cash or cash equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term notes and
repurchase agreements.
The Fund may borrow up to 10% of the value of its total assets, but
only for temporary purposes when it would be advantageous to do so from an
investment standpoint. The Fund may invest up to 5% of its net assets in
warrants. The Fund may not invest more than 15% of its net assets in illiquid
securities. The Fund may enter into forward foreign currency contracts.
Ivy US Emerging Growth Fund may write put options, with respect to not
more than 10% of the value of its net assets, on securities and stock indices,
and may write covered call options with respect to not more than 25% of the
value of its net assets. The Fund may purchase options, provided the aggregate
premium paid for all options held does not exceed 5% of its net assets. For
hedging purposes only, the Fund may enter into stock index futures contracts as
a means of regulating its exposure to equity markets. The Fund's equivalent
exposure in stock index futures contracts will not exceed 15% of its total
assets.
INVESTMENT RESTRICTIONS FOR IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
ADDITIONAL RESTRICTIONS FOR IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund has adopted the following additional
restrictions, which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, the Fund may not:
(i) purchase any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) less than three years
old;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii) engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iv) invest in companies for the purpose of exercising control of
management;
(v) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(vi) purchase or retain securities of any company if officers and Trustees
of the Trust and officers and directors of Ivy Management, Inc. (the
Manager, with respect to Ivy Bond Fund), MIMI or Mackenzie Financial
Corporation who individually own more than 1/2 of 1% of the securities
of that company together own beneficially more than 5% of such
securities;
(vii) invest more than 15% of its net assets taken at market value at the
time of investment in "illiquid securities." Illiquid securities may
include securities subject to legal or contractual restrictions on
resale (including private placements), repurchase agreements maturing
in more than seven days, certain options traded over the counter that
the Fund has purchased, securities being used to cover certain options
that a fund has written, securities for which market quotations are
not readily available, or other securities which legally or in IMI's
opinion, subject to the Board's supervision, may be deemed illiquid,
but shall not include any instrument that, due to the existence of a
trading market, to the Fund's compliance with certain conditions
intended to provide liquidity, or to other factors, is liquid;
(viii) purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets, and except
that it may purchase shares of other investment companies subject to
such restrictions as may be imposed by the 1940 Act and rules
thereunder or by any state in which its shares are registered;
(ix) purchase securities on margin;
(x) sell securities short;
(xi) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than capital stock of the Fund), but such persons or firms may
act as brokers for the Fund for customary commissions to the extent
permitted by the Investment Company Act of 1940; or
(xii) borrow money, except for temporary purposes where investment
transactions might advantageously require it. Any such loan may not be
for a period in excess of 60 days, and the aggregate amount of all
outstanding loans may not at any time exceed 10% of the value of the
total assets of the Fund at the time any such loan is made.
The Trust has no current intention of borrowing amounts in excess of 5%
of the Fund's assets. The Fund will continue to interpret fundamental investment
restriction (v) above to prohibit investment in real estate limited partnership
interests; this restriction shall not, however, prohibit investment in readily
marketable securities of companies that invest in real estate or interests
therein, including REITs.
RISK CONSIDERATIONS
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities represent a proportionate ownership interest in a company. As a
result, the value of equity securities rises and falls with a company's success
or failure. The market value of equity securities can fluctuate significantly,
with smaller companies being particularly susceptible to price swings.
Transaction costs in smaller company stocks may also be higher than those of
larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each Fund may invest include
corporate bonds, notes, debentures, preferred stock and other securities that
may be converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. Investments in convertible securities can
provide income through interest and dividend payments as well as an opportunity
for capital appreciation by virtue of their conversion or exchange features.
Because convertible securities can be converted into equity securities, their
values will normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.
The exchange ratio for any particular convertible security may be adjusted from
time to time due to stock splits, dividends, spin-offs, other corporate
distributions or scheduled changes in the exchange ratio. Convertible debt
securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stock changes, and, therefore, also
tends to follow movements in the general market for equity securities. When the
market price of the underlying common stock increases, the price of a
convertible security tends to rise as a reflection of the value of the
underlying common stock, although typically not as much as the price of the
underlying common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are investments that provide
for a stream of income. Like all debt securities, there can be no assurance of
income or principal payments because the issuers of the convertible securities
may default on their obligations. Convertible securities generally offer lower
yields than non-convertible securities of similar quality because of their
conversion or exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, are senior in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible preferred stock
typically have lower coupon rates than similar non-convertible securities.
Convertible securities may be issued as fixed income obligations that pay
current income.
SMALL COMPANIES
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with investing in
larger, more established companies. For example, the securities of small or new
companies may be subject to more abrupt or erratic market movements because they
tend to be thinly traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to have limited
product lines, markets or financial resources. Transaction costs in smaller
company stocks also may be higher than those of larger companies.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. A Fund may engage in short-term trading in
connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is
limited, so it is likely that IPO securities will represent a smaller component
of a Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
ADJUSTABLE RATE PREFERRED STOCKS
Adjustable rate preferred stocks have a variable dividend, generally
determined on a quarterly basis according to a formula based upon a specified
premium or discount to the yield on a particular U.S. Treasury security rather
than a dividend which is set for the life of the issue. Although the dividend
rates on these stocks are adjusted quarterly and their market value should
therefore be less sensitive to interest rate fluctuations than are other fixed
income securities and preferred stocks, the market values of adjustable rate
preferred stocks have fluctuated and can be expected to continue to do so in the
future.
DEBT SECURITIES
IN GENERAL. Investment in debt securities involves both interest rate
and credit risk. Generally, the value of debt instruments rises and falls
inversely with fluctuations in interest rates. As interest rates decline, the
value of debt securities generally increases. Conversely, rising interest rates
tend to cause the value of debt securities to decrease. Bonds with longer
maturities generally are more volatile than bonds with shorter maturities. The
market value of debt securities also varies according to the relative financial
condition of the issuer. In general, lower-quality bonds offer higher yields due
to the increased risk that the issuer will be unable to meet its obligations on
interest or principal payments at the time called for by the debt instrument.
INVESTMENT-GRADE DEBT SECURITIES. Bonds rated Aaa by Moody's Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("S&P") are
judged to be of the best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered to be of high
quality (i.e., capacity to pay interest and repay principal is very strong and
differs from the highest rated issues only to a small degree). Bonds rated A are
viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics). The Funds
may invest in debt securities that are given an investment-grade rating by
Moody's or S&P, and may also invest in unrated debt securities that are
considered by IMI to be of comparable quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets bonds, are considered
to be predominantly speculative with respect to the issuer's continuing ability
to meet principal and interest payments. The lower the ratings of corporate debt
securities, the more their risks render them like equity securities. Such
securities carry a high degree of risk (including the possibility of default or
bankruptcy of the issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be less liquid)
than securities in the higher rating categories. (See Appendix A for a more
complete description of the ratings assigned by Moody's and S&P and their
respective characteristics.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest. Also, an increase
in interest rates would likely have an adverse impact on the value of such
obligations. During an economic downturn or period of rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to service their principal and interest payment
obligations. Prices and yields of high yield securities will fluctuate over time
and, during periods of economic uncertainty, volatility of high yield securities
may adversely affect a Fund's net asset value. In addition, investments in high
yield zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater fluctuations
in value due to changes in interest rates.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of
each Fund to accurately value high yield securities in the Fund's portfolio,
could adversely affect the price at which that Fund could sell such securities,
and cause large fluctuations in the daily net asset value of that Fund's shares.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for high yield
securities become relatively less liquid, it may be more difficult to value the
securities, requiring additional research and elements of judgment. These
securities may also involve special registration responsibilities, liabilities
and costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high yield security. For these reasons,
it is the policy of IMI not to rely exclusively on ratings issued by established
credit rating agencies, but to supplement such ratings with its own independent
and on-going review of credit quality. The achievement of each Fund's investment
objectives by investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds. Should the rating of
a portfolio security be downgraded, IMI will determine whether it is in the best
interest of a Fund to retain or dispose of such security. However, should any
individual bond held by a Fund be downgraded below a rating of C, IMI currently
intends to dispose of such bond based on then existing market conditions.
Prices for high yield securities may be affected by legislative and
regulatory developments. For example, Federal rules require savings and loan
institutions to gradually reduce their holdings of this type of security. Also,
Congress has from time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in these securities
and regulate corporate restructurings. Such legislation may significantly
depress the prices of outstanding securities of this type.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations
of, or guaranteed by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes, and bonds) and (2) Federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and interest is
unconditionally guaranteed by the U.S. Government, and thus they are of the
highest possible credit quality. U.S. Government securities that are not held to
maturity are subject to variations in market value due to fluctuations in
interest rates.
Mortgage-backed securities are securities representing part ownership
of a pool of mortgage loans. For example, GNMA certificates are such securities
in which the timely payment of principal and interest is guaranteed by the full
faith and credit of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life of the loans
typically will be substantially less because the mortgages will be subject to
principal amortization and may be prepaid prior to maturity. Prepayment rates
vary widely and may be affected by changes in market interest rates. In periods
of falling interest rates, the rate of prepayments tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayment, thereby lengthening the actual
average life of the security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average life of a
particular pool. Reinvestment of prepayment may occur at higher or lower rates
than the original yield on the certificates. Due to the prepayment feature and
the need to reinvest prepayments of principal at current rates, mortgage-backed
securities can be less effective than typical bonds of similar maturities at
"locking in" yields during periods of declining interest rates, and may involve
significantly greater price and yield volatility than traditional debt
securities. Such securities may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
Securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of nor guaranteed by the U.S.
Treasury; however, they involve Federal sponsorship in one way or another. Some
are backed by specific types of collateral, some are supported by the issuer's
right to borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the issuer, others
are supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, Federal Land Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks,
Federal National Mortgage Association, Federal Home Loan Mortgage Association
and Student Loan Marketing Association.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations issued
without any requirement for the periodic payment of interest. Zero coupon bonds
are issued at a significant discount from face value. The discount approximates
the total amount of interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate at the time of
issuance. If a Fund holds zero coupon bonds in its portfolio, it would recognize
income currently for Federal income tax purposes in the amount of the unpaid,
accrued interest and generally would be required to distribute dividends
representing such income to shareholders currently, even though funds
representing such income would not have been received by the Fund. Cash to pay
dividends representing unpaid, accrued interest may be obtained from, for
example, sales proceeds of portfolio securities and Fund shares and from loan
proceeds. The potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund being forced to
sell portfolio securities at a time when it might otherwise choose not to sell
these securities and when the Fund might incur a capital loss on such sales.
Because interest on zero coupon obligations is not distributed to a Fund on a
current basis, but is in effect compounded, the value of such securities of this
type is subject to greater fluctuations in response to changing interest rates
than the value of debt obligations which distribute income regularly.
ILLIQUID SECURITIES
Each Fund may purchase securities other than in the open market. While
such purchases may often offer attractive opportunities for investment not
otherwise available on the open market, the securities so purchased are often
"restricted securities" or "not readily marketable" (i.e., they cannot be sold
to the public without registration under the Securities Act of 1933, as amended
(the "1933 Act"), or the availability of an exemption from registration (such as
Rule 144A) or because they are subject to other legal or contractual delays in
or restrictions on resale). This investment practice, therefore, could have the
effect of increasing the level of illiquidity of a Fund. It is each Fund's
policy that illiquid securities (including repurchase agreements of more than
seven days duration, certain restricted securities, and other securities which
are not readily marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's Board of Trustees
has approved guidelines for use by IMI in determining whether a security is
illiquid.
Generally speaking, restricted securities may be sold (i) only to
qualified institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers; (iii) in limited quantities after they have been
held for a specified period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for which a
registration statement is in effect under the 1933 Act. Issuers of restricted
securities may not be subject to the disclosure and other investor protection
requirements that would be applicable if their securities were publicly traded.
If adverse market conditions were to develop during the period between a Fund's
decision to sell a restricted or illiquid security and the point at which that
Fund is permitted or able to sell such security, the Fund might obtain a price
less favorable than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted securities, a
Fund may be required to bear all or part of the registration expenses. A Fund
may be deemed to be an "underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, if so, could be liable to purchasers of
such securities if the registration statement prepared by the issuer is
materially inaccurate or misleading.
Since it is not possible to predict with assurance that the market for
securities eligible for resale under Rule 144A will continue to be liquid, IMI
will monitor such restricted securities subject to the supervision of the Board
of Trustees. Among the factors IMI may consider in reaching liquidity decisions
relating to Rule 144A securities are: (1) the frequency of trades and quotes for
the security; (2) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
market for the security (i.e., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer).
FOREIGN SECURITIES
The securities of foreign issuers in which Ivy Growth Fund and Ivy US
Emerging Growth Fund may invest include non-U.S. dollar-denominated debt
securities, Euro dollar securities, sponsored and unsponsored American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs"), Global Depository Shares ("GDSs") and related
depository instruments, and debt securities issued, assumed or guaranteed by
foreign governments or political subdivisions or instrumentalities thereof.
Shareholders should consider carefully the substantial risks involved in
investing in securities issued by companies and governments of foreign nations,
which are in addition to the usual risks inherent in each Fund's domestic
investments.
Although IMI intends to invest each Fund's assets only in nations that
are generally considered to have relatively stable and friendly governments,
there is the possibility of expropriation, nationalization, repatriation or
confiscatory taxation, taxation on income earned in a foreign country and other
foreign taxes, foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default on foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations. In addition, in many countries there is less publicly available
information about issuers than is available for U.S. companies. Moreover,
foreign companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to U.S. companies. In many foreign countries,
there is less governmental supervision and regulation of business and industry
practices, stock exchanges, brokers, and listed companies than in the United
States. Foreign securities transactions may also be subject to higher brokerage
costs than domestic securities transactions. The foreign securities markets of
many of the countries in which each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond markets have different clearance and settlement procedures
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of a Fund are uninvested and no return is earned thereon.
The inability of each Fund to make intended security purchases due to settlement
problems could cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to settlement
problems could result either in losses to a Fund because of subsequent declines
in the value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each Fund's agents to keep currently informed about corporate
actions such as stock dividends or other matters that may affect the prices of
portfolio securities. Communications between the United States and foreign
countries may be less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Moreover, individual foreign economies
may differ favorably or unfavorably from the United States economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. IMI
seeks to mitigate the risks to each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
EMERGING MARKETS
Ivy Growth Fund and Ivy US Emerging Growth Fund could have significant
investments in securities traded in emerging markets. Investors should recognize
that investing in such countries involves special considerations, in addition to
those set forth above, that are not typically associated with investing in
United States securities and that may affect each Fund's performance favorably
or unfavorably.
In recent years, many emerging market countries around the world have
undergone political changes that have reduced government's role in economic and
personal affairs and have stimulated investment and growth. Historically, there
is a strong direct correlation between economic growth and stock market returns.
While this is no guarantee of future performance, IMI believes that investment
opportunities (particularly in the energy, environmental services, natural
resources, basic materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging market
countries from which each Fund and its shareholders will benefit.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
Such risks include (i) less social, political and economic stability; (ii) a
small market for securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies that may restrict each Fund's investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive
to national interests; (iv) foreign taxation; (v) the absence of developed
structures governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until relatively
recently in certain Eastern European countries, of a capital market structure or
market-oriented economy; (vii) the possibility that recent favorable economic
developments in Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries; and (viii) the possibility that
currency devaluations could adversely affect the value of each Fund's
investments. Further, many emerging markets have experienced and continue to
experience high rates of inflation.
Despite the dissolution of the Soviet Union, the Communist Party may
continue to exercise a significant role in certain Eastern European countries.
To the extent of the Communist Party's influence, investments in such countries
will involve risks of nationalization, expropriation and confiscatory taxation.
The communist governments of a number of Eastern European countries expropriated
large amounts of private property in the past, in many cases without adequate
compensation, and there can be no assurance that such expropriation will not
occur in the future. In the event of such expropriation, each Fund could lose a
substantial portion of any investments it has made in the affected countries.
Further, few (if any) accounting standards exist in Eastern European countries.
Finally, even though certain Eastern European currencies may be convertible into
U.S. dollars, the conversion rates may be artificial in relation to the actual
market values and may be adverse to a Fund's net asset value.
Certain Eastern European countries that do not have well-established
trading markets are characterized by an absence of developed legal structures
governing private and foreign investments and private property. In addition,
certain countries require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in a particular
company, or limit the investment of foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals.
Authoritarian governments in certain Eastern European countries may
require that a governmental or quasi-governmental authority act as custodian of
each Fund's assets invested in such country. To the extent such governmental or
quasi-governmental authorities do not satisfy the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect to the custody of
a Fund's cash and securities, that Fund's investment in such countries may be
limited or may be required to be effected through intermediaries. The risk of
loss through governmental confiscation may be increased in such countries.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, Ivy Growth Fund and Ivy US Emerging Growth Fund may
temporarily hold funds in bank deposits in foreign currencies during the
completion of investment programs and may purchase forward foreign currency
contracts. Because of these factors, the value of the assets of each Fund as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and each Fund
may incur costs in connection with conversions between various currencies.
Although each Fund's custodian values the Fund's assets daily in terms of U.S.
dollars, each Fund does not intend to convert its holdings of foreign currencies
into U.S. dollars on a daily basis. Each Fund will do so from time to time,
however, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer. Each
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies.
Because Ivy Growth Fund and Ivy US Emerging Growth Fund normally will
be invested in both U.S. and foreign securities markets, changes in these Funds'
share price may have a low correlation with movements in U.S. markets. Each
Fund's share price will reflect the movements of the different stock and bond
markets in which it is invested (both U.S. and foreign), and of the currencies
in which the investments are denominated. Thus, the strength or weakness of the
U.S. dollar against foreign currencies may account for part of each Fund's
investment performance. U.S. and foreign securities markets do not always move
in step with each other, and the total returns from different markets may vary
significantly. Foreign currencies in which each Fund's assets are denominated
may be devalued against the U.S. dollar, resulting in a loss to the Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Ivy Growth Fund and Ivy US Emerging Growth Fund may enter into forward
foreign currency contracts in order to protect against uncertainty in the level
of future foreign exchange rates in the purchase and sale of securities. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date (usually less than a year), and typically is
individually negotiated and privately traded by currency traders and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although foreign exchange
dealers do not charge a fee for commissions, they do realize a profit based on
the difference between the price at which they are buying and selling various
currencies. Although these contracts are intended to minimize the risk of loss
due to a decline in the value of the hedged currencies, at the same time, they
tend to limit any potential gain which might result should the value of such
currencies increase.
While each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each Fund than if it had not engaged in such transactions.
Moreover, there may be an imperfect correlation between a Fund's portfolio
holdings of securities denominated in a particular currency and forward
contracts entered into by the Fund. An imperfect correlation of this type may
prevent each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Ivy Growth Fund and Ivy US Emerging Growth Fund may purchase currency
forwards and combine such purchases with sufficient cash or short-term
securities to create unleveraged substitutes for investments in foreign markets
when deemed advantageous. Each Fund may also combine the foregoing with bond
futures or interest rate futures contracts to create the economic equivalent of
an unhedged foreign bond position.
Ivy Growth Fund and Ivy US Emerging Growth Fund may also cross-hedge
currencies by entering into transactions to purchase or sell one or more
currencies that are expected to decline in value relative to other currencies to
which each Fund has or in which each Fund expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a Fund buys a money
market instrument and obtains a simultaneous commitment from the seller to
repurchase the instrument at a specified time and at an agreed-upon yield. Under
guidelines approved by the Board, each Fund is permitted to enter into
repurchase agreements only if the repurchase agreements are at least fully
collateralized with U.S. Government securities or other securities that IMI has
approved for use as collateral for repurchase agreements and the collateral must
be marked-to-market daily. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI under the
above-referenced guidelines. In the unlikely event of failure of the executing
bank or broker-dealer, each Fund could experience some delay in obtaining direct
ownership of the underlying collateral and might incur a loss if the value of
the security should decline, as well as costs in disposing of the security.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at maturity). In
addition to investing in certificates of deposit and bankers' acceptances, each
Fund may invest in time deposits in banks or savings and loan associations. Time
deposits are generally similar to certificates of deposit, but are
uncertificated. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance are limited to obligations of (i) banks having
total assets in excess of $1 billion, (ii) U.S. banks which do not meet the $1
billion asset requirement, if the principal amount of such obligation is fully
insured by the Federal Deposit Insurance Corporation (the "FDIC"), (iii) savings
and loan association which have total assets in excess of $1 billion and which
are members of the FDIC, and (iv) foreign banks if the obligation is, in IMI's
opinion, of an investment quality comparable to other debt securities which may
be purchased by a Fund. Each Fund's investments in certificates of deposit of
savings associations are limited to obligations of Federal and state-chartered
institutions whose total assets exceed $1 billion and whose deposits are insured
by the FDIC.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each Fund may invest in commercial paper that is rated Prime-1 by
Moody's Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's
Corporation ("S&P") or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
BORROWING
Borrowing may exaggerate the effect on each Fund's net asset value of
any increase or decrease in the value of each Fund's portfolio securities. Money
borrowed will be subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances). Although the principal
of each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
WARRANTS
The holder of a warrant has the right, until the warrant expires, to
purchase a given number of shares of a particular issuer at a specified price.
Such investments can provide a greater potential for profit or loss than an
equivalent investment in the underlying security. However, prices of warrants do
not necessarily move in a tandem with the prices of the underlying securities,
and are, therefore, considered speculative investments. Warrants pay no
dividends and confer no rights other than a purchase option. Thus, if a warrant
held by a Fund were not exercised by the date of its expiration, the Fund would
lose the entire purchase price of the warrant.
REAL ESTATE INVESTMENT TRUSTS (REITS)
A REIT is a corporation, trust or association that invests in real
estate mortgages or equities for the benefit of its investors. REITs are
dependent upon management skill, may not be diversified and are subject to the
risks of financing projects. Such entities are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code of 1986, as amended (the "Code"), and to maintain exemption from
the Investment Company Act of 1940 (the "1940 Act"). By investing in REITs
indirectly through Ivy Growth Fund or Ivy US Blue Chip Fund, a shareholder will
bear not only his or her proportionate share of the expenses of the Fund, but
also, indirectly, similar expenses of the REITs.
OPTIONS TRANSACTIONS
IN GENERAL. A call option is a short-term contract (having a duration
of less than one year) pursuant to which the purchaser, in return for the
premium paid, has the right to buy the security underlying the option at the
specified exercise price at any time during the term of the option. The writer
of the call option, who receives the premium, has the obligation, upon exercise
of the option, to deliver the underlying security against payment of the
exercise price. A put option is a similar contract pursuant to which the
purchaser, in return for the premium paid, has the right to sell the security
underlying the option at the specified exercise price at any time during the
term of the option. The writer of the put option, who receives the premium, has
the obligation, upon exercise of the option, to buy the underlying security at
the exercise price. The premium paid by the purchaser of an option will reflect,
among other things, the relationship of the exercise price to the market price
and volatility of the underlying security, the time remaining to expiration of
the option, supply and demand, and interest rates.
If the writer of a U.S. exchange-traded option wishes to terminate the
obligation, the writer may effect a "closing purchase transaction." This is
accomplished by buying an option of the same series as the option previously
written. The effect of the purchase is that the writer's position will be
canceled by the Options Clearing Corporation. However, a writer may not effect a
closing purchase transaction after it has been notified of the exercise of an
option. Likewise, an investor who is the holder of an option may liquidate his
or her position by effecting a "closing sale transaction." This is accomplished
by selling an option of the same series as the option previously purchased.
There is no guarantee that either a closing purchase or a closing sale
transaction can be effected at any particular time or at any acceptable price.
If any call or put option is not exercised or sold, it will become worthless on
its expiration date. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, the
Fund would negotiate directly with the counterparty.
Each Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by the Fund if
the premium, plus commission costs, paid by the Fund to purchase the call or the
put is less (or greater) than the premium, less commission costs, received by
the Fund on the sale of the call or the put. A gain also will be realized if a
call or a put that a Fund has written lapses unexercised, because the Fund would
retain the premium. Any such gains (or losses) are considered short-term capital
gains (or losses) for Federal income tax purposes. Net short-term capital gains,
when distributed by any Fund, are taxable as ordinary income. See "Taxation."
Each Fund will realize a gain (or a loss) on a closing sale transaction
with respect to a call or a put previously purchased by the Fund if the premium,
less commission costs, received by the Fund on the sale of the call or the put
is greater (or less) than the premium, plus commission costs, paid by the Fund
to purchase the call or the put. If a put or a call expires unexercised, it will
become worthless on the expiration date, and the Fund will realize a loss in the
amount of the premium paid, plus commission costs. Any such gain or loss will be
long-term or short-term gain or loss, depending upon the Fund's holding period
for the option.
Exchange-traded options generally have standardized terms and are
issued by a regulated clearing organization (such as the Options Clearing
Corporation), which, in effect, guarantees the completion of every
exchange-traded option transaction. In contrast, the terms of OTC options are
negotiated by each Fund and its counterparty (usually a securities dealer or a
financial institution) with no clearing organization guarantee. When a Fund
purchases an OTC option, it relies on the party from whom it has purchased the
option (the "counterparty") to make delivery of the instrument underlying the
option. If the counterparty fails to do so, the Fund will lose any premium paid
for the option, as well as any expected benefit of the transaction. Accordingly,
IMI will assess the creditworthiness of each counterparty to determine the
likelihood that the terms of the OTC option will be satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. Each Fund may write (sell)
covered call options on the Fund's securities in an attempt to realize a greater
current return than would be realized on the securities alone. Each Fund may
also write covered call options to hedge a possible stock or bond market decline
(only to the extent of the premium paid to the Fund for the options). In view of
the investment objectives of each Fund, each Fund generally would write call
options only in circumstances where the investment adviser to the Fund does not
anticipate significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A "covered" call option means generally that so long as a Fund is
obligated as the writer of a call option, the Fund will (i) own the underlying
securities subject to the option, or (ii) have the right to acquire the
underlying securities through immediate conversion or exchange of convertible
preferred stocks or convertible debt securities owned by the Fund. Although each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Each
Fund may purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, each Fund receives a premium for
undertaking the obligation to sell the underlying security at a fixed price
during the option period, if the option is exercised. So long as a Fund remains
obligated as a writer of a call option, it forgoes the opportunity to profit
from increases in the market price of the underlying security above the exercise
price of the option, except insofar as the premium represents such a profit (and
retains the risk of loss should the value of the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. Each Fund may purchase a
put option on an underlying security owned by the Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each Fund, as the holder of the put option, may sell the underlying security at
the exercise price regardless of any decline in its market price. In order for a
put option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs that the Fund must pay. These costs will reduce any profit a
Fund might have realized had it sold the underlying security instead of buying
the put option. The premium paid for the put option would reduce any capital
gain otherwise available for distribution when the security is eventually sold.
The purchase of put options will not be used by any Fund for leverage purposes.
Each Fund may also purchase a put option on an underlying security that
it owns and at the same time write a call option on the same security with the
same exercise price and expiration date. Depending on whether the underlying
security appreciates or depreciates in value, the Fund would sell the underlying
security for the exercise price either upon exercise of the call option written
by it or by exercising the put option held by it. A Fund would enter into such
transactions in order to profit from the difference between the premium received
by the Fund for the writing of the call option and the premium paid by the Fund
for the purchase of the put option, thereby increasing the Fund's current
return. A Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. Each Fund may
purchase and sell (write) put and call options on securities indices. An index
assigns relative values to the securities included in the index and the index
fluctuates with changes in the market values of the securities so included. Call
options on indices are similar to call options on individual securities, except
that, rather than giving the purchaser the right to take delivery of an
individual security at a specified price, they give the purchaser the right to
receive cash. The amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option, expressed in dollars,
times a specified multiple (the "multiplier"). The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
The multiplier for an index option performs a function similar to the
unit of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices have
different multipliers.
When a Fund writes a call or put option on a stock index, the option is
"covered," in the case of a call, or "secured," in the case of a put, if the
Fund maintains in a segregated account with the Custodian cash or liquid
securities equal to the contract value. A call option is also covered if a Fund
holds a call on the same index as the call written where the exercise price of
the call held is (i) equal to or less than the exercise price of the call
written or (ii) greater than the exercise price of the call written, provided
that the Fund maintains in a segregated account with the Custodian the
difference in cash or liquid securities. A put option is also "secured" if a
Fund holds a put on the same index as the put written where the exercise price
of the put held is (i) equal to or greater than the exercise price of the put
written or (ii) less than the exercise price of the put written, provided that
the Fund maintains in a segregated account with the Custodian the difference in
cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of options
involves certain risks. During the option period, the covered call writer has,
in return for the premium on the option, given up the opportunity to profit from
a price increase in the underlying securities above the exercise price, but, as
long as its obligation as a writer continues, has retained the risk of loss
should the price of the underlying security decline. The writer of a U.S. option
has no control over the time when it may be required to fulfill its obligation
as a writer of the option. Once an option writer has received an exercise
notice, it cannot effect a closing purchase transaction in order to terminate
its obligation under the option and must deliver the underlying securities (or
cash in the case of an index option) at the exercise price. If a put or call
option purchased by a Fund is not sold when it has remaining value, and if the
market price of the underlying security (or index), in the case of a put,
remains equal to or greater than the exercise price or, in the case of a call,
remains less than or equal to the exercise price, the Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security (or index) is purchased to hedge against price movements in a related
security (or securities), the price of the put or call option may move more or
less than the price of the related security (or securities). In this regard,
there are differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objective.
There can be no assurance that a liquid market will exist when a Fund
seeks to close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Fund may be unable to close
out a position. Finally, trading could be interrupted, for example, because of
supply and demand imbalances arising from a lack of either buyers or sellers, or
the options exchange could suspend trading after the price has risen or fallen
more than the maximum amount specified by the exchange. Closing transactions can
be made for OTC options only by negotiating directly with the counterparty or by
a transaction in the secondary market, if any such market exists. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. There is no assurance that a Fund will be able to close out an OTC
option position at a favorable price prior to its expiration. An OTC
counterparty may fail to deliver or to pay, as the case may be. In the event of
insolvency of the counterparty, a Fund might be unable to close out an OTC
option position at any time prior to its expiration. Although a Fund may be able
to offset to some extent any adverse effects of being unable to liquidate an
option position, the Fund may experience losses in some cases as a result of
such inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level
of its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each Fund may enter into futures contracts and options on
futures contracts for hedging purposes. A futures contract provides for the
future sale by one party and purchase by another party of a specified quantity
of a commodity at a specified price and time. When a purchase or sale of a
futures contract is made by a Fund, the Fund is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of cash or liquid
securities ("initial margin"). The margin required for a futures contract is set
by the exchange on which the contract is traded and may be modified during the
term of the contract. The initial margin is in the nature of a performance bond
or good faith deposit on the futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day each Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by a Fund but is instead a
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing daily net asset value, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of
the underlying securities, generally these obligations are closed out prior to
delivery of offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, a Fund generally realizes a
capital gain, or if it is more, the Fund generally realizes a capital loss.
Conversely, if an offsetting sale price is more than the original purchase
price, a Fund generally realizes a capital gain, or if it is less, the Fund
generally realizes a capital loss. The transaction costs must also be included
in these calculations.
When purchasing a futures contract, each Fund will maintain with its
Custodian (and mark-to-market on a daily basis) cash or liquid securities that,
when added to the amounts deposited with a futures commission merchant ("FCM")
as margin, are equal to the market value of the futures contract. Alternatively,
a Fund may "cover" its position by purchasing a put option on the same futures
contract with a strike price as high as or higher than the price of the contract
held by the Fund, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each Fund will maintain with its
Custodian in a segregated account (and mark-to-market on a daily basis) cash or
liquid securities that, when added to the amounts deposited with an FCM as
margin, are equal to the market value of the instruments underlying the
contract. Alternatively, a Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based), or by holding a call option
permitting the Fund to purchase the same futures contract at a price no higher
than the price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each Fund will
maintain with its Custodian in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the amounts deposited
with an FCM as margin, equal the total market value of the futures contract
underlying the call option. Alternatively, a Fund may cover its position by
entering into a long position in the same futures contract at a price no higher
than the strike price of the call option, by owning the instruments underlying
the futures contract, or by holding a separate call option permitting the Fund
to purchase the same futures contract at a price not higher than the strike
price of the call option sold by the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (and mark-to-market on a daily basis) cash or liquid
securities that equal the purchase price of the futures contract less any margin
on deposit. Alternatively, a Fund may cover the position either by entering into
a short position in the same futures contract, or by owning a separate put
option permitting it to sell the same futures contract so long as the strike
price of the purchased put option is the same or higher than the strike price of
the put option sold by the Fund, or, if lower, the Fund may hold securities to
cover the difference.
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in any Fund's portfolio securities being hedged. In
addition, there are significant differences between the securities and futures
markets that could result in an imperfect correlation between the markets,
causing a given hedge not to achieve its objectives. The degree of imperfection
of correlation depends on circumstances such as variations in speculative market
demand for futures and futures options on securities, including technical
influences in futures trading and futures options, and differences between the
financial instruments being hedged and the instruments underlying the standard
contracts available for trading in such respects as interest rate levels,
maturities, and creditworthiness of issuers. A decision as to whether, when and
how to hedge involves the exercise of skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market will exist at a time
when a Fund seeks to close out a futures or a futures option position, and the
Fund would remain obligated to meet margin requirements until the position is
closed. In addition, there can be no assurance that an active secondary market
will continue to exist.
Currency futures contracts and options thereon may be traded on foreign
exchanges. Such transactions may not be regulated as effectively as similar
transactions in the United States; may not involve a clearing mechanism and
related guarantees; and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
position also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in a
Fund's ability to act upon economic events occurring in foreign markets during
non business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
SECURITIES INDEX FUTURES CONTRACTS
Each Fund may enter into securities index futures contracts as an
efficient means of regulating that Fund's exposure to the equity markets. Each
Fund will not engage in transactions in futures contracts for speculation, but
only as a hedge against changes resulting from market conditions in the values
of securities held in the Fund's portfolio or which it intends to purchase. An
index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. Entering
into a contract to buy units of an index is commonly referred to as purchasing a
contract or holding a long position in the index. Entering into a contract to
sell units of an index is commonly referred to as selling a contract or holding
a short position. The value of a unit is the current value of the stock index.
For example, the S&P 500 Index is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange (the "Exchange"). The S&P 500
Index assigns relative weightings to the 500 common stocks included in the
Index, and the Index fluctuates with changes in the market values of the shares
of those common stocks. In the case of the S&P 500 Index, contracts are to buy
or sell 500 units. Thus, if the value of the S&P 500 Index were $150, one
contract would be worth $75,000 (500 units x $150). The index futures contract
specifies that no delivery of the actual securities making up the index will
take place. Instead, settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the contract price
and the actual level of the stock index at the expiration of the contract. For
example, if a Fund enters into a futures contract to buy 500 units of the S&P
500 Index at a specified future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, the Fund will gain $2,000 (500 units x
gain of $4). If a Fund enters into a futures contract to sell 500 units of the
stock index at a specified future date at a contract price of $150 and the S&P
500 Index is at $154 on that future date, the Fund will lose $2,000 (500 units x
loss of $4).
RISKS OF SECURITIES INDEX FUTURES. Each Fund's success in using hedging
techniques depends, among other things, on IMI's ability to predict correctly
the direction and volatility of price movements in the futures and options
markets as well as in the securities markets and to select the proper type, time
and duration of hedges. The skills necessary for successful use of hedges are
different from those used in the selection of individual stocks.
Each Fund's ability to hedge effectively all or a portion of its
securities through transactions in index futures (and therefore the extent of
its gain or loss on such transactions) depends on the degree to which price
movements in the underlying index correlate with price movements in the Fund's
securities. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each Fund
will bear the risk that the prices of the securities being hedged will not move
in the same amount as the hedging instrument. This risk will increase as the
composition of the Fund's portfolio diverges from the composition of the hedging
instrument.
Although each Fund intends to establish positions in these instruments
only when there appears to be an active market, there is no assurance that a
liquid market will exist at a time when a Fund seeks to close a particular
option or futures position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers.
In addition, the futures exchanges may suspend trading after the price has risen
or fallen more than the maximum amount specified by the exchange. In some cases,
a Fund may experience losses as a result of its inability to close out a
position, and it may have to liquidate other investments to meet its cash needs.
Although some index futures contracts call for making or taking
delivery of the underlying securities, generally these obligations are closed
out prior to delivery by offsetting purchases or sales of matching futures
contracts (same exchange, underlying security or index, and delivery month). If
an offsetting purchase price is less than the original sale price, a Fund
generally realizes a capital gain, or if it is more, a Fund generally realizes a
capital loss. Conversely, if an offsetting sale price is more than the original
purchase price, a Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs must also be
included in these calculations.
Each Fund will only enter into index futures contracts or futures
options that are standardized and traded on a U.S. or foreign exchange or board
of trade, or similar entity, or quoted on an automated quotation system. Each
Fund will use futures contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the CFTC.
When purchasing an index futures contract, each Fund will maintain with
its Custodian (and mark-to-market on a daily basis) cash or liquid securities
that, when added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures contract.
Alternatively, a Fund may "cover" its position by purchasing a put option on the
same futures contract with a strike price as high as or higher than the price of
the contract held by the Fund.
When selling an index futures contract, each Fund will maintain with
its Custodian (and mark-to-market on a daily basis) cash or liquid securities
that, when added to the amounts deposited with an FCM as margin, are equal to
the market value of the instruments underlying the contract. Alternatively, a
Fund may "cover" its position by owning the instruments underlying the contract
(or, in the case of an index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the futures contract is
based), or by holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the contract written by
the Fund (or at a higher price if the difference is maintained in cash or liquid
assets in a segregated account with the Fund's custodian).
COMBINED TRANSACTIONS
Each Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions and multiple currency
transactions (including forward currency contracts) and some combination of
futures, options and currency transactions ("component" transactions), instead
of a single transaction, as part of a single or combined strategy when, in the
opinion of IMI, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on IMI's judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio management goal, it is
possible that the combination will instead increase such risks or hinder
achievement of the management objective.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed by IMI to have above
average potential for capital appreciation. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities have a greater potential. Therefore, each Fund
may purchase and sell securities without regard to the length of time the
security is to be, or has been, held. A change in securities held by a Fund is
known as "portfolio turnover" and may involve the payment by the Fund of dealer
markup or underwriting commission and other transaction costs on the sale of
securities, as well as on the reinvestment of the proceeds in other securities.
Each Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the most recently completed
fiscal year by the monthly average of the value of the portfolio securities
owned by the Fund during that year. For purposes of determining a Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded. Ivy U.S. Blue Chip Fund's
portfolio turnover rate was significantly higher in 1999 than it was in 1998
because of the late date of its inception in 1998.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business addresses and
principal occupations during the past five years are:
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------- ------------------------------------------------
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
-------------------------------------- ----------------------------- -------------------------------------------------
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (instruments
60 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
Investment Management Inc. (1995-present);
Senior Vice President, Mackenzie Investment
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
President, Mackenzie Investment Management Inc.
(1996-1997); Senior Vice President and
Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President and
Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management Company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee, Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, 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 33303 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>
*Deemed to be an "interested person" (as defined under the 1940 Act)of the
Trust.
<TABLE>
<CAPTION>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
<S> <C> <C> <C> <C>
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
TOTAL COMPENSA-TION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM TRUST AND FUND
COMPENSA-TION FROM BENEFITS ACCRUED AS BENEFITS UPON COMPLEX PAID TO
NAME, POSITION TRUST PART OF FUND EXPENSES RETIREMENT TRUSTEES*
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
John S. Anderegg, $21,500 N/A N/A $21,500
Jr.(Trustee)
James W. $0 N/A N/A $0
Broadfoot(Trustee and
President)
Paul H. Broyhill(Trustee) $20,500 N/A N/A $20,500
Keith J. Carlson (Trustee $0 N/A N/A $0
and Chairman)
Stanley Channick(Trustee) $21,500 N/A N/A $21,500
Roy J. Glauber(Trustee) $21,500 N/A N/A $21,500
Dianne Lister(Trustee) $0 N/A N/A $0
Joseph G. $21,500 N/A N/A $21,500
Rosenthal(Trustee)
Richard N. $21,500 N/A N/A $21,500
Silverman(Trustee)
J. Brendan Swan(Trustee) $21,500 N/A N/A $21,500
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William $0 N/A N/A $0
Ferris(Secretary/
Treasurer)
</TABLE>
*The Fund complex consists of Ivy Fund.
As of April 6, 2000, the Officers and Trustees of the Trust as a group
owned beneficially or of record less than 1% of the outstanding Class A, Class
B, Class C, Class I and Advisor Class shares of each of the eighteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI
and the Trust have adopted a Code of Ethics and Business Conduct Policy (the
"Code of Ethics"), which is designed to identify and address certain conflicts
of interest between personal investment activities and the interests of
investment advisory clients such as each Fund, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions.
PRINCIPAL HOLDERS OF SECURITIES
To the knowledge of the Trust as of April 6, 2000, no shareholder owned
beneficially or of record 5% or more of any Fund's outstanding shares of any
class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of:
Ivy Asia Pacific Fund, Northern Trust Custodian FBO W. Hall Wendel
Jr., P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares
(34.67%) and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL Jacksonville,
FL 32246, owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL 32246, owned of record 733,792.800 shares
(25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE
FBO Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 8,648,661.843 shares (30.25%) and Merrill Lynch Pierce Fenner & Smith
For the Sole Benefit of Its Customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,025,817.607
(21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch, Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc. FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target
Benefit Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890,
owned of record 784,722.350 shares (5.36%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn:
Russ Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. Mutual Fund
Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E, 3rd FL, Jacksonville, FL, owned of record 33,931.288 shares
(20.64%) and Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD
5/2/94 Martha K Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record
10,022 shares (6.09 %);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert
M. Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL., San
Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), Salomon Smith Barney Inc., 333 West 34th St. - 3rd
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 shares (35.64%),
Salomon Smith Barney Inc. 00129805698, 333 West 34th St. - 3rd Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, owned of record 2,034.101 shares (6.71%) and Raymond
James & Assoc. Inc. CSDN David C Johnson M/P, 1113 45th Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce Street,
Garden City, MI 48135, owned of record 4,651.187 shares (14.03%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17 Cordes
Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%), May Ann
Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of record
2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham, Buffalo,
NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares
(71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K Aistrope & Mary Sue Jenkins JT TEN, 1635 N. 106th Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 389,576.275 shares (13.74%), State Street Bank TTEE FBO Allison
Engines, 200 Newport Ave., 7th Floor, North Quincy, MA 02171, owned of record
327,350.589 shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box
83084, Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%),
Harleysville Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438,
owned of record 191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great
Lakes Chemical RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S,
Chicago, IL 60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark
Taper Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049,
owned of record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company
FBO Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST,
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 19,521.431 shares (73.06%), Brown Brothers
Harriman & Co. CUST International Solutions V- Aggressive Growth, Attn: Terron
McGovern, 40 Water St. Boston, MA 02109, owned of record 5,387.835 shares
(20.17%), Brown Brothers Harriman & Co. CUST International Solutions II -
Balanced Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned
of record 1,602.659 shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St., Boston, MA 02109, owned of record 32,622.646 shares (61.95%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
9,740.980 shares (18.49%), Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd
FL, Jacksonville, FL owned of record 5,243.316 shares (9.95%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
3,240.952 shares (6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Technology Fund, Robert Chapin & Michelle Broadfoot
TTEE Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton,
FL 33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner
& Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 35,889.863 shares (24.70%), Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 26,271.557 shares (18.08%) and
Brown Brothers Harriman & Co. CUST International Solutions III - Moderate
Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management
Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste.
300, Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc., Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St., San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory services to
the Fund pursuant to a Business Management and Investment Advisory Agreement
(the "Agreement"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("MIMI"). MIMI, a Delaware corporation, has approximately 10% of
its outstanding common stock listed for trading on the Toronto Stock Exchange
("TSE"). MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"), 150
Bloor Street West, Toronto, Ontario, Canada, a public corporation organized
under the laws of Ontario whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises Ivy Global Natural
Resources Fund. IMI also currently acts as manager and investment adviser to the
other series of Ivy Fund. IMI also provides business management services to Ivy
Global Natural Resources Fund.
The Agreement obligates IMI to make investments for the account of each
Fund in accordance with its best judgment and within the investment objectives
and restrictions set forth in the Prospectus, the 1940 Act and the provisions of
the Code relating to regulated investment companies, subject to policy decisions
adopted by the Board. IMI also determines the securities to be purchased or sold
by each Fund and places orders with brokers or dealers who deal in such
securities.
Under the Agreement, IMI also provides certain business management
services. IMI is obligated to (1) coordinate with each Fund's Custodian and
monitor the services it provides to each Fund; (2) coordinate with and monitor
any other third parties furnishing services to each Fund; (3) provide each Fund
with necessary office space, telephones and other communications facilities as
are adequate for the Fund's needs; (4) provide the services of individuals
competent to perform administrative and clerical functions that are not
performed by employees or other agents engaged by each Fund or by IMI acting in
some other capacity pursuant to a separate agreement or arrangements with each
Fund; (5) maintain or supervise the maintenance by third parties of such books
and records of the Trust as may be required by applicable Federal or state law;
(6) authorize and permit IMI's directors, officers and employees who may be
elected or appointed as trustees or officers of the Trust to serve in such
capacities; and (7) take such other action with respect to the Trust, after
approval by the Trust as may be required by applicable law, including without
limitation the rules and regulations of the SEC and of state securities
commissions and other regulatory agencies.
Ivy Growth Fund Pays IMI a monthly fee for providing business
management and investment advisory services that is equal, on an annual basis,
to 0.85% of the first $350 million of the Fund's average net assets, reduced to
0.75% on its average net assets in excess of $350 million.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Growth Fund paid IMI fees of $2,794,304, $2,722,314 and $2,731,358,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $0, $0 and $113,237, respectively.
Ivy US Blue Chip Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of 0.75% of the
Fund's average net assets.
During the fiscal years ended December 31, 1998 and 1999, Ivy US Blue
Chip Fund paid IMI fees of $1,687 and $78,946, respectively. During the fiscal
year ended December 31, 1998 and 1999, IMI reimbursed Fund expenses in the
amount of $11,052 and $213,586, respectively.
Ivy US Emerging Growth Fund pays IMI a monthly fee for providing
business management and investment advisory services at an annual rate of 0.85%
of the Fund's average net assets.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy US
Emerging Growth Fund paid IMI fees of $973,756, $985,816 and $1,070,591,
respectively.
Under the Agreement, the Trust pays the following expenses: (1) the
fees and expenses of the Trust's Independent Trustees; (2) the salaries and
expenses of any of the Trust's officers or employees who are not affiliated with
IMI; (3) interest expenses; (4) taxes and governmental fees, including any
original issue taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and other expenses
incurred in acquiring or disposing of portfolio securities; (6) the expenses of
registering and qualifying shares for sale with the SEC and with various state
securities commissions; (7) accounting and legal costs; (8) insurance premiums;
(9) fees and expenses of the Trust's Custodian and Transfer Agent and any
related services; (10) expenses of obtaining quotations of portfolio securities
and of pricing shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and distribution to
existing shareholders of periodic reports, proxy materials and prospectuses; and
(13) fees and expenses of membership in industry organizations.
IMI currently limits the total operating expenses (excluding Rule 12b-1
fees, interest, taxes, brokerage commissions, litigation, class-specific
expenses, indemnification expenses, and extraordinary expenses) of Ivy US Blue
Chip Fund to an annual rate of 1.34% of the Fund's average net assets, which may
lower each Fund's expenses and increase its yield.
The Agreement will continue in effect with respect to each Fund from
year to year, only so long as the continuance is specifically approved at least
annually (i) by the vote of a majority of the Independent Trustees and (ii)
either (a) by the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of each Fund or (b) by the vote of a majority of the
entire Board. If the question of continuance of the Agreement (or adoption of
any new agreement) with respect to any Fund is presented to the shareholders,
continuance (or adoption) shall be effected only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreement may be terminated with respect to each Fund at any time,
without payment of any penalty, by the vote of a majority of the Board, or by a
vote of a majority of the outstanding voting securities of the Fund, on 60 days'
written notice to IMI, or by IMI on 60 days' written notice to the Trust. The
Agreement shall terminate automatically in the event of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the exclusive
distributor of Ivy Fund's shares pursuant to an Amended and Restated
Distribution Agreement with the Trust dated March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
through broker-dealers who are members of the National Association of Securities
Dealers, Inc. and who have executed dealer agreements with IMDI. IMDI
distributes shares of each Fund on a continuous basis, but reserves the right to
suspend or discontinue distribution on that basis. IMDI is not obligated to sell
any specific amount of Fund shares.
Each Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at the Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
Pursuant to the Distribution Agreement, IMDI is entitled to deduct a
commission on all Class A Fund shares sold equal to the difference, if any,
between the public offering price, as set forth in each Fund's then-current
prospectus, and the net asset value on which such price is based. Out of that
commission, IMDI may reallow to dealers such concessions as IMDI may determine
from time to time. In addition, IMDI is entitled to deduct a CDSC on the
redemption of Class A shares sold without an initial sales charge and Class B
and Class C shares, in accordance with, and in the manner set forth in, the
Prospectus.
Under the Distribution Agreement, each Fund bears, among other
expenses, the expenses of registering and qualifying its shares for sale under
Federal and state securities laws and preparing and distributing to existing
shareholders periodic reports, proxy materials and prospectuses.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy Growth Fund $105,281, $71,547, and
$67,547, respectively, in sales commissions, of which $16,522, $10,859, and
$10,389 was retained after dealer allowance. During the fiscal year ended
December 31, 1999, IMDI received $7,985 in CDSCs on redemptions of Class B
shares of Ivy Growth Fund. During the fiscal year ended December 31, 1999, IMDI
received $1,004 in CDSCs on redemptions of Class C shares of Ivy Growth Fund.
During the fiscal years ended December 31, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy US Blue Chip Fund $12,738 and
$69,514, respectively, in sales commissions, of which $1,940 and $8,790,
respectively, was retained after dealer allowance. During the fiscal year ended
December 31, 1999, IMDI received $26 in CDSCs on redemptions of Class B shares
of Ivy US Blue Chip Fund. During the fiscal year ended December 31, 1999, IMDI
received $2,004 in CDSCs on redemptions of Class C shares of Ivy US Blue Chip
Fund.
During the fiscal years ended December 31, 1997, 1998, and 1999, IMDI
received from sales of Class A shares of Ivy US Emerging Growth Fund $350,718,
$102,664, and $167,177, respectively, in sales commissions, of which $46,744,
$14,318, and $23,611, respectively, was retained after dealer allowance. During
the fiscal year ended December 31, 1999, IMDI received $36,337 in CDSCs on
redemptions of Class B shares of Ivy US Emerging Growth Fund. During the fiscal
year ended December 31, 1999, IMDI received $9,258 in CDSCs on redemptions of
Class C shares of Ivy US Emerging Growth Fund.
The Distribution Agreement will continue in effect for successive
one-year periods, provided that such continuance is specifically approved at
least annually by the vote of a majority of the Independent Trustees, cast in
person at a meeting called for that purpose and by the vote of either a majority
of the entire Board or a majority of the outstanding voting securities of each
Fund. The Distribution Agreement may be terminated with respect to any Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the Fund or by the Fund by vote of either a majority of the outstanding voting
securities of the Fund or a majority of the Independent Trustees on 60 days'
written notice to IMDI. The Distribution Agreement shall terminate automatically
in the event of its assignment.
RULE 18f-3 PLAN. On February 23, 1995, the SEC adopted Rule 18f-3 under
the 1940 Act, which permits a registered open-end investment company to issue
multiple classes of shares in accordance with a written plan approved by the
investment company's board of directors/trustees and filed with the SEC. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of each Fund
represent an equal pro rata interest in the Fund and generally have identical
voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications, terms and conditions, except that
each class bears certain class-specific expenses and has separate voting rights
on certain matters that relate solely to that class or in which the interests of
shareholders of one class differ from the interests of shareholders of another
class; (ii) subject to certain limitations described in the Prospectus, shares
of a particular class of each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each Fund's Class B shares will convert
automatically into Class A shares of that Fund after a period of eight years,
based on the relative net asset value of such shares at the time of conversion.
RULE 12b-1 DISTRIBUTION PLANS.
The Trust has adopted on behalf of each Fund, in accordance with Rule
12b-1 under the 1940 Act, separate Rule 12b-1 distribution plans pertaining to
each Fund's Class A, Class B and Class C shares (each, a "Plan"). In adopting
each Plan, a majority of the Independent Trustees have concluded in accordance
with the requirements of Rule 12b-1 that there is a reasonable likelihood that
each Plan will benefit each Fund and its shareholders. The Trustees of the Trust
believe that the Plans should result in greater sales and/or fewer redemptions
of each Fund's shares, although it is impossible to know for certain the level
of sales and redemptions of the Fund's shares in the absence of a Plan or under
an alternative distribution arrangement.
Under each Plan, each Fund pays IMDI a service fee, accrued daily and
paid monthly, at the annual rate of up to 0.25% of the average daily net assets
attributable to its Class A, Class B or Class C shares, as the case may be. This
fee is a reimbursement to IMDI for service fees paid by IMDI. The services for
which service fees may be paid include, among other things, advising clients or
customers regarding the purchase, sale or retention of shares of each Fund,
answering routine inquiries concerning the Fund and assisting shareholders in
changing options or enrolling in specific plans. Pursuant to each Plan, service
fee payments made out of or charged against the assets attributable to a Fund's
Class A, Class B or Class C shares must be in reimbursement for services
rendered for or on behalf of the affected class. The expenses not reimbursed in
any one month may be reimbursed in a subsequent month. The Class A Plan does not
provide for the payment of interest or carrying charges as distribution
expenses.
Under each Fund's Class B and Class C Plans, each Fund also pays IMDI a
distribution fee, accrued daily and paid monthly, at the annual rate of 0.75% of
the average daily net assets attributable to its Class B or Class C shares. This
fee is paid to IMDI as compensation and is not dependent on IMDI's expenses
incurred. IMDI may reallow to dealers all or a portion of the service and
distribution fees as IMDI may determine from time to time. The distribution fee
compensates IMDI for expenses incurred in connection with activities primarily
intended to result in the sale of each Fund's Class B or Class C shares,
including the printing of prospectuses and reports for persons other than
existing shareholders and the preparation, printing and distribution of sales
literature and advertising materials. Pursuant to each Class B and Class C Plan,
IMDI may include interest, carrying or other finance charges in its calculation
of distribution expenses, if not prohibited from doing so pursuant to an order
of or a regulation adopted by the SEC.
Among other things, each Plan provides that (1) IMDI will submit to the
Board at least quarterly, and the Trustees will review, written reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made; (2) each Plan will continue in effect only so long as
such continuance is approved at least annually, and any material amendment
thereto is approved, by the votes of a majority of the Board, including the
Independent Trustees, cast in person at a meeting called for that purpose; (3)
payments by any Fund under each Plan shall not be materially increased without
the affirmative vote of the holders of a majority of the outstanding shares of
the relevant class; and (4) while each Plan is in effect, the selection and
nomination of Independent Trustees shall be committed to the discretion of the
Trustees who are not "interested persons" of the Trust.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may include the
management fees paid by each Fund. IMDI also may make payments (such as the
service fee payments described above) to unaffiliated broker-dealers, banks,
investment advisers, financial institutions and other entities for services
rendered in the distribution of a Fund's shares. To qualify for such payments,
shares may be subject to a minimum holding period. However, no such payments
will be made to any dealer or broker or other party if at the end of each year
the amount of shares held does not exceed a minimum amount. The minimum holding
period and minimum level of holdings will be determined from time to time by
IMDI.
A report of the amount expended pursuant to each Plan, and the purposes
for which such expenditures were incurred, must be made to the Board for its
review at least quarterly.
The Class B Plan and underwriting agreement were amended effective
March 16, 1999 to permit IMDI to sell its right to receive distribution fees
under the Class B Plan and CDSCs to third parties. IMDI enters into such
transactions to finance the payment of commissions to brokers at the time of
sale and other distribution-related expenses. In connection with such
amendments, the Trust has agreed that the distribution fee will not be
terminated or modified (including a modification by change in the rules relating
to the conversion of Class B shares into shares of another class) for any reason
(including a termination of the underwriting agreement) except:
(i) to the extent required by a change in the 1940 Act, the rules or
regulations under the 1940 Act, or the Conduct Rules of the NASD, in
each case enacted, issued, or promulgated after March 16, 1999;
(ii) on a basis which does not alter the amount of the distribution
payments to IMDI computed with reference to Class B shares the date of
original issuance of which occurred on or before December 31, 1998;
(iii) in connection with a Complete Termination (as defined in the Class B
Plan); or
(iv) on a basis determined by the Board of Trustees acting in good faith so
long as (a) neither the Trust nor any successor trust or fund or any
trust or fund acquiring a substantial portion of the assets of the
Trust (collectively, the "Affected Funds") nor the sponsors of the
Affected Funds pay, directly or indirectly, as a fee, a trailer fee,
or by way of reimbursement, any fee, however denominated, to any
person for personal services, account maintenance services or other
shareholder services rendered to the holder of Class B shares of the
Affected Funds from and after the effective date of such modification
or termination, and (b) the termination or modification of the
distribution fee applies with equal effect to all outstanding Class B
shares from time to time of all Affected Funds regardless of the date
of issuance thereof.
In the amendments to the underwriting agreement, the Trust has also
agreed that it will not take any action to waive or change any CDSC in respect
of any Class B share the date of original issuance of which occurred on or
before December 31, 1998, except as provided in the Trust's prospectus or
statement of additional information, without the consent of IMDI and its
transferees.
During the fiscal year ended December 31, 1999, Ivy Growth Fund paid
IMDI $170,946 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999, Ivy Growth Fund paid IMDI $61,058 pursuant to its Class B
plan. During the fiscal year ended December 31, 1999, Ivy Growth Fund paid IMDI
$2,812 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy Growth Fund: advertising
$0; printing and mailing of prospectuses to persons other than current
shareholders, $55,887; compensation to underwriters $0; compensation to dealers,
$145,049; compensation to sales personnel $1,157,581; interest, carrying or
other financing charges $0; seminars and meetings, $36,262; travel and
entertainment, $115,690; general and administrative, $699,514; telephone,
$35,680; and occupancy and equipment rental, $91,829.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy Growth Fund: advertising,
$0; printing and mailing of prospectuses to persons other than current
shareholders, $1,070; compensation to underwriters $0; compensation to dealers,
$11,550; compensation to sales personnel, $22,979; interest, carrying or other
financing charges $0; seminars and meetings, $2,887; travel and entertainment,
$2,305; general and administrative, $13,741; telephone, $707; and occupancy and
equipment rental $1,801.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy Growth Fund: advertising,
$1; printing and mailing of prospectuses to persons other than current
shareholders, $50; compensation to underwriters $0; compensation to dealers,
$851; compensation to sales personnel, $1,102; interest, carrying or other
financing charges $0; seminars and meetings, $212; travel and entertainment,
$109; general administrative, $658; telephone, $33; and occupancy and equipment
rental, $86.
During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid IMDI $5,576 pursuant to its Class A plan. During the fiscal year ended
December 31, 1999, Ivy US Blue Chip Fund paid IMDI $57,173 pursuant to its Class
B plan. During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid IMDI $18,084 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy US Blue Chip Fund:
advertising $51; printing and mailing of prospectuses to persons other than
current shareholders, $0; compensation to underwriters $0; compensation to
dealers, $1,299; compensation to sales personnel $8,206; interest, carrying or
other financing charges $0; seminars and meetings, $325; travel and
entertainment, $842; general and administrative, $4,766; telephone, $251; and
occupancy and equipment rental, $619.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy US Blue Chip Fund:
advertising, $205; printing and mailing of prospectuses to persons other than
current shareholders, $17,338; compensation of underwriters $0; compensation to
dealers, $22,670; compensation to sales personnel, $26,795; interest, carrying
or other financing charges $0; seminars and meetings, $5,668; travel and
entertainment, $2,649; general and administrative, $15,676; telephone, $814; and
occupancy and equipment rental $2,069.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy US Blue Chip Fund:
advertising, $73; printing and mailing of prospectuses to persons other than
current shareholders, $4,987; compensation to underwriters $0; compensation to
dealers, $5,188; compensation to sales personnel, $8,328; interest, carrying or
other financing charges $0; seminars and meetings, $1,298; travel and
entertainment, $832; general administrative, $4,840; telephone, $253; and
occupancy and equipment rental, $636.
During the fiscal year ended December 31, 1999, Ivy US Emerging Growth
Fund paid IMDI $154,097 pursuant to its Class A plan. During the fiscal year
ended December 31, 1999, Ivy US Emerging Growth Fund paid IMDI $530,238 pursuant
to its Class B plan. During the fiscal year ended December 31, 1999, Ivy US
Emerging Growth Fund paid IMDI $104,332 pursuant to its Class C plan.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class A shares of Ivy US Emerging Growth Fund:
advertising $0; printing and mailing of prospectuses to persons other than
current shareholders, $22,608; compensation to underwriters $0; compensation to
dealers, $32,323; compensation to sales personnel $237,055; interest, carrying
or other financing charges $0; seminars and meetings, $8,081; travel and
entertainment, $23,752; general and administrative, $142,608; telephone, $7,300;
and occupancy and equipment rental, $18,703.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class B shares of Ivy US Emerging Growth Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $19,310; compensation to underwriters $0; compensation to
dealers, $58,429; compensation to sales personnel, $200,870; interest, carrying
or other financing charges $0; seminars and meetings, $14,607; travel and
entertainment, $20,086; general and administrative, $120,713; telephone, $6,182;
and occupancy and equipment rental $15,846.
During the fiscal year ended December 31, 1999, IMDI expended the
following amounts in marketing Class C shares of Ivy US Emerging Growth Fund:
advertising, $0; printing and mailing of prospectuses to persons other than
current shareholders, $3,780; compensation to underwriters $0; compensation to
dealers, $21,447; compensation to sales personnel, $39,452; interest, carrying
or other financing charges $0; seminars and meetings, $5,362; travel and
entertainment, $3,947; general administrative, $23,696; telephone, $1,214; and
occupancy and equipment rental, $3,110.
Each Plan may be amended at any time with respect to the class of
shares of the Fund to which the Plan relates by vote of the Trustees, including
a majority of the Independent Trustees, cast in person at a meeting called for
the purpose of considering such amendment. Each Plan may be terminated at any
time with respect to the class of shares of the Fund to which the Plan relates,
without payment of any penalty, by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of that
class.
If the Distribution Agreement or the Distribution Plans are terminated
(or not renewed) with respect to any of the Ivy funds (or class of shares
thereof), each may continue in effect with respect to any other fund (or Class
of shares thereof) as to which they have not been terminated (or have been
renewed).
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown Brothers
Harriman & Co. (the "Custodian"), a private bank and member of the principal
securities exchanges, located at 40 Water Street, Boston, Massachusetts 02109
(the "Custodian"), maintains custody of the assets of each Fund held in the
United States. Rules adopted under the 1940 Act permit the Trust to maintain its
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Pursuant to those rules, the Custodian has entered into
subcustodial agreements for the holding of each Fund's foreign securities. With
respect to each Fund, the Custodian may receive, as partial payment for its
services to the Fund, a portion of the Trust's brokerage business, subject to
its ability to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI provides certain
accounting and pricing services for each Fund. As compensation for those
services, each Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee is based upon the net assets of each Fund at the
preceding month end at the following rates: $1,250 when net assets are $10
million and under; $2,500 when net assets are over $10 million to $40 million;
$5,000 when net assets are over $40 million to $75 million; and $6,500 when net
assets are over $75 million.
During the fiscal year ended December 31, 1999, Ivy Growth Fund paid
MIMI $113,237 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid MIMI $29,915 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Emerging Growth
Fund paid MIMI $100,632 under the agreement
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, located at
Via Mizner Financial Plaza, Ste. 300, 700 S. Federal Hwy., Boca Raton, Florida,
33432, is the transfer agent for each Fund. Under the Agreement, each Fund pays
a monthly fee at an annual rate of $20.00 for each open Class A, Class B, Class
C and Advisor Class account. In addition, each Fund pays a monthly fee at an
annual rate of $4.70 per account that is closed plus certain out-of-pocket
expenses. Ivy US Blue Chip Fund pays a monthly fee at an annual rate of $10.25
per open Class I account. Such fees and expenses for the fiscal year ended
December 31, 1999 for Ivy Growth Fund totaled $778,713. Such fees and expenses
for the fiscal year ended December 31, 1999 for Ivy US Blue Chip Fund totaled
$17,901. Such fees and expenses for the fiscal year ended December 31, 1999 for
Ivy US Emerging Growth Fund totaled $333,603. Certain broker-dealers that
maintain shareholder accounts with each Fund through an omnibus account provide
transfer agent and other shareholder-related services that would otherwise be
provided by IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly. IMSC pays such broker-dealers a
per account fee for each open account within the omnibus account, or a fixed
rate (e.g., 0.10%) fee, based on the average daily net asset value of the
omnibus account (or a combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI provides certain
administrative services to each Fund. As compensation for these services, each
Fund pays MIMI a monthly fee at the annual rate of 0.10% of the Fund's average
daily net asset value of its Class A, Class B, Class C, and Advisor Class
shares. Ivy US Blue Chip Fund pays MIMI a monthly fee at the annual rate of
0.01% of its average daily net assets for Class I. Such fees for the fiscal year
ended December 31, 1999 for Ivy Growth Fund totaled $321,469. Such fees for the
fiscal year ended December 31, 1999 for Ivy US Blue Chip Fund totaled $10,526.
Such fees for the fiscal year ended December 31, 1999 for Ivy US Emerging Growth
Fund totaled $100,632.
AUDITORS
PricewaterhouseCoopers LLP, independent 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 each 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 any Fund for such purchases
and sales (although the price paid generally includes undisclosed compensation
to the dealer). The prices paid to underwriters of newly-issued securities
usually include a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally reflect the spread
between the bid and asked prices. In connection with OTC transactions, IMI
attempts to deal directly with the principal market makers, except in those
circumstances where IMI believes that a better price and execution are available
elsewhere.
IMI selects broker-dealers to execute transactions and evaluates the
reasonableness of commissions on the basis of quality, quantity, and the nature
of the firms' professional services. Commissions to be charged and the rendering
of investment services, including statistical, research, and counseling services
by brokerage firms, are factors to be considered in the placing of brokerage
business. The types of research services provided by brokers may include general
economic and industry data, and information on securities of specific companies.
Research services furnished by brokers through whom the Trust effects securities
transactions may be used by IMI in servicing all of its accounts. In addition,
not all of these services may be used by IMI in connection with the services it
provides to the Funds or the Trust. IMI may consider sales of shares of Ivy
funds as a factor in the selection of broker-dealers and may select
broker-dealers who provide it with research services. IMI 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 the 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, Ivy Growth
Fund paid brokerage commissions of $683,881 and $907,345, respectively. For the
fiscal year ended December 31, 1999, Ivy Growth Fund paid a total of $739,391 in
brokerage commissions with respect to portfolio transactions aggregating
$395,240,254. Of such amount, $218,593 in brokerage commissions with respect to
portfolio transactions aggregating $123,858,312 was placed with broker-dealers
who provided research services.
During the period from commencement of operations (November 2, 1998)
through December 31, 1998, Ivy US Blue Chip Fund paid brokerage commissions of
$1,806. For the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund paid
a total of $19,700 in brokerage commissions with respect to portfolio
transactions aggregating $27,986,875. Of such amount, $15,344 in brokerage
commissions with respect to portfolio transactions aggregating $23,627,153 was
placed with broker-dealers who provided research services.
During the fiscal years ended December 31, 1997 and 1998, Ivy US
Emerging Growth Fund paid brokerage commissions of $583,738 and $658,613,
respectively. For the fiscal year ended December 31, 1999, Ivy US Emerging
Growth Fund paid a total of $588,118 in brokerage commissions with respect to
portfolio transactions aggregating $266,009,325. Of such amount, $60,490 in
brokerage commissions with respect to portfolio transactions aggregating
$20,395,447 was placed with broker-dealers who provided research services.
Brokerage commissions vary from year to year in accordance with the
extent to which a particular Fund is more or less actively traded.
Each Fund may, under some circumstances, accept securities in lieu of
cash as payment for Fund shares. Each Fund will accept securities only to
increase its holdings in a portfolio security or to take a new portfolio
position in a security that IMI deems to be a desirable investment for that
Fund. While no minimum has been established, it is expected that each Fund will
not accept securities having an aggregate value of less than $1 million. The
Trust may reject in whole or in part any or all offers to pay for Fund shares
with securities and may discontinue accepting securities as payment for Fund
shares at any time without notice. The Trust will value accepted securities in
the manner and at the same time provided for valuing portfolio securities of
each Fund, and each Fund's shares will be sold for net asset value determined at
the same time the accepted securities are valued. The Trust will only accept
securities delivered in proper form and will not accept securities subject to
legal restrictions on transfer. The acceptance of securities by the Trust must
comply with the applicable laws of certain states.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an unlimited number of
shares of beneficial interest (no par value per share). When issued, shares of
each class of each Fund are fully paid, non-assessable, redeemable and fully
transferable. No class of shares of any Fund has preemptive rights or
subscription rights.
The Declaration of Trust permits the Trustees to create separate series
or portfolios and to divide any series or portfolio into one or more classes.
The Trustees have authorized eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Class A, Class B, and Class
C shares for Ivy Money Market Fund, and Class A, Class B, Class C and Advisor
Class shares for the Funds, Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China
Region Fund, Ivy Cundill Value Fund, Ivy Developing Markets Fund, Ivy European
Opportunities Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
Global Science & Technology Fund, Ivy International Fund, Ivy International Fund
II, Ivy International Small Companies Fund, Ivy International Strategic Bond
Fund and Ivy Next Wave Internet Fund, as well as Class I shares for Ivy Bond
Fund, Ivy Cundill Value Fund, Ivy European Opportunities Fund, Ivy Global
Science & Technology Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy International Strategic Bond Fund,
Ivy US Blue Chip Fund and Ivy Next Wave Internet Fund. 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 each Fund entitle their holders to one vote per share (with
proportionate voting for fractional shares). Shareholders of each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each Fund will vote together, except with respect to the distribution
plan applicable to the Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all funds of the Trust,
but affecting the funds differently, separate votes by the shareholders of each
fund are required. Approval of an investment advisory agreement and a change in
fundamental policies would be regarded as matters requiring separate voting by
the shareholders of each fund of the Trust. If the Trustees determine that a
matter does not affect the interests of a Fund, then the shareholders of that
Fund will not be entitled to vote on that matter. Matters that affect the Trust
in general, such as ratification of the selection of independent 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 a Fund means the vote of the lesser of: (1) 67% of
the shares of that Fund (or of the Trust) present at a meeting if the holders of
more than 50% of the outstanding shares are present in person or by proxy; or
(2) more than 50% of the outstanding shares of that Fund (or of the Trust).
With respect to the submission to shareholder vote of a matter
requiring separate voting by a Fund, the matter shall have been effectively
acted upon with respect to that Fund if a majority of the outstanding voting
securities of the Fund votes for the approval of the matter, notwithstanding
that: (1) the matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the matter has not been
approved by a majority of the outstanding voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that the holders
of not less than two-thirds of the outstanding shares of the Trust may remove a
person serving as trustee either by declaration in writing or at a meeting
called for such purpose. The Trustees are required to call a meeting for the
purpose of considering the removal of a person serving as Trustee if requested
in writing to do so by the holders of not less than 10% of the outstanding
shares of the Trust. Shareholders will be assisted in communicating with other
shareholders in connection with the removal of a Trustee as if Section 26(c) of
the Act were applicable.
The Trust's shares do not have cumulative voting rights and accordingly
the holders of more than 50% of the outstanding shares could elect the entire
Board, in which case the holders of the remaining shares would not be able to
elect any Trustees.
Under Massachusetts law, the Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Amended and Restated Declaration of Trust disclaims liability of
the shareholders, Trustees or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust, and
requires that notice of the disclaimer be given in each contract or obligation
entered into or executed by the Trust or its Trustees. The Amended and Restated
Declaration of Trust provides for indemnification out of Fund property for all
loss and expense of any shareholder of any Fund held personally liable for the
obligations of that Fund. The risk of a shareholder of the Trust incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations and, thus,
should be considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust.
SPECIAL RIGHTS AND PRIVILEGES
The Trust offers, and (except as noted below) bears the cost of
providing, to investors the following rights and privileges. The Trust reserves
the right to amend or terminate any one or more of these rights and privileges.
Notice of amendments to or terminations of rights and privileges will be
provided to shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer to funds,
other than the Funds, whose shares are also distributed by IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Cundill
Value Fund, Ivy Developing Markets Fund, Ivy European Opportunities Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy Global Science & Technology
Fund, Ivy International Fund, Ivy International Fund II, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Money Market Fund and
Ivy Next Wave Internet Fund (the other fifteen 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 each Fund have an
exchange privilege with other Ivy funds. Before effecting an exchange,
shareholders of a Fund should obtain and read the currently effective prospectus
for the Ivy fund into which the exchange is to be made.
INITIAL SALES CHARGE SHARES. Class A shareholders may exchange their
Class A shares ("outstanding Class A shares") for Class A shares of another Ivy
fund ("new Class A Shares") on the basis of the relative net asset value per
Class A share, plus an amount equal to the difference, if any, between the sales
charge previously paid on the outstanding Class A shares and the sales charge
payable at the time of the exchange on the new Class A shares. (The additional
sales charge will be waived for Class A shares that have been invested for a
period of 12 months or longer.) Class A shareholders may also exchange their
shares for shares of Ivy Money Market Fund (no initial sales charge will be
assessed at the time of such an exchange).
Each Fund may, from time to time, waive the initial sales charge on its
Class A shares sold to clients of The Legend Group and United Planners Financial
Services of America, Inc. This privilege will apply only to Class A Shares of a
Fund that are purchased using all or a portion of the proceeds obtained by such
clients through redemptions of shares of a mutual fund (other than one of the
Funds) on which a sales charge was paid (the "NAV transfer privilege").
Purchases eligible for the NAV transfer privilege must be made within 60 days of
redemption from the other fund, and the Class A shares purchased are subject to
a 1.00% CDSC on shares redeemed within the first year after purchase. The NAV
transfer privilege also applies to Fund shares purchased directly by clients of
such dealers as long as their accounts are linked to the dealer's master
account. The normal service fee, as described in the "Initial Sales Charge
Alternative - Class A Shares" section of the Prospectus, will be paid to those
dealers in connection with these purchases. IMDI may from time to time pay a
special cash incentive to The Legend Group or United Planners Financial Services
of America, Inc. in connection with sales of shares of a Fund by its registered
representatives under the NAV transfer privilege. Additional information on
sales charge reductions or waivers may be obtained from IMDI at the address
listed on the cover of this Statement of Additional Information.
On August 19, 1999, Ivy US Emerging Growth Fund and Hudson Capital
Appreciation Fund ("Hudson Capital") entered into an Agreement and Plan of
Reorganization (the "Plan") pursuant to which all or substantially all of the
assets of Hudson Capital would be acquired by Ivy US Emerging Growth Fund in
exchange solely for Class A and Class B voting shares of beneficial interest of
Ivy US Emerging Growth Fund (the "Reorganization"). In connection with the
Reorganization, the parties agreed that no sales charge would be imposed in
connection with the issuance of Ivy US Emerging Growth Fund shares to
shareholders of Hudson Capital pursuant to the Plan. In addition, the parties
agreed that former Class N shareholders of Hudson Capital would be exempt from
the initial sales charge on additional purchases of Class A shares of Ivy US
Emerging Growth Fund.
CONTINGENT DEFERRED SALES CHARGE SHARES
CLASS A:
Class A shareholders may exchange their Class A shares that are subject
to a contingent deferred sales charge ("CDSC"), as described in the Prospectus
("outstanding Class A shares"), for Class A shares of another Ivy fund ("new
Class A shares") on the basis of the relative net asset value per Class A share,
without the payment of any CDSC that would otherwise be due upon the redemption
of the outstanding Class A shares. Class A shareholders of any Fund exercising
the exchange privilege will continue to be subject to that Fund's CDSC period
following an exchange if such period is longer than the CDSC period, if any,
applicable to the new Class A shares.
For purposes of computing the CDSC that may be payable upon the
redemption of the new Class A shares, the holding period of the outstanding
Class A shares is "tacked" onto the holding period of the new Class A shares.
CLASS B: Class B shareholders may exchange their Class B shares
("outstanding Class B shares") for Class B shares of another Ivy fund ("new
Class B shares") on the basis of the relative net asset value per Class B share,
without the payment of any CDSC that would otherwise be due upon the redemption
of the outstanding Class B shares. Class B shareholders of any Fund exercising
the exchange privilege will continue to be subject to that Fund's CDSC schedule
(or period) following an exchange if such schedule is higher (or such period is
longer) than the CDSC schedule (or period) applicable to the new Class B shares.
Class B shares of any Fund acquired through an exchange of Class B
shares of another Ivy fund will be subject to that Fund's CDSC schedule (or
period) if such schedule is higher (or such period is longer) than the CDSC
schedule (or period) applicable to the Ivy fund from which the exchange was
made.
For purposes of both the conversion feature and computing the CDSC that
may be payable upon the redemption of the new Class B shares (prior to
conversion), the holding period of the outstanding Class B shares is "tacked"
onto the holding period of the new Class B shares.
The following CDSC table applies to Class B shares of Ivy Asia Pacific
Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Cundill Value Fund, Ivy
Developing Markets Fund, Ivy European Opportunities Fund, Ivy Global Fund, Ivy
Global Natural Resources Fund, Ivy Global Science & Technology Fund, Ivy Growth
Fund, Ivy International 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 Fund.
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders may exchange their Class C shares
("outstanding Class C shares") for Class C shares of another Ivy fund ("new
Class C shares") on the basis of the relative net asset value per Class C share,
without the payment of any CDSC that would otherwise be due upon redemption.
(Class C shares are subject to a CDSC of 1.00% if redeemed within one year of
the date of purchase.)
CLASS I: Subject to the restrictions set forth in the following
paragraph, Class I shareholders may exchange their outstanding Class I shares
for Class I shares of another Ivy fund on the basis of the relative net asset
value per share.
ALL CLASSES: The minimum value of shares which may be exchanged into an
Ivy fund in which shares are not already held is $1,000 ($5,000,000 in the case
of Class I). No exchange out of any Fund (other than by a complete exchange of
all Fund shares) may be made if it would reduce the shareholder's interest in
that Fund to less than $1,000 ($250,000 in the case of Class I).
Each exchange will be made on the basis of the relative net asset value
per share of the Ivy funds involved in the exchange next computed following
receipt by IMSC of telephone instructions by IMSC or a properly executed
request. Exchanges, whether written or telephonic, must be received by IMSC by
the close of regular trading on the Exchange (normally 4:00 p.m., eastern time)
to receive the price computed on the day of receipt. Exchange requests received
after that time will receive the price next determined following receipt of the
request. The exchange privilege may be modified or terminated at any time, upon
at least 60 days' notice to the extent required by applicable law. See
"Redemptions."
An exchange of shares between any of the Ivy funds will result in a
taxable gain or loss. Generally, this will be a capital gain or loss (long-term
or short-term, depending on the holding period of the shares) in the amount of
the difference between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain circumstances,
shareholders will be ineligible to take sales charges into account in computing
taxable gain or loss on an exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred retirement
plan will not be taxable to the plan and will not be taxed to the participant
until distribution. Each investor should consult his or her tax adviser
regarding the tax consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial investments in Class A shares of
each Fund made pursuant to a non-binding Letter of Intent. A Letter of Intent
may be submitted by an individual, his or her spouse and children under the age
of 21, or a trustee or other fiduciary of a single trust estate or single
fiduciary account. See the Account Application in the Prospectus. Any investor
may submit a Letter of Intent stating that he or she will invest, over a period
of 13 months, at least $50,000 in Class A shares of any Fund. A Letter of Intent
may be submitted at the time of an initial purchase of Class A shares of a Fund
or within 90 days of the initial purchase, in which case the Letter of Intent
will be back dated. A shareholder may include, as an accumulation credit, the
value (at the applicable offering price) of all Class A shares of Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Cundill Value Fund, Ivy
Developing Markets Fund, Ivy European Opportunities Fund, Ivy Global Fund, Ivy
Global Natural Resources Fund, Ivy Global Science & Technology Fund, Ivy Growth
Fund, Ivy International 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 Fund (and shares that
have been exchanged into Ivy Money Market Fund from any of the other funds in
the Ivy funds) held of record by him or her as of the date of his or her Letter
of Intent. During the term of the Letter of Intent, the Transfer Agent will hold
Class A shares representing 5% of the indicated amount (less any accumulation
credit value) in escrow. The escrowed Class A shares will be released when the
full indicated amount has been purchased. If the full indicated amount is not
purchased during the term of the Letter of Intent, the investor is required to
pay IMDI an amount equal to the difference between the dollar amount of sales
charge that he or she has paid and that which he or she would have paid on his
or her aggregate purchases if the total of such purchases had been made at a
single time. Such payment will be made by an automatic liquidation of Class A
shares in the escrow account. A Letter of Intent does not obligate the investor
to buy or the Trust to sell the indicated amount of Class A shares, and the
investor should read carefully all the provisions of such letter before signing.
RETIREMENT PLANS
Shares may be purchased in connection with several types of
tax-deferred retirement plans. Shares of more than one fund distributed by IMDI
may be purchased in a single application establishing a single account under the
plan, and shares held in such an account may be exchanged among the Ivy funds in
accordance with the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase payments in
connection with tax-deferred retirement plans must be at least $25 per
participant.
The following fees will be charged to individual shareholder accounts
as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per fund account
For shareholders whose retirement accounts are diversified across
several Ivy funds, the annual maintenance fee will be limited to not more than
$20.
The following discussion describes the tax treatment of certain
tax-deferred retirement plans under current Federal income tax law. State income
tax consequences may vary. An individual considering the establishment of a
retirement plan should consult with an attorney and/or an accountant with
respect to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of each Fund may be used as a
funding medium for an Individual Retirement Account ("IRA"). Eligible
individuals may establish an IRA by adopting a model custodial account available
from IMSC, who may impose a charge for establishing the account.
An individual who has not reached age 70-1/2 and who receives
compensation or earned income is eligible to contribute to an IRA, whether or
not he or she is an active participant in a retirement plan. An individual who
receives a distribution from another IRA, a qualified retirement plan, a
qualified annuity plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible to establish an
IRA by rolling over the distribution either directly or within 60 days after its
receipt. Tax advice should be obtained in connection with planning a rollover
contribution to an IRA.
In general, an eligible individual may contribute up to the lesser of
$2,000 or 100% of his or her compensation or earned income to an IRA each year.
If a husband and wife are both employed, and both are under age 70-1/2, each may
set up his or her own IRA within these limits. If both earn at least $2,000 per
year, the maximum potential contribution is $4,000 per year for both. For years
after 1996, the result is similar even if one spouse has no earned income; if
the joint earned income of the spouses is at least $4,000, a contribution of up
to $2,000 may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to an IRA in
computing his or her Federal income tax within the limits described above,
provided he or she (or his or her spouse, if they file a joint Federal income
tax return) is not an active participant in a qualified retirement plan (such as
a qualified corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan, 403(b) plan,
simplified employee pension, or governmental plan. If he or she (or his or her
spouse) is an active participant, whether the individual's contribution to an
IRA is fully deductible, partially deductible or not deductible depends on (i)
adjusted gross income and (ii) whether it is the individual or the individual's
spouse who is an active participant, in the case of married individuals filing
jointly. Contributions may be made up to the maximum permissible amount even if
they are not deductible. Rollover contributions are not includable in income for
Federal income tax purposes and therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current Federal income
tax until distributed. Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary income. Distributions of
non-deductible contributions are not subject to Federal income tax. In general,
distributions from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the taxable amount of
the distribution. The 10% penalty tax does not apply to amounts withdrawn from
an IRA after the individual reaches age 59-1/2, becomes disabled or dies, or if
withdrawn in the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated beneficiary, if any, or
rolled over into another IRA, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed individuals not in
excess of amounts paid for certain health insurance premiums, amounts used to
pay certain qualified higher education expenses, and amounts used within 120
days of the date the distribution is received to pay for certain first-time
homebuyer expenses. Distributions must begin to be withdrawn not later than
April 1 of the calendar year following the calendar year in which the individual
reaches age 70-1/2. Failure to take certain minimum required distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAs: Shares of each Fund also may be used as a funding medium for
a Roth Individual Retirement Account ("Roth IRA"). A Roth IRA is similar in
numerous ways to the regular (traditional) IRA, described above. Some of the
primary differences are as follows.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000. An individual whose adjusted gross income exceeds the maximum
phase-out amount cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
Contributions to a Roth IRA are not deductible. Contributions to a Roth IRA may
be made even after the individual for whom the account is maintained has
attained age 70 1/2.
No distributions are required to be taken prior to the death of the
original account holder. If a Roth IRA has been established for a minimum of
five years, distributions can be taken tax-free after reaching age 59 1/2, for a
first-time home purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher education
expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. After 1998, all taxes on such a rollover will have to be paid in the tax
year in which the rollover is made.
QUALIFIED PLANS: For those self-employed individuals who wish to
purchase shares of one or more Ivy funds through a qualified retirement plan, an
Agreement and a Retirement Plan are available from IMSC. The Retirement Plan may
be adopted as a profit sharing plan or a money purchase pension plan. A profit
sharing plan permits an annual contribution to be made in an amount determined
each year by the self-employed individual within certain limits prescribed by
law. A money purchase pension plan requires annual contributions at the level
specified in the Agreement. There is no set-up fee for qualified plans and the
annual maintenance fee is $20.00 per account.
In general, if a self-employed individual has any common law employees,
employees who have met certain minimum age and service requirements must be
covered by the Retirement Plan. A self-employed individual generally must
contribute the same percentage of income for common law employees as for himself
or herself.
A self-employed individual may contribute up to the lesser of $30,000
or 25% of compensation or earned income to a money purchase pension plan or to a
combination profit sharing and money purchase pension plan arrangement each year
on behalf of each participant. To be deductible, total contributions to a profit
sharing plan generally may not exceed 15% of the total compensation or earned
income of all participants in the plan, and total contributions to a combination
money purchase-profit sharing arrangement generally may not exceed 25% of the
total compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be included in
computing the deduction is limited (generally to $150,000 for benefits accruing
in plan years beginning after 1993, with annual inflation adjustments). A
self-employed individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement and
Retirement Plan for the benefit of their eligible employees. Similar
contribution and deduction rules apply to corporate employers.
Distributions from the Retirement Plan generally are made after a
participant's separation from service. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies; (3)
becomes disabled; (4) uses the withdrawal to pay tax-deductible medical
expenses; (5) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust to furnish
custodial services to the employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE ORGANIZATIONS
("403(B)(7) ACCOUNT"): Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code") permits public school systems and certain charitable
organizations to use mutual fund shares held in a custodial account to fund
deferred compensation arrangements with their employees. A custodial account
agreement is available for those employers whose employees wish to purchase
shares of the Trust in conjunction with such an arrangement. The special
application for a 403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only following
death, disability, separation from service, attainment of age 59-1/2, or
incurring a financial hardship. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies or
becomes disabled; (3) uses the withdrawal to pay tax-deductible medical
expenses; (4) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (5) rolls over the distribution.
There is no set-up fee for 403(b)(7) Accounts and the annual maintenance fee is
$20.00 per account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs: An employer may deduct
contributions to a SEP up to the lesser of $30,000 or 15% of compensation. SEP
accounts generally are subject to all rules applicable to IRA accounts, except
the deduction limits, and are subject to certain employee participation
requirements. No new salary reduction SEPs ("SARSEPs") may be established after
1996, but existing SARSEPs may continue to be maintained, and non-salary
reduction SEPs may continue to be established as well as maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a SIMPLE 401(k)
for years after 1996. An employee can make pre-tax salary reduction
contributions to a SIMPLE Plan, up to $6,000 a year (as indexed). Subject to
certain limits, the employer will either match a portion of employee
contributions, or will make a contribution equal to 2% of each employee's
compensation without regard to the amount the employee contributes. An employer
cannot maintain a SIMPLE Plan for its employees if the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of a Fund may reinvest
all or a part of the proceeds of the redemption back into Class A shares of the
same Fund at net asset value (without a sales charge) within 60 days from the
date of redemption. This privilege may be exercised only once. The reinvestment
will be made at the net asset value next determined after receipt by IMSC of the
reinvestment order accompanied by the funds to be reinvested. No compensation
will be paid to any sales personnel or dealer in connection with the
transaction.
Any redemption is a taxable event. A loss realized on a redemption
generally may be disallowed for tax purposes if the reinvestment privilege is
exercised within 30 days after the redemption. In certain circumstances,
shareholders will be ineligible to take sales charges into account in computing
taxable gain or loss on a redemption if the reinvestment privilege is exercised.
See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any investment of $50,000
or more in Class A shares of each Fund. See "Initial Sales Charge Alternative --
Class A Shares" in the Prospectus. The reduced sales charge is applicable to
investments made at one time by an individual, his or her spouse and children
under the age of 21, or a trustee or other fiduciary of a single trust estate or
single fiduciary account (including a pension, profit sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code). Rights of Accumulation are also applicable to current purchases of all of
the funds of Ivy Fund (except Ivy Money Market Fund) by any of the persons
enumerated above, where the aggregate quantity of Class A shares of such funds
(and shares that have been exchanged into Ivy Money Market Fund from any of the
other funds in the Ivy funds) and of any other investment company distributed by
IMDI, previously purchased or acquired and currently owned, determined at the
higher of current offering price or amount invested, plus the Class A shares
being purchased, amounts to $50,000 or more for all funds other than Ivy Bond
Fund; or $100,000 or more for Ivy Bond Fund.
At the time an investment takes place, IMSC must be notified by the
investor or his or her dealer that the investment qualifies for the reduced
sales charge on the basis of previous investments. The reduced sales charge is
subject to confirmation of the investor's holdings through a check of the
particular fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder (except shareholders with accounts in Class I) may
establish a Systematic Withdrawal Plan (a "Withdrawal Plan"), by telephone
instructions or by delivery to IMSC of a written election to have his or her
shares withdrawn periodically, accompanied by a surrender to IMSC of all share
certificates then outstanding in such shareholder's name, properly endorsed by
the shareholder. To be eligible to elect a Withdrawal Plan, a shareholder must
have at least $5,000 in his or her account. A Withdrawal Plan may not be
established if the investor is currently participating in the Automatic
Investment Method. A Withdrawal Plan may involve the depletion of a
shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event. Shareholders
contemplating participating in a Withdrawal Plan should consult their tax
advisers.
Additional investments made by investors participating in a Withdrawal
Plan must equal at least $1,000 each while the Withdrawal Plan is in effect.
Making additional purchases while a Withdrawal Plan is in effect may be
disadvantageous to the investor because of applicable initial sales charges or
CDSCs.
An investor may terminate his or her participation in the Withdrawal
Plan at any time by delivering written notice to IMSC. If all shares held by the
investor are liquidated at any time, participation in the Withdrawal Plan will
terminate automatically. The Trust or IMSC may terminate the Withdrawal Plan
option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of each Fund may be purchased in connection with investment
programs established by employee or other groups using systematic payroll
deductions or other systematic payment arrangements. The Trust does not itself
organize, offer or administer any such programs. However, it may, depending upon
the size of the program, waive the minimum initial and additional investment
requirements for purchases by individuals in conjunction with programs organized
and offered by others. Unless shares of a Fund are purchased in conjunction with
IRAs (see "How to Buy Shares" in the Prospectus), such group systematic
investment programs are not entitled to special tax benefits under the Code. The
Trust reserves the right to refuse purchases at any time or suspend the offering
of shares in connection with group systematic investment programs, and to
restrict the offering of shareholder privileges, such as check writing,
simplified redemptions and other optional privileges, as described in the
Prospectus, to shareholders using group systematic investment programs.
With respect to each shareholder account established on or after
September 15, 1972 under a group systematic investment program, the Trust and
IMI each currently charge a maintenance fee of $3.00 (or portion thereof) that
for each twelve-month period (or portion thereof) that the account is
maintained. The Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by causing on the
date the fee is assessed a redemption in each such shareholder account
sufficient to pay such fee. The Trust reserves the right to change these fees
from time to time without advance notice.
Class A shares of each Fund are made available to Merrill Lynch Daily K
Plan (the "Plan") participants at NAV without an initial sales charge if:
(i) the Plan is recordkept on a daily valuation basis by
Merrill Lynch and, on the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3
million or more in assets invested in broker/dealer funds not
advised or managed by Merrill Lynch Asset Management, L.P.
("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the fund's principal
underwriter or distributor and in funds advised or managed by
MLAM (collectively, the "Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an
independent recordkeeper whose services are provided through a
contract or alliance arrangement with Merrill Lynch, and on
the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by
Merrill Lynch plan conversion manager, on the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement.
Alternatively, Class B shares of each Fund are made available to Plan
participants at NAV without a CDSC if the Plan conforms with the requirements
for eligibility set forth in (i) through (iii) above but either does not meet
the $3 million asset threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B shares of any Fund convert to Class A shares once the Plan has reached
$5 million invested in Applicable Investments, or 10 years after the date of the
initial purchase by a participant under the Plan--the Plan will receive a Plan
level share conversion.
REDEMPTIONS
Shares of each Fund are redeemed at their net asset value next
determined after a proper redemption request has been received by IMSC, less any
applicable CDSC.
Unless a shareholder requests that the proceeds of any redemption be
wired to his or her bank account, payment for shares tendered for redemption is
made by check within seven days after tender in proper form, except that the
Trust reserves the right to suspend the right of redemption or to postpone the
date of payment upon redemption beyond seven days, (i) for any period during
which the Exchange is closed (other than customary weekend and holiday closings)
or during which trading on the Exchange is restricted, (ii) for any period
during which an emergency exists as determined by the SEC as a result of which
disposal of securities owned by a Fund is not reasonably practicable or it is
not reasonably practicable for the Fund to fairly determine the value of its net
assets, or (iii) for such other periods as the SEC may by order permit for the
protection of shareholders of a Fund.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in any Fund for
a period of more than 12 months. All accounts below that minimum will be
redeemed simultaneously when MIMI deems it advisable. The $1,000 balance will be
determined by actual dollar amounts invested by the shareholder, unaffected by
market fluctuations. The Trust will notify any such shareholder by certified
mail of its intention to redeem such account, and the shareholder shall have 60
days from the date of such letter to invest such additional sums as shall raise
the value of such account above that minimum. Should the shareholder fail to
forward such sum within 60 days of the date of the Trust's letter of
notification, the Trust will redeem the shares held in such account and transmit
the redemption in value thereof to the shareholder. However, those shareholders
who are investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments pursuant to the
plan for a period of at least six consecutive months, and these shareholders
will be given six-months' notice by the Trust before such redemption.
Shareholders in a qualified retirement, pension or profit sharing plan who wish
to avoid tax consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may change the minimum
account size.
If a shareholder has given authorization for telephonic redemption
privilege, shares can be redeemed and proceeds sent by Federal wire to a single
previously designated bank account. Delivery of the proceeds of a wire
redemption request of $250,000 or more may be delayed by any Fund for up to
seven days if deemed appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the telephonic
redemption privilege without prior notice. The Trust cannot be responsible for
the efficiency of the Federal wire system of the shareholder's dealer of record
or bank. The shareholder is responsible for any charges by the shareholder's
bank.
Each Fund employs reasonable procedures that require personal
identification prior to acting on redemption or exchange instructions
communicated by telephone to confirm that such instructions are genuine. In the
absence of such instructions, a Fund may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
CONVERSION OF CLASS B SHARES
As described in the Prospectus, Class B shares of each Fund will
automatically convert to Class A shares of that Fund, based on the relative net
asset values per share of the two classes, no later than the month following the
eighth anniversary of the initial issuance of such Class B shares of the Fund
occurs. For the purpose of calculating the holding period required for
conversion of Class B shares, the date of initial issuance shall mean: (1) the
date on which such Class B shares were issued, or (2) for Class B shares
obtained through an exchange, or a series of exchanges, (subject to the exchange
privileges for Class B shares) the date on which the original Class B shares
were issued. For purposes of conversion of Class B shares, Class B shares
purchased through the reinvestment of dividends and capital gain distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
shares in the sub-account) convert to Class A shares, a pro rata portion of the
Class B shares in the sub-account will also convert to Class A shares. The
portion will be determined by the ratio that the shareholder's Class B shares
converting to Class A shares bears to the shareholder's total Class B shares not
acquired through the reinvestment of dividends and capital gain distributions.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that Fund's aggregate net assets (i.e., its total assets less its
liabilities) by the number of the Fund's shares outstanding. For purposes of
determining a Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each Fund's liabilities, if not identifiable as belonging to
a particular class of that Fund, are allocated among the Fund's several classes
based on their relative net asset size. Liabilities attributable to a particular
class are charged to that class directly. The total liabilities for a class are
then deducted from the class's proportionate interest in the Fund's assets, and
the resulting amount is divided by the number of shares of the class outstanding
to produce its net asset value per share.
A security listed or traded on a recognized stock exchange or The
Nasdaq Stock Market, Inc. ("Nasdaq") is valued at the security's last quoted
sale price on the exchange on which the security is principally traded. If no
sale is reported at that time, the average between the last bid and asked price
(the "Calculated Mean") is used. Unless otherwise noted herein, the value of a
foreign security is determined in its national currency as of the normal close
of trading on the foreign exchange on which it is traded or as of the close of
regular trading on the Exchange, if that is earlier, and that value is then
converted into its U.S. dollar equivalent at the foreign exchange rate in effect
at noon, eastern time, on the day the value of the foreign security is
determined. All other securities for which OTC market quotations are readily
available are valued at the Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) or
pricing services that take into account appropriate valuation factors. Interest
is accrued daily. Money market instruments are valued at amortized cost, which
the Board believes approximates market value.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. Exchange listed and widely-traded OTC
futures (and options thereon) are valued at the most recent settlement price.
Securities and other assets for which market prices are not readily
available are priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on foreign exchanges may not take place on all days on
which there is regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of the national
business holidays identified below). If events materially affecting the value of
a Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when that Fund's net asset value is calculated (see
following paragraph), such securities may be valued at fair value as determined
by IMI in accordance with procedures approved by the Board.
Portfolio securities are valued (and net asset value per share is
determined) as of the close of regular trading on the Exchange (normally 4:00
p.m., eastern time) on each day the Exchange is open for trading. The Exchange
and the Trust's offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. On those days
when either or both of a Fund's Custodian or the Exchange close early as a
result of a partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption requests must be
received.
The number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
normally invests in securities that are listed on foreign exchanges that may
trade on weekends or other days when the Fund does not price its shares, each
Fund's net asset value may change on days when shareholders will not be able to
purchase or redeem that Fund's shares. The sale of each Fund's shares will be
suspended during any period when the determination of its net asset value is
suspended pursuant to rules or orders of the SEC and may be suspended by the
Board whenever in its judgment it is in a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each Fund. It is merely a summary and is not an
exhaustive discussion of all possible situations or of all potentially
applicable taxes. Accordingly, shareholders and prospective shareholders should
consult a competent tax adviser about the tax consequences to them of investing
in any Fund. The Funds are not managed for tax-efficiency.
Each Fund intends to be taxed as a regulated investment company under
Subchapter M of the Code. Accordingly, each Fund must, among other things, (a)
derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the market value of the Fund's assets
is represented by cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies).
As a regulated investment company, each Fund generally will not be
subject to U.S. Federal income tax on its income and gains that it distributes
to shareholders, if at least 90% of its investment company taxable income (which
includes, among other items, dividends, interest and the excess of any
short-term capital gains over long-term capital losses) for the taxable year is
distributed. Each Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, each Fund must distribute during each calendar
year, (1) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year (2) at least 98% of its capital
gains in excess of its capital losses (adjusted for certain ordinary losses) for
a one-year period generally ending on October 31 of the calendar year, and (3)
all ordinary income and capital gains for previous years that were not
distributed during such years. To avoid application of the excise tax, each Fund
intends to make distributions in accordance with the calendar year distribution
requirements. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by a Fund in October, November or
December of the year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be taxable to
shareholders in the calendar year the distributions are declared, rather than
the calendar year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt securities is
governed by Code section 1234. Pursuant to Code section 1234, the premium
received by each Fund for selling a put or call option is not included in income
at the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If a Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium received is
short-term capital gain or loss. If a call option written by a Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward contracts in
which each Fund may invest may be "section 1256 contracts." Gains (or losses) on
these contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary in character.
Also, section 1256 contracts held by each Fund at the end of each taxable year
(and on certain other dates prescribed in the Code) are "marked-to-market" with
the result that unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts undertaken
by each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each Fund on positions that are part of a
straddle may be deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in which such
losses are realized. Because only a few regulations implementing the straddle
rules have been promulgated, the consequences of such transactions to each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by any Fund, which is taxed as ordinary income when
distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, each Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if the Fund enters into a short sale, offsetting notional principal contract,
futures or forward contract transaction with respect to the appreciated position
or substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment of appreciated financial positions does not apply to certain
transactions closed in the 90-day period ending with the 30th day after the
close of each Fund's taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in exchange rates which
occur between the time each Fund accrues receivables or liabilities denominated
in a foreign currency and the time that Fund actually collects such receivables
or pays such liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of some investments, including debt securities
denominated in a foreign currency and certain options, futures and forward
contracts, gains or losses attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the security or contract and
the date of disposition also are treated as ordinary gain or loss. These gains
and losses, referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute investment-type assets, or 75% or more of its gross income
is investment-type income. If a Fund receives a so-called "excess distribution"
with respect to PFIC stock, that Fund itself may be subject to a tax on a
portion of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which a Fund held the PFIC shares. Each Fund itself will be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
Each Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Each Fund may elect to mark to market its PFIC shares,
resulting in the shares being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income; any resulting loss and any loss from an actual disposition of
the shares would be reported as ordinary loss to the extent of any net gains
reported in prior years. Under another election that currently is available in
some circumstances, each Fund generally would be required to include in its
gross income its share of the earnings of a PFIC on a current basis, regardless
of whether distributions are received from the PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by each Fund may be
treated as debt securities that are issued originally at a discount. Generally,
the amount of the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures.
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by each Fund in the
secondary market may be treated as having market discount. Generally, gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. In addition, the deduction of any interest expenses
attributable to debt securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. Each Fund may make one
or more of the elections applicable to debt securities having market discount,
which could affect the character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year or less
from the date of issuance) that may be acquired by each Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, each Fund will be required to include the acquisition
discount, or OID, in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. Each Fund may make one or more of the elections applicable to
debt securities having acquisition discount, or OID, which could affect the
character and timing of recognition of income.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by that Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by each Fund.
DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a
U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends
paid by each Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by that Fund, may
qualify for the dividends received deduction. However, the revised alternative
minimum tax applicable to corporations may reduce the value of the dividends
received deduction. Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, designated
by each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains whether paid in cash or in shares, and regardless of how long the
shareholder has held the Fund's shares; such distributions are not eligible for
the dividends received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share received equal
to the net asset value of a share of that Fund on the distribution date. A
distribution of an amount in excess of a Fund's current and accumulated earnings
and profits will be treated by a shareholder as a return of capital which is
applied against and reduces the shareholder's basis in his or her shares. To the
extent that the amount of any such distribution exceeds the shareholder's basis
in his or her shares, the excess will be treated by the shareholder as gain from
a sale or exchange of the shares. Shareholders will be notified annually as to
the U.S. Federal tax status of distributions and shareholders receiving
distributions in the form of newly issued shares will receive a report as to the
net asset value of the shares received.
If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by a Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Shareholders
should be careful to consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at this time may reflect the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which generally will be taxable to
them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a shareholder
will realize a taxable gain or loss depending upon his or her basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and, if so, will be long-term or
short-term, depending upon the shareholder's holding period for the shares. Any
loss realized on a redemption sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized by a
shareholder on the sale of Fund shares held by the shareholder for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any distributions of capital gain dividends received or treated as having
been received by the shareholder with respect to such shares.
In some cases, shareholders will not be permitted to take all or
portion of their sales loads into account for purposes of determining the amount
of gain or loss realized on the disposition of their shares. This prohibition
generally applies where (1) the shareholder incurs a sales load in acquiring the
shares of a Fund, (2) the shares are disposed of before the 91st day after the
date on which they were acquired, and (3) the shareholder subsequently acquires
shares in the same Fund or another regulated investment company and the
otherwise applicable sales charge is reduced under a "reinvestment right"
received upon the initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated investment companies
without the payment of a sales load or with the payment of a reduced sales
charge. Sales charges affected by this rule are treated as if they were incurred
with respect to the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of fund shares.
FOREIGN WITHHOLDING TAXES
Income received by each Fund from sources within a foreign country may
be subject to withholding and other taxes imposed by that country.
BACKUP WITHHOLDING
Each Fund will be required to report to the Internal Revenue Service
("IRS") all taxable distributions as well as gross proceeds from the redemption
of the Fund's shares, except in the case of certain exempt shareholders. All
such distributions and proceeds will be subject to withholding of Federal income
tax at a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Fund with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the shareholder or the Fund that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he or she is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above. This discussion does not purport to deal with all of the
tax consequences applicable to the Funds or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in any Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Fund may be
compared, in reports and promotional literature, to: (i) the S&P 500 Index, the
Dow Jones Industrial Average ("DJIA"), or other unmanaged indices so that
investors may compare each Fund's results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm that ranks mutual
funds by overall performance, investment objectives and assets, or tracked by
other services, companies, publications or other criteria; and (iii) the
Consumer Price Index (measure for inflation) to assess the real rate of return
from an investment in a Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses. Performance rankings are based on historical
information and are not intended to indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of the Fund made on the
first day of a designated period to equal the ending redeemable value ("ERV") of
such hypothetical investment on the last day of the designated period, according
to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000 to purchase
shares of a specific class
T = the average annual total return of shares of that class
n = the number of years
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
For purposes of the above computation for each Fund, it is assumed that
all dividends and capital gains distributions made by the Fund are reinvested at
net asset value in additional shares of the same class during the designated
period. In calculating the ending redeemable value for Class A shares and
assuming complete redemption at the end of the applicable period, the maximum
5.75% sales charge is deducted from the initial $1,000 payment and, for Class B
and Class C shares, the applicable CDSC imposed upon redemption of Class B or
Class C shares held for the period is deducted. Standardized Return quotations
for each Fund do not take into account any required payments for federal or
state income taxes. Standardized Return quotations for Class B shares for
periods of over eight years will reflect conversion of the Class B shares to
Class A shares at the end of the eighth year. Standardized Return quotations are
determined to the nearest 1/100 of 1%.
Each Fund may, from time to time, include in advertisements,
promotional literature or reports to shareholders or prospective investors total
return data that are not calculated according to the formula set forth above
("Non-Standardized Return"). Neither initial nor CDSCs are taken into account in
calculating Non-Standardized Return; a sales charge, if deducted, would reduce
the return.
The following table summarizes the calculation of Standardized and
Non-Standardized Return for the Class A, Class B and Class C shares of each Fund
for the periods indicated. In determining the average annual total return for a
specific class of shares of each Fund, recurring fees, if any, that are charged
to all shareholder accounts are taken into consideration. For any account fees
that vary with the size of the account of each Fund, the account fee used for
purposes of the following computations is assumed to be the fee that would be
charged to the mean account size of the Fund.
IVY GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C
Year ended December 31, 1999
24.28% 25.63% 29.43%
Five Years ended December 31, 1999
18.77% 18.85% N/A
Ten Years ended December 31, 1999
13.05% N/A N/A
Inception [#] to year ended December
31, 1999 [5]: 11.37% 14.80% 15.74%
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4] CLASS C
Year ended December 31, 1999
31.87% 30.63% 30.43%
Five Years ended December 31, 1999
20.18% 19.05% N/A
Ten Years ended December 31, 1999
13.72% N/A N/A
Inception [#] to year ended December
31, 1999 [5]: 11.54% 14.80% 15.74%
-------------------------------------------------------------------------------
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B and C shares reflect the deduction of the applicable CDSC
imposed on redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date for Class A shares of Ivy Growth Fund was March
1, 1984. The inception dates for Class B and Class C shares of the Fund were
October 22, 1993 and April 30, 1996, respectively.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1999 and
the one, five and ten year periods ended December 31, 1999 would have been
11.37%, 24.28%, 18,.77%, and 13.02%, respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1999 and
the one and five year periods ended December 31, 1999 would have been 14,77%,
25.63%, and 18.85%, respectively. (Since the inception date for Class B shares
was October 22, 1993, there were no Class B shares outstanding for the duration
of the ten-year period ended December 31, 1999.)
[3] The Non-Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class A shares for the period from inception through December 31,
1999 and the one, five and ten year periods ended December 31, 1999 would have
been 11.54%, 31.87%, 20.18%, and 13.69%, respectively.
[4] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 and the one and five year periods ended December 31, 1999 would have been
14.77%, 30.63%, and 19.05%, respectively. (Since the inception date for Class B
shares was October 22, 1993, there were no Class B shares outstanding for the
duration of the ten-year period ended December 31, 1999.)
[5] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY US BLUE CHIP FUND
STANDARD RETURN[*]
CLASS A[1] CLASS B[2] CLASS C[3] CLASS I[4]
Year ended December 31,
1999
8.71% 9.74% 13.84% N/A
Inception [#] to year
ended December 31, 1999
[8]
14.29% 13.28% 16.76% N/A
NON-STANDARD RETURN[**]
CLASS A[5] CLASS B[6] CLASS C[7] CLASS I[4]
Year ended
December 31, 1999
15.35% 14.74% 14.84% N/A
Inception [#] to year
ended December 31, 1999
[8]
20.25% 16.68% 16.76% N/A
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B and C shares reflect the deduction of the applicable CDSC
imposed on redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date for Ivy US Blue Chip Fund was November 2, 1998.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the one-year period ended December 31, 1999 and the
period from inception through December 31, 1999 would have been 7.11% and
12.00%, respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the one-year period ended December 31, 1999 and the
period from inception through December 31, 1999 would have been 8.05% and
10.99%, respectively.
[3] The Standardized Return figures for the Class C shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class C shares for the one-year period ended December 31, 1999 and the
period from inception through December 31, 1999 would have been 12.05% and
14.37%, respectively.
[4] Class I Shares are not subject to an initial sales charge or a
CDSC; therefore, the Standardized and Non-Standardized Return figures would be
identical. However, there were no outstanding Class I Shares during the periods
indicated.
[5] The Non-Standardized Return figures for Class A shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class A shares for the one-year period ended December 31, 1999 and
the period from inception through December 31, 1999 would have been 13.66% and
17.89%, respectively.
[6] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the one-year period ended December 31, 1999 and
the period from inception through December 31, 1999 would have been 13.05% and
14.33%, respectively.
[7] The Non-Standardized Return figures for Class C shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class C shares for the one-year period ended December 31, 1999 and
the period from inception through December 31, 1999 would have been 13.05% and
14.37%, respectively.
[8] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
IVY US EMERGING GROWTH FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2] CLASS C
Year ended
December 31, 1999 53.13% 56.27% 60.32%
Five years ended December 31, 1999
25.97% 26.39% N/A
Inception [#] to year ended
December 31, 1999 [4]: 26.36% 21.40% 18.60%
NON-STANDARDIZED RETURN[**]
CLASS A CLASS B[3] CLASS C
Year ended December 31, 1999
62.47% 61.27% 61.32%
Five years ended December 31, 1999
27.47% 26.54% N/A
Inception [#] to year ended
December 31, 1999 [4]: 27.47% 21.40% 18.60%
--------------------------------------------------------------------------------
[*] The Standardized Return figures for Class A shares reflect the
deduction of the maximum initial sales charge of 5.75%. The Standardized Return
figures for Class B and C shares reflect the deduction of the applicable CDSC
imposed on redemption of Class B or C shares held for the period.
[**] The Non-Standardized Return figures do not reflect the deduction
of any initial sales charge or CDSC.
[#] The inception date for Ivy US Emerging Growth Fund was March 3,
1993. Class A shares of the Fund were first offered for sale to the public on
April 30, 1993, and Class B shares of the Fund were first offered for sale to
the public on October 22, 1993. The inception date for the Class C shares of the
Fund was April 30, 1996.
[1] The Standardized Return figures for the Class A shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class A shares for the period from inception through December 31, 1999 and
the one and five year periods ended December 31, 1999 would have been 26.34%,
53.13%, and 25.97%, respectively.
[2] The Standardized Return figures for the Class B shares reflect
expense reimbursement. Without expense reimbursement, the Standardized Return
for Class B shares for the period from inception through December 31, 1999 and
the one and five year periods ended December 31, 1999 would have been 21.39%,
56.27%, and 26.39%, respectively.
[3] The Non-Standardized Return figures for Class B shares reflect
expense reimbursement. Without expense reimbursement, the Non-Standardized
Return for Class B shares for the period from inception through December 31,
1999 and the one and five year periods ended December 31, 1999 would have been
21.39%, 61.27%, and 26.54%, respectively.
[4] The total return for a period less than a full year is calculated
on an aggregate basis and is not annualized.
CUMULATIVE TOTAL RETURN. Cumulative total return is the cumulative rate
of return on a hypothetical initial investment of $1,000 in a specific class of
shares of each Fund for a specified period. Cumulative total return quotations
reflect changes in the price of each Fund's shares and assume that all dividends
and capital gains distributions during the period were reinvested in the same
Fund's shares. Cumulative total return is calculated by computing the cumulative
rates of return of a hypothetical investment in a specific class of shares of
each Fund over such periods, according to the following formula (cumulative
total return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000 to
purchase shares of a specific class
ERV = ending redeemable value: ERV is
the value, at the end of the
applicable period, of a hypothetical
$1,000 investment made at the
beginning of the applicable period.
IVY GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth Fund for the periods indicated through December 31, 1999,
assuming the maximum 5.75% sales charge has been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 24.28% 136.31% 240.91% 6,066.80%
Class B 25.63% 137.09% N/A 135.16%
Class C 29.43% N/A N/A 71.02%
The following table summarizes the calculation of Cumulative Total
Return for Ivy Growth Fund for the periods indicated through December 31, 1999,
assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR FIVE YEARS TEN YEARS INCEPTION[*]
Class A 31.87% 150.73% 261.71% 6,443.02%
Class B 30.63% 139.09% N/A 135.16%
Class C 30.43% N/A N/A 71.02%
---------------------------
[*] The inception date for Ivy Growth Fund (Class A shares) was April 1,
1984; the inception date for the Class B shares of the Fund was October
22, 1993. The inception date for Class C shares of the Fund was April
30, 1996.
IVY US BLUE CHIP FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Blue Chip Fund for the periods indicated through December 31,
1999, assuming the maximum 5.75% sales charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 8.71% 16.76%
Class B 9.74% 15.42%
Class C 13.84% 19.52%
Class I N/A N/A
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Blue Chip Fund for the periods indicated through December 31,
1999, assuming the maximum 5.75% sales charge has not been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 15.35% 23.88%
Class B 14.74% 19.42%
Class C 14.84% 19.52%
Class I N/A N/A
[*] The inception date for Ivy US Blue Chip Fund was November 2, 1998.
IVY US EMERGING GROWTH FUND
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Emerging Growth Fund for the periods indicated through
December 31, 1999, assuming the maximum 5.75% sales charge has been assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION[*]
Class A 53.13% 217.21% 376.18%
Class B 56.27% 222.49% 232.48%
Class C 60.32% N/A 87.04%
The following table summarizes the calculation of Cumulative Total
Return for Ivy US Emerging Growth Fund for the periods indicated through
December 31, 1999, assuming the maximum 5.75% sales charge has not been
assessed.
SINCE
ONE YEAR FIVE YEARS INCEPTION[*]
Class A 62.47% 236.56% 405.23%
Class B 61.27% 224.49% 232.48%
Class C 61.32% N/A 87.04%
---------------------------
[*] The inception date for Ivy US Emerging Growth Fund was March 3, 1993.
Class A shares of the Fund were first offered for sale to the public on
April 30, 1993, and Class B shares were first offered for sale to the
public on October 22, 1993. The inception date for Class C shares was
April 30, 1996.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The foregoing
computation methods are prescribed for advertising and other communications
subject to SEC Rule 482. Communications not subject to this rule may contain a
number of different measures of performance, computation methods and
assumptions, including but not limited to: historical total returns; results of
actual or hypothetical investments; changes in dividends, distributions or share
values; or any graphic illustration of such data. These data may cover any
period of the Trust's existence and may or may not include the impact of sales
charges, taxes or other factors.
Performance quotations for each Fund will vary from time to time
depending on market conditions, the composition of the Fund's portfolio and
operating expenses of the Fund. These factors and possible differences in the
methods used in calculating performance quotations should be considered when
comparing performance information regarding each Fund's shares with information
published for other investment companies and other investment vehicles.
Performance quotations should also be considered relative to changes in the
value of each Fund's shares and the risks associated with each Fund's investment
objectives and policies. At any time in the future, performance quotations may
be higher or lower than past performance quotations and there can be no
assurance that any historical performance quotation will continue in the future.
Each Fund may also cite endorsements or use for comparison its
performance rankings and listings reported in such newspapers or business or
consumer publications as, among others: AAII Journal, Barron's, Boston Business
Journal, Boston Globe, Boston Herald, Business Week, Consumer's Digest, Consumer
Guide Publications, Changing Times, Financial Planning, Financial World, Forbes,
Fortune, Growth Fund Guide, Houston Post, Institutional Investor, International
Fund Monitor, Investor's Daily, Los Angeles Times, Medical Economics, Miami
Herald, Money Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's Directory of Investment
Managers, New York Times, Newsweek, No Load Fund Investor, No Load Fund* X,
Oakland Tribune, Pension World, Pensions and Investment Age, Personal Investor,
Rugg and Steele, Time, U.S. News and World Report, USA Today, The Wall Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Portfolio of Investments as of December 31, 1999, Statement of
Assets and Liabilities as of December 31, 1999, Statement of Operations for the
fiscal year ended December 31, 1999, Statement of Changes in Net Assets for the
fiscal year ended December 31, 1999, Financial Highlights, Notes to Financial
Statements, and Report of Independent 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.
<PAGE>
IVY GROWTH FUND
IVY US BLUE CHIP FUND
IVY US EMERGING GROWTH FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
ADVISOR CLASS SHARES
May 1, 2000
(as supplemented on June 30, 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 Growth Fund, Ivy
US Blue Chip Fund and Ivy US Emerging Growth Fund (each a "Fund"). The other
fifteen portfolios of the Trust are described in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with the
prospectus for the Funds' Advisor Class shares dated May 1, 2000, as
supplemented on June 30, 2000 (the "Prospectus"), which may be obtained upon
request and without charge from the Trust at the Distributor's address and
telephone number printed below. Advisor Class shares are only offered to certain
investors (see the Prospectus). The Funds also offer Class A, B and C shares
(and Class I shares, in the case of Ivy US Blue Chip Fund), which are described
in a separate prospectus and SAI that may also be obtained without charge from
the Distributor.
Each Fund's Annual Report to shareholders dated December 31, 1999
(each, an "Annual Report") is incorporated by reference into this SAI. Each
Fund's Annual Report may be obtained without charge from the Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION....................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RESTRICTIONS.....................1
IVY GROWTH FUND...............................................1
IVY US BLUE CHIP FUND.........................................4
IVY US EMERGING GROWTH FUND...................................8
RISK CONSIDERATIONS...................................................11
EQUITY SECURITIES............................................11
CONVERTIBLE SECURITIES.......................................11
SMALL COMPANIES..............................................12
INITIAL PUBLIC OFFERINGS.....................................12
ADJUSTABLE RATE PREFERRED STOCKS.............................13
DEBT SECURITIES..............................................13
ILLIQUID SECURITIES..........................................16
FOREIGN SECURITIES...........................................17
EMERGING MARKETS.............................................18
FOREIGN CURRENCIES...........................................19
FOREIGN CURRENCY EXCHANGE TRANSACTIONS.......................20
REPURCHASE AGREEMENTS........................................21
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS............21
COMMERCIAL PAPER.............................................21
BORROWING....................................................22
WARRANTS.....................................................22
REAL ESTATE INVESTMENT TRUSTS (REITS)........................22
OPTIONS TRANSACTIONS.........................................22
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS...........26
SECURITIES INDEX FUTURES CONTRACTS...........................28
COMBINED TRANSACTIONS........................................30
PORTFOLIO TURNOVER....................................................30
TRUSTEES AND OFFICERS.................................................31
PRINCIPAL HOLDERS OF SECURITIES.......................................37
CLASS A......................................................38
CLASS B......................................................39
CLASS C......................................................40
CLASS I......................................................42
ADVISOR CLASS................................................43
INVESTMENT ADVISORY AND OTHER SERVICES................................45
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES.........45
DISTRIBUTION SERVICES........................................47
CUSTODIAN....................................................48
FUND ACCOUNTING SERVICES.....................................48
TRANSFER AGENT AND DIVIDEND PAYING AGENT.....................49
ADMINISTRATOR................................................49
AUDITORS.....................................................50
BROKERAGE ALLOCATION..................................................50
CAPITALIZATION AND VOTING RIGHTS......................................51
SPECIAL RIGHTS AND PRIVILEGES.........................................53
AUTOMATIC INVESTMENT METHOD..................................53
EXCHANGE OF SHARES...........................................53
RETIREMENT PLANS.............................................54
SYSTEMATIC WITHDRAWAL PLAN...................................58
GROUP SYSTEMATIC INVESTMENT PROGRAM..........................58
REDEMPTIONS...........................................................59
NET ASSET VALUE.......................................................60
TAXATION..............................................................62
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS......62
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES.......64
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES...........64
DEBT SECURITIES ACQUIRED AT A DISCOUNT.......................65
DISTRIBUTIONS................................................65
DISPOSITION OF SHARES........................................66
FOREIGN WITHHOLDING TAXES....................................66
BACKUP WITHHOLDING...........................................67
PERFORMANCE INFORMATION...............................................67
FINANCIAL STATEMENTS..................................................70
APPENDIX A............................................................71
<PAGE>
GENERAL INFORMATION
Each Fund is organized as a separate, diversified portfolio of the
Trust, an open-end management investment company organized as a Massachusetts
business trust on December 21, 1983. Ivy Growth Fund commenced operations on
March 1, 1984. Ivy US Blue Chip Fund commenced operations on November 2, 1998.
Ivy US Emerging Growth Fund commenced operations on March 3, 1993. Advisor Class
shares of each Fund (except Ivy US Blue Chip Fund) were first offered on January
1, 1998. Advisor Class shares of Ivy US Blue Chip Fund were first offered on
November 2, 1998.
Descriptions in this SAI of a particular investment practice or
technique in which any Fund may engage or a financial instrument which any Fund
may purchase are meant to describe the spectrum of investments that IMI, in its
discretion, might, but is not required to, use in managing each Fund's portfolio
assets. For example, IMI may, in its discretion, at any time employ a given
practice, technique or instrument for one or more funds but not for all funds
advised by it. It is also possible that certain types of financial instruments
or investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in some or all
markets, in which case a Fund would not use them. Investors should also be aware
that certain practices, techniques, or instruments could, regardless of their
relative importance in the Fund's overall investment strategy, from time to time
have a material impact on that Fund's performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RESTRICTIONS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
Whenever an investment objective, policy or restriction set forth in
the Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall, unless otherwise
indicated, apply to a Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time of investment,
a later increase or decrease in the percentage which results from circumstances
not involving any affirmative action by a Fund, such as a change in market
conditions or a change in a Fund's asset level or other circumstances beyond a
Fund's control, will not be considered a violation.
IVY GROWTH FUND
Ivy Growth Fund's principal investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund invests at
least 65% of its total assets in common stocks and securities convertible into
common stocks. The Fund invests primarily in equity securities of domestic
corporations with low price-earnings ratios and rising earnings. Approximately
one half of the Fund's portfolio is comprised of companies that have had a
proven and consistent record of earnings, but whose prices appear to be low
relative to their underlying profitability. The other half is invested in equity
securities of small and medium-sized U.S. companies that are in the early stages
of their life cycles and that are believed to have the potential to increase
their sales and earnings at above average rates.
Ivy Growth Fund may invest up to 5% of its net assets in foreign equity
securities, primarily those traded in European, Pacific Basin and Latin American
markets, some of which may be emerging markets involving special risks, as
described below. Individual foreign securities are selected based on value
indicators, such as a low price-earnings ratio, and are reviewed for fundamental
financial strength.
When circumstances warrant, the Fund may invest without limit in
investment grade debt securities (e.g., U.S. Government securities or other
corporate debt securities rated at least Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poors Ratings Services ("S&P"), or, if unrated,
considered by IMI to be of comparable quality), preferred stocks, or cash or
cash equivalents such as bank obligations (including certificates of deposit and
bankers' acceptances), commercial paper, short-term notes and repurchase
agreements.
The Fund may invest up to 5% of its net assets in debt securities rated
Ba or below by Moody's or BB or below by S&P, or if unrated, considered by IMI
to be of comparable quality (commonly referred to as "high yield" or "junk"
bonds). The Fund will not invest in debt securities rated less than C by either
Moody's or S&P.
The Fund may borrow up to 10% of the value of its total assets, but
only for temporary purposes when it would be advantageous to do so from an
investment standpoint. The Fund may invest up to 5% of its net assets in
warrants. The Fund may not invest more than 15% of its net assets in illiquid
securities. The Fund may enter into forward foreign currency contracts and may
also invest in equity real estate investment trusts.
Ivy Growth Fund may write put options, with respect to not more than
10% of the value of its net assets, on securities and stock indices, and may
write covered call options with respect to not more than 25% of the value of its
net assets. The Fund may purchase options, provided the aggregate premium paid
for all options held does not exceed 5% of its net assets. For hedging purposes
only, the Fund may enter into stock index futures contracts as a means of
regulating its exposure to equity markets. The Fund's equivalent exposure in
stock index futures contracts will not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY GROWTH FUND
Ivy Growth Fund's investment objectives as set forth in the "Summary"
section of the Prospectus, together with the investment restrictions set forth
below, are fundamental policies of the Fund and may not be changed without the
approval of a majority (as defined in the 1940 Act) of the outstanding voting
shares of the Fund. The Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by its
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
ADDITIONAL RESTRICTIONS FOR IVY GROWTH FUND
Ivy Growth Fund has adopted the following additional restrictions which
are not fundamental and which may be changed without shareholder approval to the
extent permitted by applicable law, regulation or regulatory policy.
Under these restrictions, the Fund may not:
(i) invest in oil, gas or other mineral leases or exploration or
development programs;
(ii) engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iii) invest in companies for the purpose of exercising control of
management;
(iv) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(v) purchase any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) less than three years
old;
(vi) invest more than 5% of the value of its total assets in the securities
of issuers which are not readily marketable;
(vii) borrow money, except for temporary purposes where investment
transactions might advantageously require it. Any such loan may not be
for a period in excess of 60 days, and the aggregate amount of all
outstanding loans may not at any time exceed 10% of the value of the
total assets of the Fund at the time any such loan is made;
(viii) purchase securities on margin;
(ix) sell securities short;
(x) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than capital stock of the Fund), but such persons or firms may
act as brokers for the Fund for customary commissions to the extent
permitted by the Investment Company Act of 1940; or
(xi) purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidation.
Under the 1940 Act, the Fund is permitted, subject to its investment
restrictions, to borrow money only from banks. The Trust has no current
intention of borrowing amounts in excess of 5% of the Fund's assets. The Fund
will continue to interpret fundamental investment restriction (v) to prohibit
investment in real estate limited partnership interests; this restriction shall
not, however, prohibit investment in readily marketable securities of companies
that invest in real estate or interests therein, including real estate
investment trusts.
IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund's investment objective is long-term capital
growth primarily through investment in equity securities, with current income
being a secondary consideration. Under normal conditions, the Fund will invest
at least 65% of its total assets in the common stocks of companies determined by
IMI to be "Blue Chip." Generally, the median market capitalization of companies
targeted for investment by the Fund will be greater than $5 billion. For
investment purposes, however, Blue Chip companies are those companies whose
market capitalization is greater than $1 billion at the time of investment.
Blue Chip companies are those which occupy (or in IMI's judgment have
the potential to occupy) leading market positions that are expected to be
maintained or enhanced over time. Such companies tend to have a lengthy history
of profit growth and dividend payment, and a reputation for quality management
structure, products and services. Securities of Blue Chip companies generally
are considered to be highly liquid because, compared to those of
lesser-capitalized companies, more shares of these securities are outstanding in
the marketplace and their trading volume tends to be higher.
When circumstances warrant, Ivy US Blue Chip Fund may invest without
limit in investment grade debt securities (e.g., U.S. Government securities or
other corporate debt securities rated at least Baa by Moody's or BBB by S&P, or,
if unrated, are considered by IMI to be of comparable quality), preferred
stocks, or cash or cash equivalents such as bank obligations (including
certificates of deposit and bankers' acceptances), commercial paper, short-term
notes and repurchase agreements.
Ivy US Blue Chip Fund may borrow up to 10% of the value of its total
assets, for temporary purposes when it would be advantageous to do so from an
investment standpoint. The Fund may invest up to 5% of its net assets in
warrants. The Fund may not invest more than 15% of its net assets in illiquid
securities. The Fund may also invest in equity real estate investment trusts
("REITs").
The Fund may write put options on securities and stock indices, with
respect to not more than 10% of the value of its net assets, and may write
covered call options with respect to not more than 25% of the value of its net
assets. The Fund may purchase options, provided the aggregate premium paid for
all options held does not exceed 5% of its total assets. The Fund may purchase
interest rate and other financial futures contracts and related options. For
hedging purposes only, the Fund may enter into stock index futures contracts as
a means of regulating its exposure to equity markets. The Fund's equivalent
exposure in stock index futures contracts will not exceed 15% of its total
assets.
INVESTMENT RESTRICTIONS FOR IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund's investment objective, as set forth in the
Prospectus under "Investment Objectives and Policies," and the investment
restrictions set forth below are fundamental policies of the Fund and may not be
changed with respect to the approval of a majority (as defined in the 1940 Act)
of the outstanding voting shares of the Fund. The Fund has adopted the following
fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
ADDITIONAL RESTRICTIONS FOR IVY US BLUE CHIP FUND
Ivy US Blue Chip Fund has adopted the following additional
restrictions, which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, the Fund may not:
(i) purchase any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) less than three years
old;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii) engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iv) invest in companies of the purpose of exercising control of
management;
(v) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(vi) purchase or retain securities of any company if officers and Trustees
of the Trust and officers and directors of IMI, MIMI or Mackenzie
Financial Corporation who individually own more than 1/2 of 1% of the
securities of that company together own beneficially more than 5% of
such securities;
(vii) invest more than 15% of its net assets in "illiquid securities."
Illiquid securities may include securities subject to legal or
contractual restrictions on resale (including private placements),
repurchase agreements maturing in more than seven days, certain
options traded over the counter that the Fund has purchased,
securities being used to cover certain options that the Fund has
written, securities for which market quotations are not readily
available, or other securities which legally or in IMI's opinion,
subject to the Board's supervision, may be deemed illiquid, but shall
not include any such instrument that, due to the existence of a
trading market or to other factors, is liquid;
(viii) purchase securities of another investment company, except in
connection with a merger, consolidation, reorganization or acquisition
or assets, and except that the Fund may (i) invest in securities of
other investment companies subject to the restrictions set forth in
Section 12(d)(1) of the 1940 Act and (ii) acquire any securities of
registered open-end investment companies or registered unit investment
trusts in reliance on subparagraphs (f) and (g) of Section 12(d)(1) of
the 1940 Act;
(ix) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, the deposit or payment by
the Fund of initial or variation margins in connection with futures
contracts or related options transactions is not considered the
purchase of a security on margin;
(x) sell securities short;
(xi) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than shares of the Fund), but such persons or firms may act as
brokers for the Fund for customary commissions to the extent permitted
by the 1940 Act; or
(xii) borrow amounts in excess of 10% of its total assets, taken at the
lower of cost or market value, as a temporary measure for
extraordinary or emergency purposes or where investment transactions
might advantageously require it, or except in connection with reverse
repurchase agreements, provided that the Fund maintains net asset
coverage of at least 300% for all borrowings.
Under the 1940 Act, the Fund is permitted, subject to the Fund's
investment restrictions, to borrow money only from banks. The Trust has no
current intention of borrowing amounts in excess of 5% of the Fund's assets. The
Fund will continue to interpret fundamental investment restriction (v) above to
prohibit investment in real estate limited partnership interests; this
restriction shall not, however, prohibit investment in readily marketable
securities of companies that invest in real estate or interests therein,
including REITs. Despite fundamental investment restriction (vi) above, the Fund
may invest in interest rate and other financial futures contracts and related
options.
IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's principal investment objective is
long-term capital growth primarily through investment in equity securities, with
current income being a secondary consideration. Under normal conditions, the
Fund invests at least 65% of its total assets in common stocks and securities
convertible into common stocks. The Fund invests primarily in equity securities
of small- and medium-sized companies, that are in the early stages of their life
cycles and that IMI believes have the potential to become major enterprises.
These may include securities issued pursuant to initial public offerings
("IPOs"). The Fund may engage in short-term trading.
Ivy US Emerging Growth Fund may invest up to 25% of its net assets in
foreign equity securities, primarily those traded in European, Pacific Basin and
Latin American markets, some of which may be emerging markets involving special
risks, as described below. Individual foreign securities are selected based on
value indicators, such as a low price-earnings ratio, and are reviewed for
fundamental financial strength.
When circumstances warrant, the Fund may invest without limit in
investment grade debt securities (e.g., U.S. Government securities or other
corporate debt securities rated as least Baa by Moody's or BBB by S&P, or, if
unrated, are considered by IMI to be of comparable quality), preferred stocks,
or cash or cash equivalents such as bank obligations (including certificates of
deposit and bankers' acceptances), commercial paper, short-term notes and
repurchase agreements.
The Fund may borrow up to 10% of the value of its total assets, but
only for temporary purposes when it would be advantageous to do so from an
investment standpoint. The Fund may invest up to 5% of its net assets in
warrants. The Fund may not invest more than 15% of its net assets in illiquid
securities. The Fund may enter into forward foreign currency contracts.
Ivy US Emerging Growth Fund may write put options, with respect to not
more than 10% of the value of its net assets, on securities and stock indices,
and may write covered call options with respect to not more than 25% of the
value of its net assets. The Fund may purchase options, provided the aggregate
premium paid for all options held does not exceed 5% of its net assets. For
hedging purposes only, the Fund may enter into stock index futures contracts as
a means of regulating its exposure to equity markets. The Fund's equivalent
exposure in stock index futures contracts will not exceed 15% of its total
assets.
INVESTMENT RESTRICTIONS FOR IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
The Fund has adopted the following fundamental investment restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of
the Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by the
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular
industry, as the term "concentrate" is interpreted in connection with
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
ADDITIONAL RESTRICTIONS FOR IVY US EMERGING GROWTH FUND
Ivy US Emerging Growth Fund has adopted the following additional
restrictions, which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, the Fund may not:
(i) purchase any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) less than three years
old;
(ii) invest in oil, gas or other mineral leases or exploration or
development programs;
(iii) engage in the purchase and sale of puts, calls, straddles or spreads
(except to the extent described in the Prospectus and in this SAI);
(iv) invest in companies for the purpose of exercising control of
management;
(v) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(vi) purchase or retain securities of any company if officers and Trustees
of the Trust and officers and directors of Ivy Management, Inc. (the
Manager, with respect to Ivy Bond Fund), MIMI or Mackenzie Financial
Corporation who individually own more than 1/2 of 1% of the securities
of that company together own beneficially more than 5% of such
securities;
(vii) invest more than 15% of its net assets taken at market value at the
time of investment in "illiquid securities." Illiquid securities may
include securities subject to legal or contractual restrictions on
resale (including private placements), repurchase agreements maturing
in more than seven days, certain options traded over the counter that
the Fund has purchased, securities being used to cover certain options
that a fund has written, securities for which market quotations are
not readily available, or other securities which legally or in IMI's
opinion, subject to the Board's supervision, may be deemed illiquid,
but shall not include any instrument that, due to the existence of a
trading market, to the Fund's compliance with certain conditions
intended to provide liquidity, or to other factors, is liquid;
(viii) purchase securities of other investment companies, except in
connection with a merger, consolidation or sale of assets, and except
that it may purchase shares of other investment companies subject to
such restrictions as may be imposed by the 1940 Act and rules
thereunder or by any state in which its shares are registered;
(ix) purchase securities on margin;
(x) sell securities short;
(xi) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than capital stock of the Fund), but such persons or firms may
act as brokers for the Fund for customary commissions to the extent
permitted by the Investment Company Act of 1940; or
(xii) borrow money, except for temporary purposes where investment
transactions might advantageously require it. Any such loan may not be
for a period in excess of 60 days, and the aggregate amount of all
outstanding loans may not at any time exceed 10% of the value of the
total assets of the Fund at the time any such loan is made.
The Trust has no current intention of borrowing amounts in excess of 5%
of the Fund's assets. The Fund will continue to interpret fundamental investment
restriction (v) above to prohibit investment in real estate limited partnership
interests; this restriction shall not, however, prohibit investment in readily
marketable securities of companies that invest in real estate or interests
therein, including REITs.
RISK CONSIDERATIONS
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities shares represent a proportionate ownership interest in a company. As
a result, the value of equity securities rises and falls with a company's
success or failure. The market value of equity securities can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller company stocks may also be higher than
those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each Fund may invest include
corporate bonds, notes, debentures, preferred stock and other securities that
may be converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. Investments in convertible securities can
provide income through interest and dividend payments as well as an opportunity
for capital appreciation by virtue of their conversion or exchange features.
Because convertible securities can be converted into equity securities, their
values will normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.
The exchange ratio for any particular convertible security may be adjusted from
time to time due to stock splits, dividends, spin-offs, other corporate
distributions or scheduled changes in the exchange ratio. Convertible debt
securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stock changes, and, therefore, also
tends to follow movements in the general market for equity securities. When the
market price of the underlying common stock increases, the price of a
convertible security tends to rise as a reflection of the value of the
underlying common stock, although typically not as much as the price of the
underlying common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are investments that provide
for a stream of income. Like all debt securities, there can be no assurance of
income or principal payments because the issuers of the convertible securities
may default on their obligations. Convertible securities generally offer lower
yields than non-convertible securities of similar quality because of their
conversion or exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, are senior in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible preferred stock
typically have lower coupon rates than similar non-convertible securities.
Convertible securities may be issued as fixed income obligations that pay
current income.
SMALL COMPANIES
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with investing in
larger, more established companies. For example, the securities of small or new
companies may be subject to more abrupt or erratic market movements because they
tend to be thinly traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to have limited
product lines, markets or financial resources. Transaction costs in smaller
company stocks also may be higher than those of larger companies.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. A Fund may engage in short-term trading in
connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is
limited, so it is likely that IPO securities will represent a smaller component
of a Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
ADJUSTABLE RATE PREFERRED STOCKS
Adjustable rate preferred stocks have a variable dividend, generally
determined on a quarterly basis according to a formula based upon a specified
premium or discount to the yield on a particular U.S. Treasury security rather
than a dividend which is set for the life of the issue. Although the dividend
rates on these stocks are adjusted quarterly and their market value should
therefore be less sensitive to interest rate fluctuations than are other fixed
income securities and preferred stocks, the market values of adjustable rate
preferred stocks have fluctuated and can be expected to continue to do so in the
future.
DEBT SECURITIES
IN GENERAL. Investment in debt securities involves both interest rate
and credit risk. Generally, the value of debt instruments rises and falls
inversely with fluctuations in interest rates. As interest rates decline, the
value of debt securities generally increases. Conversely, rising interest rates
tend to cause the value of debt securities to decrease. Bonds with longer
maturities generally are more volatile than bonds with shorter maturities. The
market value of debt securities also varies according to the relative financial
condition of the issuer. In general, lower-quality bonds offer higher yields due
to the increased risk that the issuer will be unable to meet its obligations on
interest or principal payments at the time called for by the debt instrument.
INVESTMENT-GRADE DEBT SECURITIES. Bonds rated Aaa by Moody's Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Group ("S&P") are
judged to be of the best quality (i.e., capacity to pay interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered to be of high
quality (i.e., capacity to pay interest and repay principal is very strong and
differs from the highest rated issues only to a small degree). Bonds rated A are
viewed as having many favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are
considered to have an adequate capacity to pay interest and repay principal, but
certain protective elements may be lacking (i.e., such bonds lack outstanding
investment characteristics and have some speculative characteristics). The Funds
may invest in debt securities that are given an investment-grade rating by
Moody's or S&P, and may also invest in unrated debt securities that are
considered by IMI to be of comparable quality.
LOW-RATED DEBT SECURITIES. Securities rated lower than Baa by Moody's
or BBB by S&P, and comparable unrated securities (commonly referred to as "high
yield" or "junk" bonds), including many emerging markets bonds, are considered
to be predominantly speculative with respect to the issuer's continuing ability
to meet principal and interest payments. The lower the ratings of corporate debt
securities, the more their risks render them like equity securities. Such
securities carry a high degree of risk (including the possibility of default or
bankruptcy of the issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be less liquid)
than securities in the higher rating categories. (See Appendix A for a more
complete description of the ratings assigned by Moody's and S&P and their
respective characteristics.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest. Also, an increase
in interest rates would likely have an adverse impact on the value of such
obligations. During an economic downturn or period of rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to service their principal and interest payment
obligations. Prices and yields of high yield securities will fluctuate over time
and, during periods of economic uncertainty, volatility of high yield securities
may adversely affect a Fund's net asset value. In addition, investments in high
yield zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater fluctuations
in value due to changes in interest rates.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of
each Fund to accurately value high yield securities in the Fund's portfolio,
could adversely affect the price at which that Fund could sell such securities,
and cause large fluctuations in the daily net asset value of that Fund's shares.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for high yield
securities become relatively less liquid, it may be more difficult to value the
securities, requiring additional research and elements of judgment. These
securities may also involve special registration responsibilities, liabilities
and costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high yield security. For these reasons,
it is the policy of IMI not to rely exclusively on ratings issued by established
credit rating agencies, but to supplement such ratings with its own independent
and on-going review of credit quality. The achievement of each Fund's investment
objectives by investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds. Should the rating of
a portfolio security be downgraded, IMI will determine whether it is in the best
interest of a Fund to retain or dispose of such security. However, should any
individual bond held by a Fund be downgraded below a rating of C, IMI currently
intends to dispose of such bond based on then existing market conditions.
Prices for high yield securities may be affected by legislative and
regulatory developments. For example, Federal rules require savings and loan
institutions to gradually reduce their holdings of this type of security. Also,
Congress has from time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in these securities
and regulate corporate restructurings. Such legislation may significantly
depress the prices of outstanding securities of this type.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations
of, or guaranteed by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes, and bonds) and (2) Federal
agency obligations guaranteed as to principal and interest by the U.S. Treasury
(such as GNMA certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and interest is
unconditionally guaranteed by the U.S. Government, and thus they are of the
highest possible credit quality. U.S. Government securities that are not held to
maturity are subject to variations in market value due to fluctuations in
interest rates.
Mortgage-backed securities are securities representing part ownership
of a pool of mortgage loans. For example, GNMA certificates are such securities
in which the timely payment of principal and interest is guaranteed by the full
faith and credit of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life of the loans
typically will be substantially less because the mortgages will be subject to
principal amortization and may be prepaid prior to maturity. Prepayment rates
vary widely and may be affected by changes in market interest rates. In periods
of falling interest rates, the rate of prepayments tends to increase, thereby
shortening the actual average life of the security. Conversely, rising interest
rates tend to decrease the rate of prepayment, thereby lengthening the actual
average life of the security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average life of a
particular pool. Reinvestment of prepayment may occur at higher or lower rates
than the original yield on the certificates. Due to the prepayment feature and
the need to reinvest prepayments of principal at current rates, mortgage-backed
securities can be less effective than typical bonds of similar maturities at
"locking in" yields during periods of declining interest rates, and may involve
significantly greater price and yield volatility than traditional debt
securities. Such securities may appreciate or decline in market value during
periods of declining or rising interest rates, respectively.
Securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of nor guaranteed by the U.S.
Treasury; however, they involve Federal sponsorship in one way or another. Some
are backed by specific types of collateral, some are supported by the issuer's
right to borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the issuer, others
are supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, Federal Land Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks,
Federal National Mortgage Association, Federal Home Loan Mortgage Association
and Student Loan Marketing Association.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations issued
without any requirement for the periodic payment of interest. Zero coupon bonds
are issued at a significant discount from face value. The discount approximates
the total amount of interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate at the time of
issuance. If a Fund holds zero coupon bonds in its portfolio, it would recognize
income currently for Federal income tax purposes in the amount of the unpaid,
accrued interest and generally would be required to distribute dividends
representing such income to shareholders currently, even though funds
representing such income would not have been received by the Fund. Cash to pay
dividends representing unpaid, accrued interest may be obtained from, for
example, sales proceeds of portfolio securities and Fund shares and from loan
proceeds. The potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund being forced to
sell portfolio securities at a time when it might otherwise choose not to sell
these securities and when the Fund might incur a capital loss on such sales.
Because interest on zero coupon obligations is not distributed to a Fund on a
current basis, but is in effect compounded, the value of such securities of this
type is subject to greater fluctuations in response to changing interest rates
than the value of debt obligations which distribute income regularly.
ILLIQUID SECURITIES
Each Fund may purchase securities other than in the open market. While
such purchases may often offer attractive opportunities for investment not
otherwise available on the open market, the securities so purchased are often
"restricted securities" or "not readily marketable" (i.e., they cannot be sold
to the public without registration under the Securities Act of 1933, as amended
(the "1933 Act"), or the availability of an exemption from registration (such as
Rule 144A) or because they are subject to other legal or contractual delays in
or restrictions on resale). This investment practice, therefore, could have the
effect of increasing the level of illiquidity of a Fund. It is each Fund's
policy that illiquid securities (including repurchase agreements of more than
seven days duration, certain restricted securities, and other securities which
are not readily marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's Board of Trustees
has approved guidelines for use by IMI in determining whether a security is
illiquid.
Generally speaking, restricted securities may be sold (i) only to
qualified institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers; (iii) in limited quantities after they have been
held for a specified period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for which a
registration statement is in effect under the 1933 Act. Issuers of restricted
securities may not be subject to the disclosure and other investor protection
requirements that would be applicable if their securities were publicly traded.
If adverse market conditions were to develop during the period between a Fund's
decision to sell a restricted or illiquid security and the point at which that
Fund is permitted or able to sell such security, the Fund might obtain a price
less favorable than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted securities, a
Fund may be required to bear all or part of the registration expenses. A Fund
may be deemed to be an "underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, if so, could be liable to purchasers of
such securities if the registration statement prepared by the issuer is
materially inaccurate or misleading.
Since it is not possible to predict with assurance that the market for
securities eligible for resale under Rule 144A will continue to be liquid, IMI
will monitor such restricted securities subject to the supervision of the Board
of Trustees. Among the factors IMI may consider in reaching liquidity decisions
relating to Rule 144A securities are: (1) the frequency of trades and quotes for
the security; (2) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
market for the security (i.e., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer).
FOREIGN SECURITIES
The securities of foreign issuers in which Ivy Growth Fund and Ivy US
Emerging Growth Fund may invest include non-U.S. dollar-denominated debt
securities, Euro dollar securities, sponsored and unsponsored American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs"), Global Depository Shares ("GDSs") and related
depository instruments, and debt securities issued, assumed or guaranteed by
foreign governments or political subdivisions or instrumentalities thereof.
Shareholders should consider carefully the substantial risks involved in
investing in securities issued by companies and governments of foreign nations,
which are in addition to the usual risks inherent in each Fund's domestic
investments.
Although IMI intends to invest each Fund's assets only in nations that
are generally considered to have relatively stable and friendly governments,
there is the possibility of expropriation, nationalization, repatriation or
confiscatory taxation, taxation on income earned in a foreign country and other
foreign taxes, foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default on foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in those
nations. In addition, in many countries there is less publicly available
information about issuers than is available for U.S. companies. Moreover,
foreign companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to U.S. companies. In many foreign countries,
there is less governmental supervision and regulation of business and industry
practices, stock exchanges, brokers, and listed companies than in the United
States. Foreign securities transactions may also be subject to higher brokerage
costs than domestic securities transactions. The foreign securities markets of
many of the countries in which each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond markets have different clearance and settlement procedures
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of a Fund are uninvested and no return is earned thereon.
The inability of each Fund to make intended security purchases due to settlement
problems could cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to settlement
problems could result either in losses to a Fund because of subsequent declines
in the value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser. It may be
more difficult for each Fund's agents to keep currently informed about corporate
actions such as stock dividends or other matters that may affect the prices of
portfolio securities. Communications between the United States and foreign
countries may be less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Moreover, individual foreign economies
may differ favorably or unfavorably from the United States economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. IMI
seeks to mitigate the risks to each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
EMERGING MARKETS
Ivy Growth Fund and Ivy US Emerging Growth Fund could have significant
investments in securities traded in emerging markets. Investors should recognize
that investing in such countries involves special considerations, in addition to
those set forth above, that are not typically associated with investing in
United States securities and that may affect each Fund's performance favorably
or unfavorably.
In recent years, many emerging market countries around the world have
undergone political changes that have reduced government's role in economic and
personal affairs and have stimulated investment and growth. Historically, there
is a strong direct correlation between economic growth and stock market returns.
While this is no guarantee of future performance, IMI believes that investment
opportunities (particularly in the energy, environmental services, natural
resources, basic materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging market
countries from which each Fund and its shareholders will benefit.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
Such risks include (i) less social, political and economic stability; (ii) a
small market for securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies that may restrict each Fund's investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive
to national interests; (iv) foreign taxation; (v) the absence of developed
structures governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until relatively
recently in certain Eastern European countries, of a capital market structure or
market-oriented economy; (vii) the possibility that recent favorable economic
developments in Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries; and (viii) the possibility that
currency devaluations could adversely affect the value of each Fund's
investments. Further, many emerging markets have experienced and continue to
experience high rates of inflation.
Despite the dissolution of the Soviet Union, the Communist Party may
continue to exercise a significant role in certain Eastern European countries.
To the extent of the Communist Party's influence, investments in such countries
will involve risks of nationalization, expropriation and confiscatory taxation.
The communist governments of a number of Eastern European countries expropriated
large amounts of private property in the past, in many cases without adequate
compensation, and there can be no assurance that such expropriation will not
occur in the future. In the event of such expropriation, each Fund could lose a
substantial portion of any investments it has made in the affected countries.
Further, few (if any) accounting standards exist in Eastern European countries.
Finally, even though certain Eastern European currencies may be convertible into
U.S. dollars, the conversion rates may be artificial in relation to the actual
market values and may be adverse to a Fund's net asset value.
Certain Eastern European countries that do not have well-established
trading markets are characterized by an absence of developed legal structures
governing private and foreign investments and private property. In addition,
certain countries require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in a particular
company, or limit the investment of foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals.
Authoritarian governments in certain Eastern European countries may
require that a governmental or quasi-governmental authority act as custodian of
each Fund's assets invested in such country. To the extent such governmental or
quasi-governmental authorities do not satisfy the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect to the custody of
a Fund's cash and securities, that Fund's investment in such countries may be
limited or may be required to be effected through intermediaries. The risk of
loss through governmental confiscation may be increased in such countries.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, Ivy Growth Fund and Ivy US Emerging Growth Fund may
temporarily hold funds in bank deposits in foreign currencies during the
completion of investment programs and may purchase forward foreign currency
contracts. Because of these factors, the value of the assets of each Fund as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and each Fund
may incur costs in connection with conversions between various currencies.
Although each Fund's custodian values the Fund's assets daily in terms of U.S.
dollars, each Fund does not intend to convert its holdings of foreign currencies
into U.S. dollars on a daily basis. Each Fund will do so from time to time,
however, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer. Each
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies.
Because Ivy Growth Fund and Ivy US Emerging Growth Fund normally will
be invested in both U.S. and foreign securities markets, changes in these Funds'
share price may have a low correlation with movements in U.S. markets. Each
Fund's share price will reflect the movements of the different stock and bond
markets in which it is invested (both U.S. and foreign), and of the currencies
in which the investments are denominated. Thus, the strength or weakness of the
U.S. dollar against foreign currencies may account for part of each Fund's
investment performance. U.S. and foreign securities markets do not always move
in step with each other, and the total returns from different markets may vary
significantly. Foreign currencies in which each Fund's assets are denominated
may be devalued against the U.S. dollar, resulting in a loss to the Fund.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Ivy Growth Fund and Ivy US Emerging Growth Fund may enter into forward
foreign currency contracts in order to protect against uncertainty in the level
of future foreign exchange rates in the purchase and sale of securities. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date (usually less than a year), and typically is
individually negotiated and privately traded by currency traders and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although foreign exchange
dealers do not charge a fee for commissions, they do realize a profit based on
the difference between the price at which they are buying and selling various
currencies. Although these contracts are intended to minimize the risk of loss
due to a decline in the value of the hedged currencies, at the same time, they
tend to limit any potential gain which might result should the value of such
currencies increase.
While each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each Fund than if it had not engaged in such transactions.
Moreover, there may be an imperfect correlation between a Fund's portfolio
holdings of securities denominated in a particular currency and forward
contracts entered into by the Fund. An imperfect correlation of this type may
prevent each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Ivy Growth Fund and Ivy US Emerging Growth Fund may purchase currency
forwards and combine such purchases with sufficient cash or short-term
securities to create unleveraged substitutes for investments in foreign markets
when deemed advantageous. Each Fund may also combine the foregoing with bond
futures or interest rate futures contracts to create the economic equivalent of
an unhedged foreign bond position.
Ivy Growth Fund and Ivy US Emerging Growth Fund may also cross-hedge
currencies by entering into transactions to purchase or sell one or more
currencies that are expected to decline in value relative to other currencies to
which each Fund has or in which each Fund expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a Fund buys a money
market instrument and obtains a simultaneous commitment from the seller to
repurchase the instrument at a specified time and at an agreed-upon yield. Under
guidelines approved by the Board, each Fund is permitted to enter into
repurchase agreements only if the repurchase agreements are at least fully
collateralized with U.S. Government securities or other securities that IMI has
approved for use as collateral for repurchase agreements and the collateral must
be marked-to-market daily. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI under the
above-referenced guidelines. In the unlikely event of failure of the executing
bank or broker-dealer, each Fund could experience some delay in obtaining direct
ownership of the underlying collateral and might incur a loss if the value of
the security should decline, as well as costs in disposing of the security.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at maturity). In
addition to investing in certificates of deposit and bankers' acceptances, each
Fund may invest in time deposits in banks or savings and loan associations. Time
deposits are generally similar to certificates of deposit, but are
uncertificated. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance are limited to obligations of (i) banks having
total assets in excess of $1 billion, (ii) U.S. banks which do not meet the $1
billion asset requirement, if the principal amount of such obligation is fully
insured by the Federal Deposit Insurance Corporation (the "FDIC"), (iii) savings
and loan association which have total assets in excess of $1 billion and which
are members of the FDIC, and (iv) foreign banks if the obligation is, in IMI's
opinion, of an investment quality comparable to other debt securities which may
be purchased by a Fund. Each Fund's investments in certificates of deposit of
savings associations are limited to obligations of Federal and state-chartered
institutions whose total assets exceed $1 billion and whose deposits are insured
by the FDIC.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each Fund may invest in commercial paper that is rated Prime-1 by
Moody's Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's
Corporation ("S&P") or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
BORROWING
Borrowing may exaggerate the effect on each Fund's net asset value of
any increase or decrease in the value of each Fund's portfolio securities. Money
borrowed will be subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances). Although the principal
of each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
WARRANTS
The holder of a warrant has the right, until the warrant expires, to
purchase a given number of shares of a particular issuer at a specified price.
Such investments can provide a greater potential for profit or loss than an
equivalent investment in the underlying security. However, prices of warrants do
not necessarily move in a tandem with the prices of the underlying securities,
and are, therefore, considered speculative investments. Warrants pay no
dividends and confer no rights other than a purchase option. Thus, if a warrant
held by a Fund were not exercised by the date of its expiration, the Fund would
lose the entire purchase price of the warrant.
REAL ESTATE INVESTMENT TRUSTS (REITS)
A REIT is a corporation, trust or association that invests in real
estate mortgages or equities for the benefit of its investors. REITs are
dependent upon management skill, may not be diversified and are subject to the
risks of financing projects. Such entities are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code of 1986, as amended (the "Code"), and to maintain exemption from
the Investment Company Act of 1940 (the "1940 Act"). By investing in REITs
indirectly through Ivy Growth Fund or Ivy US Blue Chip Fund, a shareholder will
bear not only his or her proportionate share of the expenses of the Fund, but
also, indirectly, similar expenses of the REITs.
OPTIONS TRANSACTIONS
IN GENERAL. A call option is a short-term contract (having a duration
of less than one year) pursuant to which the purchaser, in return for the
premium paid, has the right to buy the security underlying the option at the
specified exercise price at any time during the term of the option. The writer
of the call option, who receives the premium, has the obligation, upon exercise
of the option, to deliver the underlying security against payment of the
exercise price. A put option is a similar contract pursuant to which the
purchaser, in return for the premium paid, has the right to sell the security
underlying the option at the specified exercise price at any time during the
term of the option. The writer of the put option, who receives the premium, has
the obligation, upon exercise of the option, to buy the underlying security at
the exercise price. The premium paid by the purchaser of an option will reflect,
among other things, the relationship of the exercise price to the market price
and volatility of the underlying security, the time remaining to expiration of
the option, supply and demand, and interest rates.
If the writer of a U.S. exchange-traded option wishes to terminate the
obligation, the writer may effect a "closing purchase transaction." This is
accomplished by buying an option of the same series as the option previously
written. The effect of the purchase is that the writer's position will be
canceled by the Options Clearing Corporation. However, a writer may not effect a
closing purchase transaction after it has been notified of the exercise of an
option. Likewise, an investor who is the holder of an option may liquidate his
or her position by effecting a "closing sale transaction." This is accomplished
by selling an option of the same series as the option previously purchased.
There is no guarantee that either a closing purchase or a closing sale
transaction can be effected at any particular time or at any acceptable price.
If any call or put option is not exercised or sold, it will become worthless on
its expiration date. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligation in an OTC transaction, a Fund
would need to negotiate directly with the counterparty.
Each Fund will realize a gain (or a loss) on a closing purchase
transaction with respect to a call or a put previously written by the Fund if
the premium, plus commission costs, paid by the Fund to purchase the call or the
put is less (or greater) than the premium, less commission costs, received by
the Fund on the sale of the call or the put. A gain also will be realized if a
call or a put that a Fund has written lapses unexercised, because the Fund would
retain the premium. Any such gains (or losses) are considered short-term capital
gains (or losses) for Federal income tax purposes. Net short-term capital gains,
when distributed by any Fund, are taxable as ordinary income. See "Taxation."
Each Fund will realize a gain (or a loss) on a closing sale transaction
with respect to a call or a put previously purchased by the Fund if the premium,
less commission costs, received by the Fund on the sale of the call or the put
is greater (or less) than the premium, plus commission costs, paid by the Fund
to purchase the call or the put. If a put or a call expires unexercised, it will
become worthless on the expiration date, and the Fund will realize a loss in the
amount of the premium paid, plus commission costs. Any such gain or loss will be
long-term or short-term gain or loss, depending upon the Fund's holding period
for the option.
Exchange-traded options generally have standardized terms and are
issued by a regulated clearing organization (such as the Options Clearing
Corporation), which, in effect, guarantees the completion of every
exchange-traded option transaction. In contrast, the terms of OTC options are
negotiated by each Fund and its counterparty (usually a securities dealer or a
financial institution) with no clearing organization guarantee. When a Fund
purchases an OTC option, it relies on the party from whom it has purchased the
option (the "counterparty") to make delivery of the instrument underlying the
option. If the counterparty fails to do so, the Fund will lose any premium paid
for the option, as well as any expected benefit of the transaction. Accordingly,
IMI will assess the creditworthiness of each counterparty to determine the
likelihood that the terms of the OTC option will be satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. Each Fund may write (sell)
covered call options on the Fund's securities in an attempt to realize a greater
current return than would be realized on the securities alone. Each Fund may
also write covered call options to hedge a possible stock or bond market decline
(only to the extent of the premium paid to the Fund for the options). In view of
the investment objectives of each Fund, each Fund generally would write call
options only in circumstances where the investment adviser to the Fund does not
anticipate significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A "covered" call option means generally that so long as a Fund is
obligated as the writer of a call option, the Fund will (i) own the underlying
securities subject to the option, or (ii) have the right to acquire the
underlying securities through immediate conversion or exchange of convertible
preferred stocks or convertible debt securities owned by the Fund. Although each
Fund receives premium income from these activities, any appreciation realized on
an underlying security will be limited by the terms of the call option. Each
Fund may purchase call options on individual securities only to effect a
"closing purchase transaction."
As the writer of a call option, each Fund receives a premium for
undertaking the obligation to sell the underlying security at a fixed price
during the option period, if the option is exercised. So long as a Fund remains
obligated as a writer of a call option, it forgoes the opportunity to profit
from increases in the market price of the underlying security above the exercise
price of the option, except insofar as the premium represents such a profit (and
retains the risk of loss should the value of the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. Each Fund may purchase a
put option on an underlying security owned by the Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each Fund, as the holder of the put option, may sell the underlying security at
the exercise price regardless of any decline in its market price. In order for a
put option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs that the Fund must pay. These costs will reduce any profit a
Fund might have realized had it sold the underlying security instead of buying
the put option. The premium paid for the put option would reduce any capital
gain otherwise available for distribution when the security is eventually sold.
The purchase of put options will not be used by any Fund for leverage purposes.
Each Fund may also purchase a put option on an underlying security that
it owns and at the same time write a call option on the same security with the
same exercise price and expiration date. Depending on whether the underlying
security appreciates or depreciates in value, the Fund would sell the underlying
security for the exercise price either upon exercise of the call option written
by it or by exercising the put option held by it. A Fund would enter into such
transactions in order to profit from the difference between the premium received
by the Fund for the writing of the call option and the premium paid by the Fund
for the purchase of the put option, thereby increasing the Fund's current
return. A Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. Each Fund may
purchase and sell (write) put and call options on securities indices. An index
assigns relative values to the securities included in the index and the index
fluctuates with changes in the market values of the securities so included. Call
options on indices are similar to call options on individual securities, except
that, rather than giving the purchaser the right to take delivery of an
individual security at a specified price, they give the purchaser the right to
receive cash. The amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option, expressed in dollars,
times a specified multiple (the "multiplier"). The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
The multiplier for an index option performs a function similar to the
unit of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices have
different multipliers.
When a Fund writes a call or put option on a stock index, the option is
"covered," in the case of a call, or "secured," in the case of a put, if the
Fund maintains in a segregated account with the Custodian cash or liquid
securities equal to the contract value. A call option is also covered if a Fund
holds a call on the same index as the call written where the exercise price of
the call held is (i) equal to or less than the exercise price of the call
written or (ii) greater than the exercise price of the call written, provided
that the Fund maintains in a segregated account with the Custodian the
difference in cash or liquid securities. A put option is also "secured" if a
Fund holds a put on the same index as the put written where the exercise price
of the put held is (i) equal to or greater than the exercise price of the put
written or (ii) less than the exercise price of the put written, provided that
the Fund maintains in a segregated account with the Custodian the difference in
cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of options
involves certain risks. During the option period, the covered call writer has,
in return for the premium on the option, given up the opportunity to profit from
a price increase in the underlying securities above the exercise price, but, as
long as its obligation as a writer continues, has retained the risk of loss
should the price of the underlying security decline. The writer of a U.S. option
has no control over the time when it may be required to fulfill its obligation
as a writer of the option. Once an option writer has received an exercise
notice, it cannot effect a closing purchase transaction in order to terminate
its obligation under the option and must deliver the underlying securities (or
cash in the case of an index option) at the exercise price. If a put or call
option purchased by a Fund is not sold when it has remaining value, and if the
market price of the underlying security (or index), in the case of a put,
remains equal to or greater than the exercise price or, in the case of a call,
remains less than or equal to the exercise price, the Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security (or index) is purchased to hedge against price movements in a related
security (or securities), the price of the put or call option may move more or
less than the price of the related security (or securities). In this regard,
there are differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objective.
There can be no assurance that a liquid market will exist when a Fund
seeks to close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Fund may be unable to close
out a position. Finally, trading could be interrupted, for example, because of
supply and demand imbalances arising from a lack of either buyers or sellers, or
the options exchange could suspend trading after the price has risen or fallen
more than the maximum amount specified by the exchange. Closing transactions can
be made for OTC options only by negotiating directly with the counterparty or by
a transaction in the secondary market, if any such market exists. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. There is no assurance that a Fund will be able to close out an OTC
option position at a favorable price prior to its expiration. An OTC
counterparty may fail to deliver or to pay, as the case may be. In the event of
insolvency of the counterparty, a Fund might be unable to close out an OTC
option position at any time prior to its expiration. Although a Fund may be able
to offset to some extent any adverse effects of being unable to liquidate an
option position, the Fund may experience losses in some cases as a result of
such inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level
of its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each Fund's success in using options techniques depends, among other
things, on IMI's ability to predict accurately the direction and volatility of
price movements in the options and securities markets, and to select the proper
type, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each Fund may enter into futures contracts and options on
futures contracts for hedging purposes. A futures contract provides for the
future sale by one party and purchase by another party of a specified quantity
of a commodity at a specified price and time. When a purchase or sale of a
futures contract is made by a Fund, the Fund is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of cash or liquid
securities ("initial margin"). The margin required for a futures contract is set
by the exchange on which the contract is traded and may be modified during the
term of the contract. The initial margin is in the nature of a performance bond
or good faith deposit on the futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day each Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by a Fund but is instead a
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing daily net asset value, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of
the underlying securities, generally these obligations are closed out prior to
delivery of offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, a Fund generally realizes a
capital gain, or if it is more, the Fund generally realizes a capital loss.
Conversely, if an offsetting sale price is more than the original purchase
price, a Fund generally realizes a capital gain, or if it is less, the Fund
generally realizes a capital loss. The transaction costs must also be included
in these calculations.
When purchasing a futures contract, each Fund will maintain with its
Custodian (and mark-to-market on a daily basis) cash or liquid securities that,
when added to the amounts deposited with a futures commission merchant ("FCM")
as margin, are equal to the market value of the futures contract. Alternatively,
a Fund may "cover" its position by purchasing a put option on the same futures
contract with a strike price as high as or higher than the price of the contract
held by the Fund, or, if lower, may cover the difference with cash or short-term
securities.
When selling a futures contract, each Fund will maintain with its
Custodian in a segregated account (and mark-to-market on a daily basis) cash or
liquid securities that, when added to the amounts deposited with an FCM as
margin, are equal to the market value of the instruments underlying the
contract. Alternatively, a Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based), or by holding a call option
permitting the Fund to purchase the same futures contract at a price no higher
than the price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, each Fund will
maintain with its Custodian in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the amounts deposited
with an FCM as margin, equal the total market value of the futures contract
underlying the call option. Alternatively, a Fund may cover its position by
entering into a long position in the same futures contract at a price no higher
than the strike price of the call option, by owning the instruments underlying
the futures contract, or by holding a separate call option permitting the Fund
to purchase the same futures contract at a price not higher than the strike
price of the call option sold by the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (and mark-to-market on a daily basis) cash or liquid
securities that equal the purchase price of the futures contract less any margin
on deposit. Alternatively, a Fund may cover the position either by entering into
a short position in the same futures contract, or by owning a separate put
option permitting it to sell the same futures contract so long as the strike
price of the purchased put option is the same or higher than the strike price of
the put option sold by the Fund, or, if lower, the Fund may hold securities to
cover the difference.
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in any Fund's portfolio securities being hedged. In
addition, there are significant differences between the securities and futures
markets that could result in an imperfect correlation between the markets,
causing a given hedge not to achieve its objectives. The degree of imperfection
of correlation depends on circumstances such as variations in speculative market
demand for futures and futures options on securities, including technical
influences in futures trading and futures options, and differences between the
financial instruments being hedged and the instruments underlying the standard
contracts available for trading in such respects as interest rate levels,
maturities, and creditworthiness of issuers. A decision as to whether, when and
how to hedge involves the exercise of skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market will exist at a time
when a Fund seeks to close out a futures or a futures option position, and the
Fund would remain obligated to meet margin requirements until the position is
closed. In addition, there can be no assurance that an active secondary market
will continue to exist.
Currency futures contracts and options thereon may be traded on foreign
exchanges. Such transactions may not be regulated as effectively as similar
transactions in the United States; may not involve a clearing mechanism and
related guarantees; and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
position also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in a
Fund's ability to act upon economic events occurring in foreign markets during
non business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
SECURITIES INDEX FUTURES CONTRACTS
Each Fund may enter into securities index futures contracts as an
efficient means of regulating that Fund's exposure to the equity markets. Each
Fund will not engage in transactions in futures contracts for speculation, but
only as a hedge against changes resulting from market conditions in the values
of securities held in the Fund's portfolio or which it intends to purchase. An
index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. Entering
into a contract to buy units of an index is commonly referred to as purchasing a
contract or holding a long position in the index. Entering into a contract to
sell units of an index is commonly referred to as selling a contract or holding
a short position. The value of a unit is the current value of the stock index.
For example, the S&P 500 Index is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange (the "Exchange"). The S&P 500
Index assigns relative weightings to the 500 common stocks included in the
Index, and the Index fluctuates with changes in the market values of the shares
of those common stocks. In the case of the S&P 500 Index, contracts are to buy
or sell 500 units. Thus, if the value of the S&P 500 Index were $150, one
contract would be worth $75,000 (500 units x $150). The index futures contract
specifies that no delivery of the actual securities making up the index will
take place. Instead, settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the contract price
and the actual level of the stock index at the expiration of the contract. For
example, if a Fund enters into a futures contract to buy 500 units of the S&P
500 Index at a specified future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, the Fund will gain $2,000 (500 units x
gain of $4). If a Fund enters into a futures contract to sell 500 units of the
stock index at a specified future date at a contract price of $150 and the S&P
500 Index is at $154 on that future date, the Fund will lose $2,000 (500 units x
loss of $4).
RISKS OF SECURITIES INDEX FUTURES. Each Fund's success in using hedging
techniques depends, among other things, on IMI's ability to predict correctly
the direction and volatility of price movements in the futures and options
markets as well as in the securities markets and to select the proper type, time
and duration of hedges. The skills necessary for successful use of hedges are
different from those used in the selection of individual stocks.
Each Fund's ability to hedge effectively all or a portion of its
securities through transactions in index futures (and therefore the extent of
its gain or loss on such transactions) depends on the degree to which price
movements in the underlying index correlate with price movements in the Fund's
securities. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each Fund
will bear the risk that the prices of the securities being hedged will not move
in the same amount as the hedging instrument. This risk will increase as the
composition of the Fund's portfolio diverges from the composition of the hedging
instrument.
Although each Fund intends to establish positions in these instruments
only when there appears to be an active market, there is no assurance that a
liquid market will exist at a time when a Fund seeks to close a particular
option or futures position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers.
In addition, the futures exchanges may suspend trading after the price has risen
or fallen more than the maximum amount specified by the exchange. In some cases,
a Fund may experience losses as a result of its inability to close out a
position, and it may have to liquidate other investments to meet its cash needs.
Although some index futures contracts call for making or taking
delivery of the underlying securities, generally these obligations are closed
out prior to delivery by offsetting purchases or sales of matching futures
contracts (same exchange, underlying security or index, and delivery month). If
an offsetting purchase price is less than the original sale price, a Fund
generally realizes a capital gain, or if it is more, a Fund generally realizes a
capital loss. Conversely, if an offsetting sale price is more than the original
purchase price, a Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs must also be
included in these calculations.
Each Fund will only enter into index futures contracts or futures
options that are standardized and traded on a U.S. or foreign exchange or board
of trade, or similar entity, or quoted on an automated quotation system. Each
Fund will use futures contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the CFTC.
When purchasing an index futures contract, each Fund will maintain with
its Custodian (and mark-to-market on a daily basis) cash or liquid securities
that, when added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures contract.
Alternatively, a Fund may "cover" its position by purchasing a put option on the
same futures contract with a strike price as high as or higher than the price of
the contract held by the Fund.
When selling an index futures contract, each Fund will maintain with
its Custodian (and mark-to-market on a daily basis) cash or liquid securities
that, when added to the amounts deposited with an FCM as margin, are equal to
the market value of the instruments underlying the contract. Alternatively, a
Fund may "cover" its position by owning the instruments underlying the contract
(or, in the case of an index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the futures contract is
based), or by holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the contract written by
the Fund (or at a higher price if the difference is maintained in cash or liquid
assets in a segregated account with the Fund's custodian).
COMBINED TRANSACTIONS. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options and currency transactions ("component"
transactions), instead of a single transaction, as part of a single or combined
strategy when, in the opinion of IMI, it is in the best interests of the Fund to
do so. A combined transaction will usually contain elements of risk that are
present in each of its component transactions. Although combined transactions
are normally entered into based on IMI's judgment that the combined strategies
will reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the management objective.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed by IMI to have above
average potential for capital appreciation. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities have a greater potential. Therefore, each Fund
may purchase and sell securities without regard to the length of time the
security is to be, or has been, held. A change in securities held by a Fund is
known as "portfolio turnover" and may involve the payment by the Fund of dealer
markup or underwriting commission and other transaction costs on the sale of
securities, as well as on the reinvestment of the proceeds in other securities.
Each Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the most recently completed
fiscal year by the monthly average of the value of the portfolio securities
owned by the Fund during that year. For purposes of determining a Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded. Ivy U.S. Blue Chip Fund's
portfolio turnover rate was significantly higher in 1999 than it was in 1998
because of the late date of its inception in 1998.
TRUSTEES AND OFFICERS
Each Fund's Board of Trustees (the "Board") is responsible for the
overall management of the Fund, including general supervision and review of the
Fund's investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------- -------------------------------------------------
NAME, ADDRESS, AGE POSITION WITH THE TRUST BUSINESS AFFILIATIONS AND PRINCIPAL OCCUPATIONS
-------------------------------------- ----------------------------- -------------------------------------------------
<S> <C> <C>
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research Corp. (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
Investment Management Inc. (1995-present);
Senior Vice President, Mackenzie Investment
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
President, Mackenzie Investment Management Inc.
(1996-1997); Senior Vice President and
Director, Mackenzie Investment Management Inc.
(1994-1996); Chairman, Senior Vice President
and Director, Ivy Management, Inc.
(1994-present); Vice President, The Mackenzie
Funds Inc. (1987-1995); Director, Ivy Mackenzie
Services Corp. (1993-present); Senior Vice
President and Director, Ivy Mackenzie Services
Corp. (1996-1997); President and Director, Ivy
Mackenzie Services Corp. (1993-1996); Trustee
and President, Mackenzie Series Trust
(1996-1998); Vice President, Mackenzie Series
Trust (1994-1996); President, Chief Executive
Officer and Director, Ivy Mackenzie
Distributors, Inc. (1994-present); Chairman,
Trustee and Principal Executive Officer,
Mackenzie Solutions (1999-2000); President and
Trustee, Mackenzie Solutions (1999).
Stanley Channick Trustee President and Chief Executive Officer, The
11 Bala Avenue Whitestone Corporation (insurance agency);
Bala Cynwyd, PA 19004 Chairman, Scott Management Company
Age: 76 (administrative services for insurance
companies); President, The Channick Group
(consultants to insurance companies and
national trade associations); Trustee,
Mackenzie Series Trust (1994-1998); Director,
The Mackenzie Funds Inc. (1994-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of Physics, Harvard
Lyman Laboratory of Physics University (1974-present); Trustee. Mackenzie
Harvard University Series Trust (1994-1998).
Cambridge, MA 02138
Age: 74
Dianne Lister Trustee President and Chief Executive Officer, The
556 University Avenue Hospital for Sick Children Foundation
Toronto, Ontario Canada (1993-present).
L4J 2T4
Age: 47
Joseph G. Rosenthal Trustee Chartered Accountant (1958-present); Trustee,
100 Jardine Drive Mackenzie Series Trust (1985-1998); Director,
Unit #12 The Mackenzie Funds Inc. (1987-1995).
Concord, Ontario Canada
L4K 2T7
Age: 65
Richard N. Silverman Trustee Honorary Trustee, Newton-Wellesley Hospital;
18 Bonnybrook Road Overseer, Beth Israel Hospital; Trustee, 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 33303 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>
*Deemed to be an "interested person" (as defined under the 1940 Act)of the
Trust.
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
<S> <C> <C> <C> <C>
PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
AGGREGATE COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON FROM TRUST AND FUND
NAME, POSITION FROM TRUST PART OF FUND EXPENSES RETIREMENT COMPLEX PAID TO TRUSTEES*
John S. Anderegg, Jr. $21,500 N/A N/A $21,500
(Trustee)
James W. Broadfoot $0 N/A N/A $0
(Trustee and
President)
Paul H. Broyhill $20,500 N/A N/A $20,500
(Trustee)
Keith J. Carlson $0 N/A N/A $0
(Trustee and Chairman)
Stanley Channick $21,500 N/A N/A $21,500
(Trustee)
Roy J. Glauber $21,500 N/A N/A $21,500
(Trustee)
Dianne Lister $0 N/A N/A $0
(Trustee)
Joseph G. Rosenthal $21,500 N/A N/A $21,500
(Trustee)
Richard N. Silverman $21,500 N/A N/A $21,500
(Trustee)
J. Brendan Swan $21,500 N/A N/A $21,500
(Trustee)
Edward M. Tighe $1,000 N/A N/A $1,000
(Trustee)
C. William Ferris $0 N/A N/A $0
(Secretary/
Treasurer)
</TABLE>
*The Fund complex consists of Ivy Fund.
As of April 6, 2000, the Officers and Trustees of the Trust as a group
owned beneficially or of record less than 1% of the outstanding Class A, Class
B, Class C, Class I and Advisor Class shares of each of the eighteen Ivy funds
that are series of the Trust, except that the Officers and Trustees of the Trust
as a group owned 1.02% and 1.25% of Ivy European Opportunities Fund and Ivy
Global Science & Technology Fund Class A shares, respectively, and 1.13%, 5.98%,
2.05% and 3.00% of Ivy European Opportunities Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, and Ivy US Emerging Growth Fund
Advisor Class shares, respectively.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI
and the Trust have adopted a Code of Ethics and Business Conduct Policy (the
"Code of Ethics"), which is designed to identify and address certain conflicts
of interest between personal investment activities and the interests of
investment advisory clients such as each Fund, in compliance with Rule 17j-1
under the 1940 Act. The Code of Ethics permits employees of IMI, IMDI and the
Trust to engage in personal securities transactions, including with respect to
securities held by one or more Funds, subject to certain requirements and
restrictions.
PRINCIPAL HOLDERS OF SECURITIES
To the knowledge of the Trust as of April 6, 2000, no shareholder owned
beneficially or of record 5% or more of any Fund's outstanding shares of any
class, with the following exceptions:
CLASS A
Of the outstanding Class A shares of:
Ivy Asia Pacific Fund, Northern Trust Custodian FBO W. Hall Wendel
Jr., P.O. Box 92956 Chicago, IL 60675, owned of record 127,877.238 shares
(34.67%) and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd FL Jacksonville,
FL 32246, owned of record 57,697.052 shares (15.64%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL 32246, owned of record 991,944.251 shares (13.33%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 88,810.181 shares (7.43%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL 32246, owned of record 733,792.800 shares
(25.95%);
Ivy Global Natural Resources Fund, Carn & Co. 02087502 Riggs Bank TTEE
FBO Yazaki Employee Savings and Retirement PL, Attn: Star Group, P.O. Box 96211
Washington, DC 20090-6211 owned of record 60,160.879 shares (9.99%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 8,648,661.843 shares (30.25%) and Merrill Lynch Pierce Fenner & Smith
For the Sole Benefit of Its Customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd Floor, Jacksonville, FL 32246, owned of record 6,025,817.607
(21.07%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL 32246 owned of record 901,733.310 shares (32.27%);
Ivy International Small Companies Fund, Donaldson Lufkin Jenrette
Securities Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998 owned of
record 19,811.507 shares (16.64%), Mackenzie Investment Management Inc., Attn:
Bev Yanowitch,Via Mizner Financial Plaza, 700 South Federal Highway, Ste. 300,
Boca Raton, FL 33432 owned of record 10,312.921 shares (8.66%,) Parker Hunter
Inc.FBO Keshava Reddy MD Inc. Defined Benefit Pension Trust U/A DTD 2/1/80, 404
Wellington Ct., Venice, FL 34292-3157 owned of record 6,566.130 shares (5.51%),
and Merrill Lynch Pierce Fenner & Smith For the sole benefit of its customers,
Attn: Fund Administration 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 6,048.887 shares (5.08%);
Ivy International Strategic Bond Fund, IBT Cust Money Purch PL FBO
Frederic Neuburger, 25 Hanley Road, Liverpool, NY 13090, owned of record 877.125
shares (53.63%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-9998, owned of record 758.136 shares (46.35%);
Ivy Money Market Fund, Donald Annino TTEE Pediatrician Inc. Target
Benefit Pension Plan U/A DTD 10/31/87, 61 Oxford St., Winchester, MA 01890,
owned of record 784,722.350 shares (5.36%);
Ivy US Emerging Growth Fund, F & Co. Inc. CUST FBO 401 K Plan, Attn:
Russ Pollack ADM, 125 Broad Street, New York, NY 10004-2400, owned of record
115,590.121 shares (5.28%);
Ivy Developing Markets Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,092.843 shares (13.93%);
Ivy Global Science & Technology Fund, Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record
65,806.720 shares (7.10%), Merrill Lynch Pierce Fenner & Smith Inc. Mutual Fund
Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL, Jacksonville, FL 32246,
owned of record 50,772.902 shares (5.48%), and Charles Schwab & Co. Inc.
Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 49,811.577 shares (5.37%);
CLASS B
Of the outstanding Class B shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 195,131.631 shares (41.83%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 1,408,235.680 shares (48.74%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 130,194.917 (17.21%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 226,089.602 shares (25.66%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E, 3rd FL, Jacksonville, FL, owned of record 590,841.655 shares (29.21%);
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 58,255.711 shares (11.14%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 92,422.394 shares (33.65%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner & Smith
Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL 32246, owned of record 144,773.250 shares (16.14%);
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 39,872.586 shares (9.24%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 4,908,729.144 shares (46.00%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 4,765,693.148 shares (60.44%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E, 3rd FL, Jacksonville, FL, owned of record 33,931.288 shares
(20.64%) and Parker Hunter Incorporated FBO Martha K Reddy Trustee U/A DTD
5/2/94 Martha K Reddy 1994 Living Trust Venice, FL 34292-3157, owned of record
10,022 shares (6.09 %);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E,
3rd FL, Jacksonville, FL, owned of record 104,923.409 shares (14.26%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E, 3rd FL, Jacksonville, FL, owned of record 403,099.962 shares (22.91%).
CLASS C
Of the outstanding Class C shares of:
Ivy Asia Pacific Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL, owned of record 32,150.765 shares (9.45%) and Robert
M. Ahnert & Margaret A. Ahnert JT TWROS, 624 Flamingo Dr., Ft. Lauderdale, FL
33301, owned of record 17,623.011 shares (5.18%);
Ivy Bond Fund, Merrill Lynch Pierce Fenner & Smith For the sole
benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E, 3rd
FL, Jacksonville, FL, owned of record 214,807.102 shares (55.38%);
Ivy China Region Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL ,Jacksonville, FL, owned of record 31,891.102 shares (38.76%);
Ivy Developing Markets Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL, owned of record 74,441.265 shares (19.93%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL, owned of record 1,269,062.340 shares (45.54%);
Ivy Global Fund, IBT CUST 403(B) FBO Mattie A Allen, 755 Selma PL., San
Diego, CA 92114-1711, owned of record 3,312.662 shares (21.26%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
2,953.344 shares (18.96%), Salomon Smith Barney Inc., 333 West 34th St. - 3rd
Floor, New York, NY 10001, owned of record 1,148.182 shares (7.37%), Smith
Barney Inc. 00112701249, 388 Greenwich Street, New York, NY owned of record
1,104.870 shares (7.09%), and Smith Barney Inc. 00107866133, 388 Greenwich
Street, New York, NY owned of record 952.492 shares (6.11%);
Ivy Global Natural Resources Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 10,794.738 shares (35.64%),
Salomon Smith Barney Inc. 00129805698, 333 West 34th St. - 3rd Floor, New York,
NY 10001, owned of record 3,425.540 shares (11.30%), George I Kocerka & Mary L
Kocerka TTEE U/A DTD Feb 11 1993, George I and Mary L Kocerka TR, 3391 Pinnacle
CT., S. Palm Harbor, FL 34684-1771, owned of record 2,927.400 shares (9.66%),
Alma R Buncsak TTEE of the Alma R Buncsak Rev Trust U/A/D 11-27-95, 745 Cherokee
Path, Lake Mills, WI 53551, owned of record 2,034.101 shares (6.71%) and Raymond
James & Assoc. Inc. CSDN David C Johnson M/P, 1113 45th Ave NE, Saint
Petersburg, FL 33703-5247, owned of record 1,748.252 shares (5.77%);
Ivy Global Science & Technology Fund, Merrill Lynch Pierce Fenner &
Smith Inc. Mutual Fund Operations - Service Team, 4800 Deer Lake Dr. E, 3rd FL,
Jacksonville, FL, owned of record 41,373.201 shares (10.50%);
Ivy Growth Fund, IBT CUST IRA FBO Joseph L Wright ,32211 Pierce Street,
Garden City, MI 48135, owned of record 4,651.187 shares (14.03%), Merrill Lynch
Pierce Fenner & Smith For the sole benefit of its customers, Attn: Fund
Administration, 4800 Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record
3,905.716 shares (11.78%), UMB Bank CUST IRA FBO Peter L Bognar, 17 Cordes
Drive, Tonawanda, NY 14221, owned of record 3,729.271 shares (11.24%), May Ann
Ash & Robert R Ash JT TEN 1119 Rundle St. Scranton, PA 18504, owned of record
2,642.230 shares (7.97%), and UMB CUST IRA FBO Ronald Wise, 45 Fordham, Buffalo,
NY 14216, owned of record 2,041.275 shares (6.15%);
Ivy International Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 1,653,544.169 shares (61.44%);
Ivy International Fund II, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 2,298,844.349 shares (66.03%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 69,403.361 shares
(71.10%);
Ivy Money Market Fund, IBT CUST R/O IRA FBO Virginia M Hambleton, 619
Winther Blvd. Nampa, ID 83651, owned of record 109,449.820 shares (12.67%),
Painewebber For The Benefit of Bruce Blank, 36 Ridge Brook Lane Stamford, CT
06903, owned of record 108,553.810 shares (12.57%), IBT CUST R/O IRA FBO Kathryn
Batko, 1823 S 139th St., Omaha, NE 68144, owned of record 82,615.230 shares
(9.56%), Bear Stearns Securities Corp. FBO 486-89241-11, 1 Metrotech Center
North, Brooklyn, NY 11201-3859, owned of record 82,615.230 shares (9.56%), Mary
K Aistrope & Mary Sue Jenkins JT TEN, 1635 N. 106th Street, Omaha, NE 68114,
owned of record 50,174.460 shares (5.80%), and Bear Stearns Securities Corp FBO
486-05954-14 1 Metrotech Center North Brooklyn, NY 11201-3859, owned of record
48,853.000 shares (5.65%);
Ivy US Blue Chip Fund, Merrill Lynch Pierce Fenner & Smith For the
sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr. E.,
3rd FL, Jacksonville, FL owned of record 11,952.636 shares (6.54%) and Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 10,199.831 shares (5.58%);
Ivy US Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith For
the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake Dr.
E., 3rd FL, Jacksonville, FL owned of record 95,681.085 shares (28.55%);
CLASS I
Of the outstanding Class I shares of:
Ivy European Opportunities Fund, NFSC FEBO # RAS-469041 NFSC/FMTC IRA
FBO Charles Peavy, 2025 Eagle Nest Bluff, Lawrenceville, GA 30244, owned of
record 615.012 shares (100%);
Ivy International Fund, Charles Schwab & Co. Inc. Reinvest Account,
Attn: Mutual Fund Dept., 101 Montgomery Street, San Francisco, CA 94104, owned
of record 389,576.275 shares (13.74%), State Street Bank TTEE FBO Allison
Engines, 200 Newport Ave., 7th Floor, North Quincy, MA 02171, owned of record
327,350.589 shares (11.54%), Lynspen and Company For Reinvestment, P.O. Box
83084, Birmingham, AL 35283, owned of record 252,973.459 shares (8.92%),
Harleysville Mutual Ins. Co/Equity, 355 Maple Ave., Harleysville, PA 19438,
owned of record 191,304.895 shares (6.74%), Northern Trust Co. TTEE of The Great
Lakes Chemical RTMT Trust A/C # 22-37152, P.O. Box 92956, 801 S. Canal St. C1S,
Chicago, IL 60675-2956, owned of record 181,365.292 shares (5.98%), S. Mark
Taper Foundation, 12011 San Vincente Blvd., Ste 400, Los Angeles, CA 90049,
owned of record 169,779.308 shares (5.98%), and Vanguard Fiduciary Trust Company
FBO Investment & Employee Stock Ownership Plan of Avista Corp. # 92094, P.O. Box
2600, VM 613, Attn: Outside Funds, Valley Forge, PA 19482, owned of record
154,798.565 shares (5.45%);
ADVISOR CLASS
Of the outstanding Advisor Class shares of:
Ivy Asia Pacific Fund, Brown Brothers Harriman & Co. CUST,
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 19,521.431 shares (73.06%), Brown Brothers
Harriman & Co. CUST International Solutions V- Aggressive Growth, Attn: Terron
McGovern, 40 Water St. Boston, MA 02109, owned of record 5,387.835 shares
(20.17%), Brown Brothers Harriman & Co. CUST International Solutions II -
Balanced Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned
of record 1,602.659 shares (6.00%);
Ivy Bond Fund, Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052 Jersey City, NJ 07303-9998, owned of record 8,890.147 shares
(26.19%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith Carlson
U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL 33432-6114, owned of
record 6,564.613 shares (19.34%), Donaldson Lufkin Jenrette Securities
Corporation Inc. P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
5,383.304 shares (15.85%), and Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record 2,366.810
shares (6.97%);
Ivy China Region Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV- Long Term Growth, Attn: Terron McGovern, 40 Water
St. Boston, MA 02109, owned of record 32,622.646 shares (61.95%), Brown Brothers
Harriman & Co. CUST International Solutions III - Moderate Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 9,740.980 shares
(18.49%), Merrill Lynch Pierce Fenner & Smith For the sole benefit of its
customers, Attn: Fund Administration, 4800 Deer Lake Dr. E., 3rd FL,
Jacksonville, FL owned of record 5,243.316 shares (9.95%), and Brown Brothers
Harriman & Co. CUST International Solutions V - Aggressive Growth, Attn: Terron
McGovern, 40 Water Street, Boston, MA 02109, owned of record 3,240.952 shares
(6.15%);
Ivy Developing Markets Fund, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 29,259.893 shares (56.59%), NFSC FEBO
# 279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 15,597.547
shares (30.16%), and Brown Brothers Harriman & Co. CUST International Solutions
V - Aggressive Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109,
owned of record 5,809.684 shares (11.23%);
Ivy European Opportunities Fund, Merrill Lynch Pierce Fenner & Smith
For the sole benefit of its customers, Attn: Fund Administration, 4800 Deer Lake
Dr. E., 3rd FL, Jacksonville, FL owned of record 857,967.359 shares (77.29%) and
Pyramid I Limited Partnership C/O Roland Manarin, 11650 Dodge Rd., Omaha, NE
68154, owned of record 55,972.256 shares (5.04%);
Ivy Global Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 12,646.539 shares (100%);
Ivy Global Natural Resources Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway,
Boca Raton, FL 33432-6114, owned of record 1,943.284 shares (66.05%), Donaldson
Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 822.637 shares (27.96%), and Edward M. Tighe, P.O.
Box 2160, Ft. Lauderdale, FL 33303, owned of record 175.788 shares (5.97%);
Ivy Global Science & Technology Fund, Robert Chapin & Michelle Broadfoot
TTEE Of The Nella Manes Trust U/A/D 04-09-92, 117 Thatch Palm Cove, Boca Raton,
FL 33432, owned of record 3,345.624 shares (19.60%), Merrill Lynch Pierce Fenner
& Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 1,675.999 shares
(9.81%), Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052
Jersey City, NJ 07303-9998, owned of record 1,675.999 shares (9.81%), Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052 Jersey City, NJ
07303-9998, owned of record 1,061.784 shares (6.22%), and Michele C. Broadfoot,
117 Thatch Palm Cove, Boca Raton, FL 33432, owned of record 1,061.586 shares
(6.21%);
Ivy Growth Fund, NFSC FEBO # 279-055662 C. William Ferris/Michael
Landry/Keith Carlson U/A 01/01/98, 700 South Federal Highway, Boca Raton, FL
33432-6114, owned of record 19,148.030 shares (99.41%);
Ivy International Fund II, Brown Brothers Harriman & Co. CUST
International Solutions IV - Long Term Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 35,889.863 shares (24.70%), Charles
Schwab & Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery
Street, San Francisco, CA 94104, owned of record 26,271.557 shares (18.08%) and
Brown Brothers Harriman & Co. CUST International Solutions III - Moderate
Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 23,078.909 shares (15.88%);
Ivy International Small Companies Fund, Merrill Lynch Pierce Fenner &
Smith For the sole benefit of its customers, Attn: Fund Administration, 4800
Deer Lake Dr. E., 3rd FL, Jacksonville, FL owned of record 16,327.134 shares
(37.27%), Brown Brothers Harriman & Co. CUST International Solutions IV - Long
Term Growth, Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of
record 14,667.380 shares (33.48%), Brown Brothers Harriman & Co. CUST
International Solutions III - Moderate Growth, Attn: Terron McGovern, 40 Water
Street, Boston, MA 02109, owned of record 9,262.050 shares (21.14%), and Brown
Brothers Harriman & Co. CUST International Solutions V - Aggressive Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
2,403.696 shares (5.48%);
Ivy International Strategic Bond Fund, Mackenzie Investment Management
Inc. Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste.
300, Boca Raton, FL 33432, owned of record 106,161.036 shares (73.22%), Brown
Brothers Harriman & Co. CUST International Solutions III - Moderate Growth,
Attn: Terron McGovern, 40 Water Street, Boston, MA 02109, owned of record
24,135.915 shares (16.64), Brown Brothers Harriman & Co. CUST International
Solutions I - Conservative Growth, Attn: Terron McGovern, 40 Water Street,
Boston, MA 02109, owned of record 7,998.962 shares (5.51%);
Ivy US Blue Chip Fund, Mackenzie Investment Management Inc. Attn: Bev
Yanowitch, Via Mizner Financial Plaza, 700 S. Federal Hwy., Ste. 300, Boca
Raton, FL 33432, owned of record 50,392.878 shares (67.45%), NFSC FEBO #
279-055662 C. William Ferris/Michael Landry/Keith Carlson U/A 01/01/98, 700
South Federal Highway, Boca Raton, FL 33432-6114, owned of record 19,514.840
shares (26.12%), and Charles Schwab & Co. Inc. Reinvest Account, Attn: Mutual
Fund Dept, 101 Montgomery Street, San Francisco, CA 94104, owned of record
4,144.193 shares (5.54%);
Ivy US Emerging Growth Fund, NFSC FEBO # 279-055662 C. William
Ferris/Michael Landry/Keith Carlson U/A 01/01/98 700 South Federal Highway, Boca
Raton, FL 33432-6114, owned of record 27,214.448 shares (63.24%), Charles Schwab
& Co. Inc. Reinvest Account, Attn: Mutual Fund Dept., 101 Montgomery Street, San
Francisco, CA 94104, owned of record 8,850.972 shares (20.57%), Mackenzie
Investment Management Inc., Attn: Bev Yanowitch, Via Mizner Financial Plaza, 700
S. Federal Hwy., Ste. 300, Boca Raton, FL 33432, owned of record 50,392.878
shares (67.45%), NFSC FEBO # 279-055662 C. William Ferris/Michael Landry/Keith
Carlson U/A 01/01/98 700 South Federal Highway, Boca Raton, FL 33432-6114, owned
of record 19,514.840 shares (26.12%), and Charles Schwab & Co. Inc. Reinvest
Account, Attn: Mutual Fund Dept., 101 Montgomery St. San Francisco, CA 94104,
owned of record 4,144.193 shares (5.54%).
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory services to
the Fund pursuant to a Business Management and Investment Advisory Agreement
(the "Agreement"). IMI is a wholly owned subsidiary of Mackenzie Investment
Management Inc. ("MIMI"). MIMI, a Delaware corporation, has approximately 10% of
its outstanding common stock listed for trading on the Toronto Stock Exchange
("TSE"). MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"), 150
Bloor Street West, Toronto, Ontario, Canada, a public corporation organized
under the laws of Ontario whose shares are listed for trading on the TSE. MFC is
registered in Ontario as a mutual fund dealer and advises Ivy Global Natural
Resources Fund. IMI also currently acts as manager and investment adviser to the
other series of Ivy Fund. IMI also provides business management services to Ivy
Global Natural Resources Fund.
The Agreement obligates IMI to make investments for the account of each
Fund in accordance with its best judgment and within the investment objectives
and restrictions set forth in the Prospectus, the 1940 Act and the provisions of
the Code relating to regulated investment companies, subject to policy decisions
adopted by the Board. IMI also determines the securities to be purchased or sold
by each Fund and places orders with brokers or dealers who deal in such
securities.
Under the Agreement, IMI also provides certain business management
services. IMI is obligated to (1) coordinate with each Fund's Custodian and
monitor the services it provides to each Fund; (2) coordinate with and monitor
any other third parties furnishing services to each Fund; (3) provide each Fund
with necessary office space, telephones and other communications facilities as
are adequate for the Fund's needs; (4) provide the services of individuals
competent to perform administrative and clerical functions that are not
performed by employees or other agents engaged by each Fund or by IMI acting in
some other capacity pursuant to a separate agreement or arrangements with each
Fund; (5) maintain or supervise the maintenance by third parties of such books
and records of the Trust as may be required by applicable Federal or state law;
(6) authorize and permit IMI's directors, officers and employees who may be
elected or appointed as trustees or officers of the Trust to serve in such
capacities; and (7) take such other action with respect to the Trust, after
approval by the Trust as may be required by applicable law, including without
limitation the rules and regulations of the SEC and of state securities
commissions and other regulatory agencies.
Ivy Growth Fund Pays IMI a monthly fee for providing business
management and investment advisory services that is equal, on an annual basis,
to 0.85% of the first $350 million of the Fund's average net assets reduced to
0.75% on its average net assets in excess of $350 million.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy
Growth Fund paid IMI fees of $2,794,304, $2,722,314 and $2,731,358,
respectively. During the same periods, IMI reimbursed Fund expenses in the
amount of $0, $0 and $113,237, respectively.
Ivy US Blue Chip Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of 0.75% of the
Fund's average net assets.
During the fiscal years ended December 31, 1998 and 1999, Ivy US Blue
Chip Fund paid IMI fees of $1,687 and $78,946, respectively. During the fiscal
year ended December 31, 1998 and 1999, IMI reimbursed Fund expenses in the
amount of $11,052 and $213,586, respectively.
Ivy US Emerging Growth Fund pays IMI a monthly fee for providing
business management and investment advisory services at an annual rate of 0.85%
of the Fund's average net assets.
During the fiscal years ended December 31, 1997, 1998 and 1999, Ivy US
Emerging Growth Fund paid IMI fees of $973,756, $985,816 and $1,070,591,
respectively.
Under the Agreement, the Trust pays the following expenses: (1) the
fees and expenses of the Trust's Independent Trustees; (2) the salaries and
expenses of any of the Trust's officers or employees who are not affiliated with
IMI; (3) interest expenses; (4) taxes and governmental fees, including any
original issue taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and other expenses
incurred in acquiring or disposing of portfolio securities; (6) the expenses of
registering and qualifying shares for sale with the SEC and with various state
securities commissions; (7) accounting and legal costs; (8) insurance premiums;
(9) fees and expenses of the Trust's Custodian and Transfer Agent and any
related services; (10) expenses of obtaining quotations of portfolio securities
and of pricing shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and distribution to
existing shareholders of periodic reports, proxy materials and prospectuses; and
(13) fees and expenses of membership in industry organizations.
IMI currently limits the total operating expenses (excluding Rule 12b-1
fees, interest, taxes, brokerage commissions, litigation, class-specific
expenses, indemnification expenses, and extraordinary expenses) of Ivy US Blue
Chip Fund to an annual rate of 1.34% of the Fund's average net assets, which may
lower each Fund's expenses and increase its yield.
The Agreement will continue in effect with respect to each Fund from
year to year, only so long as the continuance is specifically approved at least
annually (i) by the vote of a majority of the Independent Trustees and (ii)
either (a) by the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of each Fund or (b) by the vote of a majority of the
entire Board. If the question of continuance of the Agreement (or adoption of
any new agreement) with respect to any Fund is presented to the shareholders,
continuance (or adoption) shall be effected only if approved by the affirmative
vote of a majority of the outstanding voting securities of that Fund. See
"Capitalization and Voting Rights."
The Agreement may be terminated with respect to each Fund at any time,
without payment of any penalty, by the vote of a majority of the Board, or by a
vote of a majority of the outstanding voting securities of the Fund, on 60 days'
written notice to IMI, or by IMI on 60 days' written notice to the Trust. The
Agreement shall terminate automatically in the event of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the exclusive
distributor of Ivy Fund's shares pursuant to an Amended and Restated
Distribution Agreement with the Trust dated March 16, 1999, as amended from time
to time (the "Distribution Agreement"). IMDI distributes shares of each Fund
through broker-dealers who are members of the National Association of Securities
Dealers, Inc. and who have executed dealer agreements with IMDI. IMDI
distributes shares of each Fund on a continuous basis, but reserves the right to
suspend or discontinue distribution on that basis. IMDI is not obligated to sell
any specific amount of Fund shares.
The Fund has authorized IMDI to accept on its behalf purchase and
redemption orders. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on the Fund's behalf. The Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at the Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
Under the Distribution Agreement, each Fund bears, among other
expenses, the expenses of registering and qualifying its shares for sale under
Federal and state securities laws and preparing and distributing to existing
shareholders periodic reports, proxy materials and prospectuses.
The Distribution Agreement will continue in effect for successive
one-year periods, provided that such continuance is specifically approved at
least annually by the vote of a majority of the Independent Trustees, cast in
person at a meeting called for that purpose and by the vote of either a majority
of the entire Board or a majority of the outstanding voting securities of each
Fund. The Distribution Agreement may be terminated with respect to any Fund at
any time, without payment of any penalty, by IMDI on 60 days' written notice to
the Fund or by the Fund by vote of either a majority of the outstanding voting
securities of the Fund or a majority of the Independent Trustees on 60 days'
written notice to IMDI. The Distribution Agreement shall terminate automatically
in the event of its assignment.
RULE 18f-3 PLAN. On February 23, 1995, the SEC adopted Rule 18f-3 under
the 1940 Act, which permits a registered open-end investment company to issue
multiple classes of shares in accordance with a written plan approved by the
investment company's board of directors/trustees and filed with the SEC. The
Board has adopted a Rule 18f-3 plan on behalf of each Fund. The key features of
the Rule 18f-3 plan are as follows: (i) shares of each class of each Fund
represent an equal pro rata interest in the Fund and generally have identical
voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications, terms and conditions, except that
each class bears certain class-specific expenses and has separate voting rights
on certain matters that relate solely to that class or in which the interests of
shareholders of one class differ from the interests of shareholders of another
class; (ii) subject to certain limitations described in the Prospectus, shares
of a particular class of each Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) each Fund's Class B shares will convert
automatically into Class A shares of that Fund after a period of eight years,
based on the relative net asset value of such shares at the time of conversion.
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown Brothers
Harriman & Co. (the "Custodian"), a private bank and member of the principal
securities exchanges, located at 40 Water Street, Boston, Massachusetts 02109
(the "Custodian"), maintains custody of the assets of each Fund held in the
United States. Rules adopted under the 1940 Act permit the Trust to maintain its
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Pursuant to those rules, the Custodian has entered into
subcustodial agreements for the holding of each Fund's foreign securities. With
respect to each Fund, the Custodian may receive, as partial payment for its
services to the Fund, a portion of the Trust's brokerage business, subject to
its ability to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI provides certain
accounting and pricing services for each Fund. As compensation for those
services, each Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee is based upon the net assets of each Fund at the
preceding month end at the following rates: $1,250 when net assets are $10
million and under; $2,500 when net assets are over $10 million to $40 million;
$5,000 when net assets are over $40 million to $75 million; and $6,500 when net
assets are over $75 million.
During the fiscal year ended December 31, 1999, Ivy Growth Fund paid
MIMI $113,237 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund
paid MIMI $29,915 under the agreement.
During the fiscal year ended December 31, 1999, Ivy US Emerging Growth
Fund paid MIMI $100,632 under the agreement
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI located at
Via Mizner Financial Plaza, Ste. 300, 700 S. Federal Hwy., Boca Raton, Florida,
33432, is the transfer agent for each Fund. Under the Agreement, each Fund pays
a monthly fee at an annual rate of $20.00 for each open Class A, Class B, Class
C and Advisor Class account. In addition, each Fund pays a monthly fee at an
annual rate of $4.70 per account that is closed plus certain out-of-pocket
expenses. Ivy US Blue Chip Fund pays a monthly fee at an annual rate of $10.25
per open Class I account. Such fees and expenses for the fiscal year ended
December 31, 1999 for Ivy Growth Fund totaled $778,713. Such fees and expenses
for the fiscal year ended December 31, 1999 for Ivy US Blue Chip Fund totaled
$17,901. Such fees and expenses for the fiscal year ended December 31, 1999 for
Ivy US Emerging Growth Fund totaled $333,603. Certain broker-dealers that
maintain shareholder accounts with each Fund through an omnibus account provide
transfer agent and other shareholder-related services that would otherwise be
provided by IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly. IMSC pays such broker-dealers a
per account fee for each open account within the omnibus account, or a fixed
rate (e.g., 0.10%) fee, based on the average daily net asset value of the
omnibus account (or a combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI provides certain
administrative services to each Fund. As compensation for these services, each
Fund pays MIMI a monthly fee at the annual rate of 0.10% of the Fund's average
daily net asset value of its Class A, Class B, Class C, and Advisor Class
shares. Ivy US Blue Chip Fund pays MIMI a monthly fee at the annual rate of
0.01% of its average daily net assets for Class I. Such fees for the fiscal year
ended December 31, 1999 for Ivy Growth Fund totaled $321,469. Such fees for the
fiscal year ended December 31, 1999 for Ivy US Blue Chip Fund totaled $10,526.
Such fees for the fiscal year ended December 31, 1999 for Ivy US Emerging Growth
Fund totaled $100,632.
AUDITORS
PricewaterhouseCoopers LLP, independent 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 each 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 any Fund for such purchases
and sales (although the price paid generally includes undisclosed compensation
to the dealer). The prices paid to underwriters of newly-issued securities
usually include a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally reflect the spread
between the bid and asked prices. In connection with OTC transactions, IMI
attempts to deal directly with the principal market makers, except in those
circumstances where IMI believes that a better price and execution are available
elsewhere.
IMI selects broker-dealers to execute transactions and evaluates the
reasonableness of commissions on the basis of quality, quantity, and the nature
of the firms' professional services. Commissions to be charged and the rendering
of investment services, including statistical, research, and counseling services
by brokerage firms, are factors to be considered in the placing of brokerage
business. The types of research services provided by brokers may include general
economic and industry data, and information on securities of specific companies.
Research services furnished by brokers through whom the Trust effects securities
transactions may be used by IMI in servicing all of its accounts. In addition,
not all of these services may be used by IMI in connection with the services it
provides to the Funds or the Trust. IMI may consider sales of shares of Ivy
funds as a factor in the selection of broker-dealers and may select
broker-dealers who provide it with research services. IMI 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 the 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, Ivy Growth
Fund paid brokerage commissions of $683,881 and $907,345, respectively. For the
fiscal year ended December 31, 1999, Ivy Growth Fund paid a total of $739,391 in
brokerage commissions with respect to portfolio transactions aggregating
$395,240,254. Of such amount, $218,593 in brokerage commissions with respect to
portfolio transactions aggregating $123,858,312 was placed with broker-dealers
who provided research services.
During the period from commencement of operations (November 2, 1998)
through December 31, 1998, Ivy US Blue Chip Fund paid brokerage commissions of
$1,806. For the fiscal year ended December 31, 1999, Ivy US Blue Chip Fund paid
a total of $19,700 in brokerage commissions with respect to portfolio
transactions aggregating $27,986,875. Of such amount, $15,344 in brokerage
commissions with respect to portfolio transactions aggregating $ 23,627,153 was
placed with broker-dealers who provided research services.
During the fiscal years ended December 31, 1997 and 1998, Ivy US
Emerging Growth Fund paid brokerage commissions of $583,738 and $658,613,
respectively. For the fiscal year ended December 31, 1999, Ivy US Emerging
Growth Fund paid a total of $588,118 in brokerage commissions with respect to
portfolio transactions aggregating $266,009,325. Of such amount, $60,490 in
brokerage commissions with respect to portfolio transactions aggregating
$20,395,477 was placed with broker-dealers who provided research services.
Brokerage commissions vary from year to year in accordance with the
extent to which a particular Fund is more or less actively traded.
Each Fund may, under some circumstances, accept securities in lieu of
cash as payment for Fund shares. Each Fund will accept securities only to
increase its holdings in a portfolio security or to take a new portfolio
position in a security that IMI deems to be a desirable investment for that
Fund. While no minimum has been established, it is expected that each Fund will
not accept securities having an aggregate value of less than $1 million. The
Trust may reject in whole or in part any or all offers to pay for Fund shares
with securities and may discontinue accepting securities as payment for Fund
shares at any time without notice. The Trust will value accepted securities in
the manner and at the same time provided for valuing portfolio securities of
each Fund, and each Fund's shares will be sold for net asset value determined at
the same time the accepted securities are valued. The Trust will only accept
securities delivered in proper form and will not accept securities subject to
legal restrictions on transfer. The acceptance of securities by the Trust must
comply with the applicable laws of certain states.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an unlimited number of
shares of beneficial interest (no par value per share). When issued, shares of
each class of each Fund are fully paid, non-assessable, redeemable and fully
transferable. No class of shares of any Fund has preemptive rights or
subscription rights.
The 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 Funds, Ivy Asia Pacific Fund, Ivy Bond
Fund, Ivy China Region Fund, Ivy Cundill Value Fund, Ivy Developing Markets
Fund, Ivy European Opportunities Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy Global Science & Technology Fund, Ivy International Fund II,
Ivy International Small Companies Fund and Ivy International Strategic Bond
Fund, as well as Class I shares for Ivy Bond Fund, Ivy Cundill Value Fund, Ivy
European Opportunities Fund, Ivy Global Science & Technology Fund, Ivy
International Fund, Ivy International Fund II, Ivy International Small Companies
Fund, Ivy International Strategic Bond Fund and Ivy US Blue Chip Fund and Ivy
Next Wave Internet Fund. 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 each Fund entitle their holders to one vote per share (with
proportionate voting for fractional shares). Shareholders of each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each Fund will vote together, except with respect to the distribution
plan applicable to the Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all funds of the Trust,
but affecting the funds differently, separate votes by the shareholders of each
fund are required. Approval of an investment advisory agreement and a change in
fundamental policies would be regarded as matters requiring separate voting by
the shareholders of each fund of the Trust. If the Trustees determine that a
matter does not affect the interests of a Fund, then the shareholders of that
Fund will not be entitled to vote on that matter. Matters that affect the Trust
in general, such as ratification of the selection of independent 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 a Fund means the vote of the lesser of: (1) 67% of
the shares of that Fund (or of the Trust) present at a meeting if the holders of
more than 50% of the outstanding shares are present in person or by proxy; or
(2) more than 50% of the outstanding shares of that Fund (or of the Trust).
With respect to the submission to shareholder vote of a matter
requiring separate voting by a Fund, the matter shall have been effectively
acted upon with respect to that Fund if a majority of the outstanding voting
securities of the Fund votes for the approval of the matter, notwithstanding
that: (1) the matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the matter has not been
approved by a majority of the outstanding voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that the holders
of not less than two-thirds of the outstanding shares of the Trust may remove a
person serving as trustee either by declaration in writing or at a meeting
called for such purpose. The Trustees are required to call a meeting for the
purpose of considering the removal of a person serving as Trustee if requested
in writing to do so by the holders of not less than 10% of the outstanding
shares of the Trust. Shareholders will be assisted in communicating with other
shareholders in connection with the removal of a Trustee as if Section 26(c) of
the Act were applicable.
The Trust's shares do not have cumulative voting rights and accordingly
the holders of more than 50% of the outstanding shares could elect the entire
Board, in which case the holders of the remaining shares would not be able to
elect any Trustees.
Under Massachusetts law, the Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Amended and Restated Declaration of Trust disclaims liability of
the shareholders, Trustees or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust, and
requires that notice of the disclaimer be given in each contract or obligation
entered into or executed by the Trust or its Trustees. The Amended and Restated
Declaration of Trust provides for indemnification out of Fund property for all
loss and expense of any shareholder of any Fund held personally liable for the
obligations of that Fund. The risk of a shareholder of the Trust incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations and, thus,
should be considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust.
SPECIAL RIGHTS AND PRIVILEGES
The Trust offers, and (except as noted below) bears the cost of
providing, to investors the following rights and privileges. The Trust reserves
the right to amend or terminate any one or more of these rights and privileges.
Notice of amendments to or terminations of rights and privileges will be
provided to shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer to funds,
other than the Funds, whose shares are also distributed by IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Cundill
Value Fund, Ivy Developing Markets Fund, Ivy European Opportunities Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy Global Science & Technology
Fund, Ivy International Fund, Ivy International Fund II, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Money Market Fund and
Ivy Next Wave Internet Fund (the other fifteen series of the Trust).
Shareholders should obtain a current prospectus before exercising any right or
privilege that may relate to these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund shareholder to
have specified amounts automatically drawn each month from his or her bank for
investment in Fund shares, is available for all classes of shares, except Class
I. The minimum initial and subsequent investment under this method is $250 per
month (except in the case of a tax qualified retirement plan for which the
minimum initial and subsequent investment is $25 per month). A shareholder may
terminate the Automatic Investment Method at any time upon delivery to IMSC of
telephone instructions or written notice. See "Automatic Investment Method" in
the Prospectus. To begin the plan, complete Sections 6A and 7B of the Account
Application.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of each Fund have an
exchange privilege with other Ivy funds. Before effecting an exchange,
shareholders of a Fund should obtain and read the currently effective prospectus
for the Ivy fund into which the exchange is to be made.
Advisor Class shareholders may exchange their outstanding Advisor Class
shares for Advisor Class shares of another Ivy fund on the basis of the relative
net asset value per share. The minimum value of Advisor Class shares which may
be exchanged into an Ivy fund in which shares are not already held is $10,000.
No exchange out of any Fund (other than by a complete exchange of all Fund
shares) may be made if it would reduce the shareholder's interest in the Advisor
Class shares of that Fund to less than $10,000.
Each exchange will be made on the basis of the relative net asset value
per share of the Ivy funds involved in the exchange next computed following
receipt by IMSC of telephone instructions by IMSC or a properly executed
request. Exchanges, whether written or telephonic, must be received by IMSC by
the close of regular trading on the Exchange (normally 4:00 p.m., eastern time)
to receive the price computed on the day of receipt. Exchange requests received
after that time will receive the price next determined following receipt of the
request. The exchange privilege may be modified or terminated at any time, upon
at least 60 days' notice to the extent required by applicable law. See
"Redemptions."
An exchange of shares between any of the Ivy funds will result in a
taxable gain or loss. Generally, this will be a capital gain or loss (long-term
or short-term, depending on the holding period of the shares) in the amount of
the difference between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain circumstances,
shareholders will be ineligible to take sales charges into account in computing
taxable gain or loss on an exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred retirement
plan will not be taxable to the plan and will not be taxed to the participant
until distribution. Each investor should consult his or her tax adviser
regarding the tax consequences of an exchange transaction.
RETIREMENT PLANS
Shares may be purchased in connection with several types of
tax-deferred retirement plans. Shares of more than one fund distributed by IMDI
may be purchased in a single application establishing a single account under the
plan, and shares held in such an account may be exchanged among the Ivy funds in
accordance with the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase payments in
connection with tax-deferred retirement plans must be at least $25 per
participant.
The following fees will be charged to individual shareholder accounts
as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per fund account
For shareholders whose retirement accounts are diversified across
several Ivy funds, the annual maintenance fee will be limited to not more than
$20.
The following discussion describes the tax treatment of certain
tax-deferred retirement plans under current Federal income tax law. State income
tax consequences may vary. An individual considering the establishment of a
retirement plan should consult with an attorney and/or an accountant with
respect to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of each Fund may be used as a
funding medium for an Individual Retirement Account ("IRA"). Eligible
individuals may establish an IRA by adopting a model custodial account available
from IMSC, who may impose a charge for establishing the account.
An individual who has not reached age 70-1/2 and who receives
compensation or earned income is eligible to contribute to an IRA, whether or
not he or she is an active participant in a retirement plan. An individual who
receives a distribution from another IRA, a qualified retirement plan, a
qualified annuity plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible to establish an
IRA by rolling over the distribution either directly or within 60 days after its
receipt. Tax advice should be obtained in connection with planning a rollover
contribution to an IRA.
In general, an eligible individual may contribute up to the lesser of
$2,000 or 100% of his or her compensation or earned income to an IRA each year.
If a husband and wife are both employed, and both are under age 70-1/2, each may
set up his or her own IRA within these limits. If both earn at least $2,000 per
year, the maximum potential contribution is $4,000 per year for both. For years
after 1996, the result is similar even if one spouse has no earned income; if
the joint earned income of the spouses is at least $4,000, a contribution of up
to $2,000 may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to an IRA in
computing his or her Federal income tax within the limits described above,
provided he or she (or his or her spouse, if they file a joint Federal income
tax return) is not an active participant in a qualified retirement plan (such as
a qualified corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan, 403(b) plan,
simplified employee pension, or governmental plan. If he or she (or his or her
spouse) is an active participant, whether the individual's contribution to an
IRA is fully deductible, partially deductible or not deductible depends on (i)
adjusted gross income and (ii) whether it is the individual or the individual's
spouse who is an active participant, in the case of married individuals filing
jointly. Contributions may be made up to the maximum permissible amount even if
they are not deductible. Rollover contributions are not includable in income for
Federal income tax purposes and therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current Federal income
tax until distributed. Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary income. Distributions of
non-deductible contributions are not subject to Federal income tax. In general,
distributions from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the taxable amount of
the distribution. The 10% penalty tax does not apply to amounts withdrawn from
an IRA after the individual reaches age 59-1/2, becomes disabled or dies, or if
withdrawn in the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated beneficiary, if any, or
rolled over into another IRA, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed individuals not in
excess of amounts paid for certain health insurance premiums, amounts used to
pay certain qualified higher education expenses, and amounts used within 120
days of the date the distribution is received to pay for certain first-time
homebuyer expenses. Distributions must begin to be withdrawn not later than
April 1 of the calendar year following the calendar year in which the individual
reaches age 70-1/2. Failure to take certain minimum required distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAs: Shares of each Fund also may be used as a funding medium for
a Roth Individual Retirement Account ("Roth IRA"). A Roth IRA is similar in
numerous ways to the regular (traditional) IRA, described above. Some of the
primary differences are as follows.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000. An individual whose adjusted gross income exceeds the maximum
phase-out amount cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
Contributions to a Roth IRA are not deductible. Contributions to a Roth IRA may
be made even after the individual for whom the account is maintained has
attained age 70 1/2.
No distributions are required to be taken prior to the death of the
original account holder. If a Roth IRA has been established for a minimum of
five years, distributions can be taken tax-free after reaching age 59 1/2, for a
first-time home purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA (other than the amount of
nondeductible contributions) are taxable and subject to a 10% tax penalty unless
an exception applies. Exceptions to the 10% penalty include: reaching age 59
1/2, death, disability, deductible medical expenses, the purchase of health
insurance for certain unemployed individual and qualified higher education
expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. After 1998, all taxes on such a rollover will have to be paid in the tax
year in which the rollover is made.
QUALIFIED PLANS: For those self-employed individuals who wish to
purchase shares of one or more Ivy funds through a qualified retirement plan, an
Agreement and a Retirement Plan are available from IMSC. The Retirement Plan may
be adopted as a profit sharing plan or a money purchase pension plan. A profit
sharing plan permits an annual contribution to be made in an amount determined
each year by the self-employed individual within certain limits prescribed by
law. A money purchase pension plan requires annual contributions at the level
specified in the Agreement. There is no set-up fee for qualified plans and the
annual maintenance fee is $20.00 per account.
In general, if a self-employed individual has any common law employees,
employees who have met certain minimum age and service requirements must be
covered by the Retirement Plan. A self-employed individual generally must
contribute the same percentage of income for common law employees as for himself
or herself.
A self-employed individual may contribute up to the lesser of $30,000
or 25% of compensation or earned income to a money purchase pension plan or to a
combination profit sharing and money purchase pension plan arrangement each year
on behalf of each participant. To be deductible, total contributions to a profit
sharing plan generally may not exceed 15% of the total compensation or earned
income of all participants in the plan, and total contributions to a combination
money purchase-profit sharing arrangement generally may not exceed 25% of the
total compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be included in
computing the deduction is limited (generally to $150,000 for benefits accruing
in plan years beginning after 1993, with annual inflation adjustments). A
self-employed individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement and
Retirement Plan for the benefit of their eligible employees. Similar
contribution and deduction rules apply to corporate employers.
Distributions from the Retirement Plan generally are made after a
participant's separation from service. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies; (3)
becomes disabled; (4) uses the withdrawal to pay tax-deductible medical
expenses; (5) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust to furnish
custodial services to the employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE ORGANIZATIONS
("403(B)(7) ACCOUNT"): Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code") permits public school systems and certain charitable
organizations to use mutual fund shares held in a custodial account to fund
deferred compensation arrangements with their employees. A custodial account
agreement is available for those employers whose employees wish to purchase
shares of the Trust in conjunction with such an arrangement. The special
application for a 403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only following
death, disability, separation from service, attainment of age 59-1/2, or
incurring a financial hardship. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies or
becomes disabled; (3) uses the withdrawal to pay tax-deductible medical
expenses; (4) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (5) rolls over the distribution.
There is no set-up fee for 403(b)(7) Accounts and the annual maintenance fee is
$20.00 per account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs: An employer may deduct
contributions to a SEP up to the lesser of $30,000 or 15% of compensation. SEP
accounts generally are subject to all rules applicable to IRA accounts, except
the deduction limits, and are subject to certain employee participation
requirements. No new salary reduction SEPs ("SARSEPs") may be established after
1996, but existing SARSEPs may continue to be maintained, and non-salary
reduction SEPs may continue to be established as well as maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a SIMPLE 401(k)
for years after 1996. An employee can make pre-tax salary reduction
contributions to a SIMPLE Plan, up to $6,000 a year (as indexed). Subject to
certain limits, the employer will either match a portion of employee
contributions, or will make a contribution equal to 2% of each employee's
compensation without regard to the amount the employee contributes. An employer
cannot maintain a SIMPLE Plan for its employees if the employer maintains or
maintained any other qualified retirement plan with respect to which any
contributions or benefits have been credited.
SYSTEMATIC WITHDRAWAL PLAN
An Advisor Class shareholder may establish a Systematic Withdrawal Plan
(a "Withdrawal Plan"), by telephone instructions or by delivery to IMSC of a
written election to have his or her shares withdrawn periodically (minimum
distribution amount - $50), accompanied by a surrender to IMSC of all share
certificates then outstanding in such shareholder's name, properly endorsed by
the shareholder. To be eligible to elect a Withdrawal Plan, a shareholder must
continually maintain an account balance of at least $10,000. A Withdrawal Plan
may not be established if the investor is currently participating in the
Automatic Investment Method. A Withdrawal Plan may involve the depletion of a
shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event. Shareholders
contemplating participating in a Withdrawal Plan should consult their tax
advisers.
Additional investments made by investors participating in a Withdrawal
Plan must equal at least $250 each while the Withdrawal Plan is in effect.
An investor may terminate his or her participation in the Withdrawal
Plan at any time by delivering written notice to IMSC. If all shares held by the
investor are liquidated at any time, participation in the Withdrawal Plan will
terminate automatically. The Trust or IMSC may terminate the Withdrawal Plan
option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of each Fund may be purchased in connection with investment
programs established by employee or other groups using systematic payroll
deductions or other systematic payment arrangements. The Trust does not itself
organize, offer or administer any such programs. However, it may, depending upon
the size of the program, waive the minimum initial and additional investment
requirements for purchases by individuals in conjunction with programs organized
and offered by others. Unless shares of a Fund are purchased in conjunction with
IRAs (see "How to Buy Shares" in the Prospectus), such group systematic
investment programs are not entitled to special tax benefits under the Code. The
Trust reserves the right to refuse purchases at any time or suspend the offering
of shares in connection with group systematic investment programs, and to
restrict the offering of shareholder privileges, such as check writing,
simplified redemptions and other optional privileges, as described in the
Prospectus, to shareholders using group systematic investment programs.
With respect to each shareholder account established on or after
September 15, 1972 under a group systematic investment program, the Trust and
IMI each currently charge a maintenance fee of $3.00 (or portion thereof) that
for each twelve-month period (or portion thereof) that the account is
maintained. The Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by causing on the
date the fee is assessed a redemption in each such shareholder account
sufficient to pay such fee. The Trust reserves the right to change these fees
from time to time without advance notice.
REDEMPTIONS
Shares of each Fund are redeemed at their net asset value next
determined after a proper redemption request has been received by IMSC.
Unless a shareholder requests that the proceeds of any redemption be
wired to his or her bank account, payment for shares tendered for redemption is
made by check within seven days after tender in proper form, except that the
Trust reserves the right to suspend the right of redemption or to postpone the
date of payment upon redemption beyond seven days, (i) for any period during
which the Exchange is closed (other than customary weekend and holiday closings)
or during which trading on the Exchange is restricted, (ii) for any period
during which an emergency exists as determined by the SEC as a result of which
disposal of securities owned by a Fund is not reasonably practicable or it is
not reasonably practicable for the Fund to fairly determine the value of its net
assets, or (iii) for such other periods as the SEC may by order permit for the
protection of shareholders of a Fund.
Under unusual circumstances, when the Board deems it in the best
interest of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of that Fund taken at
current values. If any such redemption in kind is to be made, each Fund may make
an election pursuant to Rule 18f-1 under the 1940 Act. This will require the
particular Fund to redeem with cash at a shareholder's election in any case
where the redemption involves less than $250,000 (or 1% of that Fund's net asset
value at the beginning of each 90-day period during which such redemptions are
in effect, if that amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs in converting
such securities to cash.
The Trust may redeem those Advisor Class accounts of shareholders who
have maintained an investment of less than $10,000 in any Fund for a period of
more than 12 months. All Advisor Class accounts below that minimum will be
redeemed simultaneously when MIMI deems it advisable. The $10,000 balance will
be determined by actual dollar amounts invested by the shareholder, unaffected
by market fluctuations. The Trust will notify any such shareholder by certified
mail of its intention to redeem such account, and the shareholder shall have 60
days from the date of such letter to invest such additional sums as shall raise
the value of such account above that minimum. Should the shareholder fail to
forward such sum within 60 days of the date of the Trust's letter of
notification, the Trust will redeem the shares held in such account and transmit
the redemption in value thereof to the shareholder. However, those shareholders
who are investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments pursuant to the
plan for a period of at least six consecutive months, and these shareholders
will be given six-months' notice by the Trust before such redemption.
Shareholders in a qualified retirement, pension or profit sharing plan who wish
to avoid tax consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may change the minimum
account size.
If a shareholder has given authorization for telephonic redemption
privilege, shares can be redeemed and proceeds sent by Federal wire to a single
previously designated bank account. Delivery of the proceeds of a wire
redemption request of $250,000 or more may be delayed by any Fund for up to
seven days if deemed appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the telephonic
redemption privilege without prior notice. The Trust cannot be responsible for
the efficiency of the Federal wire system of the shareholder's dealer of record
or bank. The shareholder is responsible for any charges by the shareholder's
bank.
Each Fund employs reasonable procedures that require personal
identification prior to acting on redemption or exchange instructions
communicated by telephone to confirm that such instructions are genuine. In the
absence of such instructions, a Fund may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
NET ASSET VALUE
The net asset value per share of each Fund is computed by dividing the
value of that Fund's aggregate net assets (i.e., its total assets less its
liabilities) by the number of the Fund's shares outstanding. For purposes of
determining a Fund's aggregate net assets, receivables are valued at their
realizable amounts. Each Fund's liabilities, if not identifiable as belonging to
a particular class of that Fund, are allocated among the Fund's several classes
based on their relative net asset size. Liabilities attributable to a particular
class are charged to that class directly. The total liabilities for a class are
then deducted from the class's proportionate interest in the Fund's assets, and
the resulting amount is divided by the number of shares of the class outstanding
to produce its net asset value per share.
A security listed or traded on a recognized stock exchange or The
Nasdaq Stock Market, Inc. ("Nasdaq") is valued at the security's last quoted
sale price on the exchange on which the security is principally traded. If no
sale is reported at that time, the average between the last bid and asked price
(the "Calculated Mean") is used. Unless otherwise noted herein, the value of a
foreign security is determined in its national currency as of the normal close
of trading on the foreign exchange on which it is traded or as of the close of
regular trading on the Exchange, if that is earlier, and that value is then
converted into its U.S. dollar equivalent at the foreign exchange rate in effect
at noon, eastern time, on the day the value of the foreign security is
determined. All other securities for which OTC market quotations are readily
available are valued at the Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) or
pricing services that take into account appropriate valuation factors. Interest
is accrued daily. Money market instruments are valued at amortized cost, which
the Board believes approximates market value.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. Exchange listed and widely-traded OTC
futures (and options thereon) are valued at the most recent settlement price.
Securities and other assets for which market prices are not readily
available are priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on foreign exchanges may not take place on all days on
which there is regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of the national
business holidays identified below). If events materially affecting the value of
a Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when that Fund's net asset value is calculated (see
following paragraph), such securities may be valued at fair value as determined
by IMI in accordance with procedures approved by the Board.
Portfolio securities are valued (and net asset value per share is
determined) as of the close of regular trading on the Exchange (normally 4:00
p.m., eastern time) on each day the Exchange is open for trading. The Exchange
and the Trust's offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. On those days
when either or both of a Fund's Custodian or the Exchange close early as a
result of a partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption requests must be
received.
The number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on each
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since each Fund
normally invests in securities that are listed on foreign exchanges that may
trade on weekends or other days when the Fund does not price its shares, each
Fund's net asset value may change on days when shareholders will not be able to
purchase or redeem that Fund's shares. The sale of each Fund's shares will be
suspended during any period when the determination of its net asset value is
suspended pursuant to rules or orders of the SEC and may be suspended by the
Board whenever in its judgment it is in a Fund's best interest to do so.
TAXATION
The following is a general discussion of certain tax rules thought to
be applicable with respect to each Fund. It is merely a summary and is not an
exhaustive discussion of all possible situations or of all potentially
applicable taxes. Accordingly, shareholders and prospective shareholders should
consult a competent tax adviser about the tax consequences to them of investing
in any Fund. The Funds are not managed for tax-efficiency.
Each Fund intends to be taxed as a regulated investment company under
Subchapter M of the Code. Accordingly, each Fund must, among other things, (a)
derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the market value of the Fund's assets
is represented by cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies).
As a regulated investment company, each Fund generally will not be
subject to U.S. Federal income tax on its income and gains that it distributes
to shareholders, if at least 90% of its investment company taxable income (which
includes, among other items, dividends, interest and the excess of any
short-term capital gains over long-term capital losses) for the taxable year is
distributed. Each Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, each Fund must distribute during each calendar
year, (1) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year (2) at least 98% of its capital
gains in excess of its capital losses (adjusted for certain ordinary losses) for
a one-year period generally ending on October 31 of the calendar year, and (3)
all ordinary income and capital gains for previous years that were not
distributed during such years. To avoid application of the excise tax, each Fund
intends to make distributions in accordance with the calendar year distribution
requirements. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by a Fund in October, November or
December of the year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be taxable to
shareholders in the calendar year the distributions are declared, rather than
the calendar year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt securities is
governed by Code section 1234. Pursuant to Code section 1234, the premium
received by each Fund for selling a put or call option is not included in income
at the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If a Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium received is
short-term capital gain or loss. If a call option written by a Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward contracts in
which each Fund may invest may be "section 1256 contracts." Gains (or losses) on
these contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary in character.
Also, section 1256 contracts held by each Fund at the end of each taxable year
(and on certain other dates prescribed in the Code) are "marked-to-market" with
the result that unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts undertaken
by each Fund may result in "straddles" for Federal income tax purposes. The
straddle rules may affect the character of gains or losses realized by each
Fund. In addition, losses realized by each Fund on positions that are part of a
straddle may be deferred under the straddle rules, rather than being taken into
account in calculating the taxable income for the taxable year in which such
losses are realized. Because only a few regulations implementing the straddle
rules have been promulgated, the consequences of such transactions to each Fund
are not entirely clear. The straddle rules may increase the amount of short-term
capital gain realized by any Fund, which is taxed as ordinary income when
distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, each Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if the Fund enters into a short sale, offsetting notional principal contract,
futures or forward contract transaction with respect to the appreciated position
or substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment of appreciated financial positions does not apply to certain
transactions closed in the 90-day period ending with the 30th day after the
close of each Fund's taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in exchange rates which
occur between the time each Fund accrues receivables or liabilities denominated
in a foreign currency and the time that Fund actually collects such receivables
or pays such liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of some investments, including debt securities
denominated in a foreign currency and certain options, futures and forward
contracts, gains or losses attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the security or contract and
the date of disposition also are treated as ordinary gain or loss. These gains
and losses, referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of each Fund's investment company taxable income
available to be distributed to its shareholders as ordinary income.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute investment-type assets, or 75% or more of its gross income
is investment-type income. If a Fund receives a so-called "excess distribution"
with respect to PFIC stock, that Fund itself may be subject to a tax on a
portion of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which a Fund held the PFIC shares. Each Fund itself will be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
Each Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Each Fund may elect to mark to market its PFIC shares,
resulting in the shares being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income; any resulting loss and any loss from an actual disposition of
the shares would be reported as ordinary loss to the extent of any net gains
reported in prior years. Under another election that currently is available in
some circumstances, each Fund generally would be required to include in its
gross income its share of the earnings of a PFIC on a current basis, regardless
of whether distributions are received from the PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by each Fund may be
treated as debt securities that are issued originally at a discount. Generally,
the amount of the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures.
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by each Fund in the
secondary market may be treated as having market discount. Generally, gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. In addition, the deduction of any interest expenses
attributable to debt securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. Each Fund may make one
or more of the elections applicable to debt securities having market discount,
which could affect the character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year or less
from the date of issuance) that may be acquired by each Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, each Fund will be required to include the acquisition
discount, or OID, in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. Each Fund may make one or more of the elections applicable to
debt securities having acquisition discount, or OID, which could affect the
character and timing of recognition of income.
Each Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by that Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by each Fund.
DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a
U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends
paid by each Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by that Fund, may
qualify for the dividends received deduction. However, the revised alternative
minimum tax applicable to corporations may reduce the value of the dividends
received deduction. Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, designated
by each Fund as capital gain dividends, are taxable to shareholders as long-term
capital gains whether paid in cash or in shares, and regardless of how long the
shareholder has held the Fund's shares; such distributions are not eligible for
the dividends received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share received equal
to the net asset value of a share of that Fund on the distribution date. A
distribution of an amount in excess of a Fund's current and accumulated earnings
and profits will be treated by a shareholder as a return of capital which is
applied against and reduces the shareholder's basis in his or her shares. To the
extent that the amount of any such distribution exceeds the shareholder's basis
in his or her shares, the excess will be treated by the shareholder as gain from
a sale or exchange of the shares. Shareholders will be notified annually as to
the U.S. Federal tax status of distributions and shareholders receiving
distributions in the form of newly issued shares will receive a report as to the
net asset value of the shares received.
If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by a Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Shareholders
should be careful to consider the tax implications of buying shares just prior
to a distribution. The price of shares purchased at this time may reflect the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which generally will be taxable to
them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a shareholder
will realize a taxable gain or loss depending upon his or her basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and, if so, will be long-term or
short-term, depending upon the shareholder's holding period for the shares. Any
loss realized on a redemption sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized by a
shareholder on the sale of Fund shares held by the shareholder for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any distributions of capital gain dividends received or treated as having
been received by the shareholder with respect to such shares.
In some cases, shareholders will not be permitted to take all or
portion of their sales loads into account for purposes of determining the amount
of gain or loss realized on the disposition of their shares. This prohibition
generally applies where (1) the shareholder incurs a sales load in acquiring the
shares of a Fund, (2) the shares are disposed of before the 91st day after the
date on which they were acquired, and (3) the shareholder subsequently acquires
shares in the same Fund or another regulated investment company and the
otherwise applicable sales charge is reduced under a "reinvestment right"
received upon the initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated investment companies
without the payment of a sales load or with the payment of a reduced sales
charge. Sales charges affected by this rule are treated as if they were incurred
with respect to the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of fund shares.
FOREIGN WITHHOLDING TAXES
Income received by each Fund from sources within a foreign country may
be subject to withholding and other taxes imposed by that country.
BACKUP WITHHOLDING
Each Fund will be required to report to the Internal Revenue Service
("IRS") all taxable distributions as well as gross proceeds from the redemption
of the Fund's shares, except in the case of certain exempt shareholders. All
such distributions and proceeds will be subject to withholding of Federal income
tax at a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Fund with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the shareholder or the Fund that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he or she is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above. This discussion does not purport to deal with all of the
tax consequences applicable to the Funds or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in any Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of each Fund may be
compared, in reports and promotional literature, to: (i) the S&P 500 Index, the
Dow Jones Industrial Average ("DJIA"), or other unmanaged indices so that
investors may compare each Fund's results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm that ranks mutual
funds by overall performance, investment objectives and assets, or tracked by
other services, companies, publications or other criteria; and (iii) the
Consumer Price Index (measure for inflation) to assess the real rate of return
from an investment in a Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses. Performance rankings are based on historical
information and are not intended to indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of each Fund
will be expressed in terms of the average annual compounded rate of return that
would cause a hypothetical investment in that class of the Fund made on the
first day of a designated period to equal the ending redeemable value ("ERV") of
such hypothetical investment on the last day of the designated period, according
to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000 to purchase
shares of a specific class
T = the average annual total return of shares of that
class
n = the number of years
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
For purposes of the above computation for each Fund, it is assumed that
all dividends and capital gains distributions made by the Fund are reinvested at
net asset value in additional Advisor Class shares during the designated period.
Standardized Return quotations for each Fund do not take into account any
required payments for federal or state income taxes. Standardized Return
quotations are determined to the nearest 1/100 of 1%.
Each Fund may, from time to time, include in advertisements,
promotional literature or reports to shareholders or prospective investors total
return data that are not calculated according to the formula set forth above
("Non-Standardized Return").
In determining the average annual total return for a specific class of
shares of each Fund, recurring fees, if any, that are charged to all shareholder
accounts are taken into consideration. For any account fees that vary with the
size of the account of each Fund, the account fee used for purposes of the
following computations is assumed to be the fee that would be charged to the
mean account size of the Fund.
The Standardized Return for the Advisor Class shares of Ivy Growth Fund
for the period from the date Advisor Class shares were first offered (January 1,
1998) through, and the one-year period ended, December 31, 1999 was 17.86% and
31.87%, respectively.
The Standardized Return for the Advisor Class shares of Ivy US Blue
Chip Fund for the period from the date Advisor Class shares were first offered
(November 2, 1998) through, and the one-year period ended, December 31, 1999 was
20.95% and 15.89% . These figures reflect expense reimbursement. Without expense
reimbursement, the Standardized Return would have been 18.20% and 13.80%.
The Standardized Return for the Advisor Class shares of Ivy US Emerging
Growth Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through, and the one-year period ended, December 31, 1999 was
39.17% and 62.85%, respectively.
CUMULATIVE TOTAL RETURN. Cumulative total return is the cumulative rate
of return on a hypothetical initial investment of $1,000 in a specific class of
shares of each Fund for a specified period. Cumulative total return quotations
reflect changes in the price of each Fund's shares and assume that all dividends
and capital gains distributions during the period were reinvested in the same
Fund's shares. Cumulative total return is calculated by computing the cumulative
rates of return of a hypothetical investment in a specific class of shares of
each Fund over such periods, according to the following formula (cumulative
total return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000 to purchase
shares of a specific class
ERV = ending redeemable value:
ERV is the value, at the end of the applicable
period, of a hypothetical $1,000 investment made at
the beginning of the applicable period.
The Cumulative Total Return for the Advisor Class shares of Ivy Growth
Fund for the period from the date Advisor Class shares were first offered
(January 1, 1998) through, and the one-year period ended, December 31, 1999 was
31.60% and 31.78%, respectively.
The Cumulative Total Return for the Advisor Class shares of Ivy US Blue
Chip Fund for the period from the date Advisor Class shares were first offered
(November 2, 1998) through December 31, 1999 was 24.47% and 15.89%,
respectively.
The Cumulative Total Return for the Advisor Class shares of Ivy US
Emerging Growth Fund for the period from the date Advisor Class shares were
first offered (January 1, 1998) through, and the one-year period ended, December
31, 1999 was 85.28% and 62.85%, respectively.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The foregoing
computation methods are prescribed for advertising and other communications
subject to SEC Rule 482. Communications not subject to this rule may contain a
number of different measures of performance, computation methods and
assumptions, including but not limited to: historical total returns; results of
actual or hypothetical investments; changes in dividends, distributions or share
values; or any graphic illustration of such data. These data may cover any
period of the Trust's existence and may or may not include the impact of sales
charges, taxes or other factors.
Performance quotations for each Fund will vary from time to time
depending on market conditions, the composition of the Fund's portfolio and
operating expenses of the Fund. These factors and possible differences in the
methods used in calculating performance quotations should be considered when
comparing performance information regarding each Fund's shares with information
published for other investment companies and other investment vehicles.
Performance quotations should also be considered relative to changes in the
value of each Fund's shares and the risks associated with each Fund's investment
objectives and policies. At any time in the future, performance quotations may
be higher or lower than past performance quotations and there can be no
assurance that any historical performance quotation will continue in the future.
Each Fund may also cite endorsements or use for comparison its
performance rankings and listings reported in such newspapers or business or
consumer publications as, among others: AAII Journal, Barron's, Boston Business
Journal, Boston Globe, Boston Herald, Business Week, Consumer's Digest, Consumer
Guide Publications, Changing Times, Financial Planning, Financial World, Forbes,
Fortune, Growth Fund Guide, Houston Post, Institutional Investor, International
Fund Monitor, Investor's Daily, Los Angeles Times, Medical Economics, Miami
Herald, Money Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's Directory of Investment
Managers, New York Times, Newsweek, No Load Fund Investor, No Load Fund* X,
Oakland Tribune, Pension World, Pensions and Investment Age, Personal Investor,
Rugg and Steele, Time, U.S. News and World Report, USA Today, The Wall Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Portfolio of Investments as of December 31, 1999, Statement of
Assets and Liabilities as of December 31, 1999, Statement of Operations for the
fiscal year ended December 31, 1999, Statement of Changes in Net Assets for the
fiscal year ended December 31, 1999, Financial Highlights, Notes to Financial
Statements, and Report of Independent Certified Public Accountants, which are
included in each Fund's December 31, 1999 Annual Report to shareholders, are
incorporated by reference into this SAI.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE
BOND AND COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's Investors Service, New
York, 1994), and "Standard & Poor's Municipal Ratings Handbook," October 1997
Issue (McGraw Hill, New York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged by Moody's to be of
the best quality, carrying the smallest degree of investment risk. Interest
payments are protected by a large or exceptionally stable margin and principal
is secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues. Bonds rated Aa are judged by Moody's to be of
high quality by all standards. Aa bonds are rated lower than Aaa bonds because
margins of protection may not be as large as those of Aaa bonds, or fluctuations
of protective elements may be of greater amplitude, or there may be other
elements present which make the long-term risks appear somewhat larger than
those applicable to Aaa securities. Bonds which are rated A by Moody's possess
many favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future. Bonds rated Baa by Moody's are considered
medium-grade obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often the protection
of interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class. Bonds which are rated B generally
lack characteristics of the desirable investment. Assurance of interest and
principal payments of or maintenance of other terms of the contract over any
long period of time may be small. Bonds which are rated Caa are of poor
standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which are rated Ca represent
obligations which are speculative in a high degree. Such issues are often in
default or have other marked shortcomings. Bonds which are rated C are the
lowest rated class of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the relative strengths of
these factors. The designation of Prime-1 indicates the highest quality
repayment capacity of the rated issue. Issuers rated Prime-2 are deemed to have
a strong ability for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not fall within any
of the Prime rating categories.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. The
ratings are based on current information furnished by the issuer or obtained by
S&P from other sources it considers reliable. The ratings described below may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA is judged by S&P
to have a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it is somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having an adequate capacity
to pay interest and repay principal. Although such bonds normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominately
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or exposures to adverse conditions. Debt
rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating. Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating. Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon favorable business, financial,
and economic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial or economic conditions,
it is not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating. The rating CC typically is applied
to debt subordinated to senior debt which is assigned an actual or implied CCC
debt rating. The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
The rating CI is reserved for income bonds on which no interest is
being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a current assessment
of the likelihood of timely payment of debt considered short-term in the
relevant market.
The commercial paper rating A-1 by S&P indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation. For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues designated A-1.
Issues rated A-3 have adequate capacity for timely payment, but are more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying higher designations.
Issues rated B are regarded as having only speculative capacity for
timely payment. The C rating is assigned to short-term debt obligations with a
doubtful capacity for payment. Debt rated D is in payment default. The D rating
category is used when interest payments or principal payments are not made on
the date due, even if the applicable grace period has not expired, unless S&P
believes such payments will be made during such grace period.
