-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L7hdnTf/XHAU3kcKZaT6fuBatUU8XIyZlhrzBhQzxqiSp8v9FDGmGLkbreuIGcSO 1c9xygLFHgFSe2M0A0IyHQ== 0000945621-96-000009.txt : 19960426 0000945621-96-000009.hdr.sgml : 19960426 ACCESSION NUMBER: 0000945621-96-000009 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19960425 EFFECTIVENESS DATE: 19960425 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IVY FUND CENTRAL INDEX KEY: 0000052858 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046006759 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-17613 FILM NUMBER: 96550996 BUSINESS ADDRESS: STREET 1: 700 SOUTH FEDERAL HIGHWAY STREET 2: SUITE 300 CITY: BOCA RATON STATE: FL ZIP: 33432 BUSINESS PHONE: 407-393-8900 MAIL ADDRESS: STREET 1: P. O. BOX 5007 CITY: BOCA RATON STATE: FL ZIP: 33431-0807 485BPOS 1 N-1A As filed with the Securities and Exchange Commission on April 25, 1996 (File No. 2-17613) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 85 [ X ] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. [ X ] IVY FUND (Exact Name of Registrant as Specified in Charter) Via Mizner Financial Plaza 700 South Federal Highway - Suite 300 Boca Raton, Florida 33432 (Address of Principal Executive Offices) Registrant's Telephone Number: (800) 777-6472 C. William Ferris Mackenzie Investment Management Inc. Via Mizner Financial Plaza 700 South Federal Highway - Suite 300 Boca Raton, Florida 33432 (Name and Address of Agent for Service) Copies to: Joseph R. Fleming, Esq. Dechert Price & Rhoads Ten Post Office Square, South - Suite 1230 Boston, MA 02109 [ X ] It is proposed that this filing become effective on April 30, 1996 pursuant to paragraph (b) of Rule 485. The Registrant has elected to register an indefinite number of shares of beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940; accordingly, no fee is payable herewith. The Registrant filed on February 28, 1996 its notice pursuant to Rule 24f-2 for the Registrant's most recent fiscal year ended December 31, 1995. The total number of pages is __________. The exhibit index is on page __________. THIS POST-EFFECTIVE AMENDMENT NO. 85 IS BEING FILED IN ORDER TO UPDATE THE FINANCIAL INFORMATION FOR IVY MONEY MARKET FUND AND IVY SHORT-TERM BOND FUND. THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION THAT ARE INCLUDED IN THIS POST-EFFECTIVE AMENDMENT NO. 85 ARE TO BE USED CONCURRENTLY WITH AND SEPARATELY FROM EACH PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE OTHER 11 SERIES OFFERED BY THE REGISTRANT, WHICH ARE INCORPORATED BY REFERENCE TO THIS FILING. IVY FUND CROSS REFERENCE SHEET Post-Effective Amendment No. 85 contains the Prospectus and Statement of Additional Information to be used with Ivy Money Market Fund and Ivy Short-Term Bond Fund, two of the thirteen series of Ivy Fund (the "Trust"). Items Required by Form N-1A PART A: 1 COVER PAGE: Cover Page 2 SYNOPSIS: Not Applicable 3 CONDENSED FINANCIAL INFORMATION: Schedule of Fees; The Funds' Financial Highlights 4 GENERAL DESCRIPTION OF REGISTRANT: Investment Objectives and Policies; Risk Factors and Investment Techniques 5 MANAGEMENT OF THE FUND(S): Organization and Management of the Funds; Investment Manager 6 CAPITAL STOCK AND OTHER SECURITIES: Dividends and Taxes 7 PURCHASE OF SECURITIES BEING OFFERED: How to Buy Shares; How Your Purchase Price is Determined; How Each Fund Values its Shares 8 REDEMPTION OR REPURCHASE: How to Redeem Shares; Minimum Account Balance Requirements; Tax Identification Number; Certificates; Exchange Privilege; Reinvestment Privilege 9 PENDING LEGAL PROCEEDINGS: Not Applicable PART B: 10 COVER PAGE: Cover Page 11 TABLE OF CONTENTS: Table of Contents 12 GENERAL INFORMATION AND HISTORY: Investment Objectives and Policies 13 INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives and Policies; Investment Restrictions; Additional Restrictions 14 MANAGEMENT OF THE FUND(S): Trustees and Officers; Investment Advisory and Other Services 15 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Trustees and Officers; Capitalization and Voting Rights 16 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory and Other Services 17 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage Allocation; Portfolio Turnover 18 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and Voting Rights 19 PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset Value; Redemptions 20 TAX STATUS: Taxation 21 UNDERWRITERS: Investment Advisory and Other Services 22 CALCULATION OF PERFORMANCE DATA: Performance Information 23 FINANCIAL STATEMENTS: Financial Statements April 30, 1996 Ivy Money Market Fund ---------- Prospectus ---------- Ivy Management, Inc. Via Mizner Financial Plaza 700 South Federal Hwy. Boca Raton, FL 33432 1-800-456-5111 IVY FUND (THE "TRUST") IS A REGISTERED INVESTMENT COMPANY CURRENTLY CONSISTING OF THIRTEEN SEPARATE PORTFOLIOS. ONE PORTFOLIO OF THE TRUST, IVY MONEY MARKET FUND (THE "FUND"), IS DESCRIBED IN THIS PROSPECTUS. THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. PLEASE READ IT CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE FUND IS CONTAINED IN THE STATEMENT OF ADDITIONAL INFORMATION FOR THE FUND DATED APRIL 30, 1996 (THE "SAI"), WHICH HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. THE SAI IS AVAILABLE UPON REQUEST AND WITHOUT CHARGE FROM THE TRUST AT THE DISTRIBUTOR'S ADDRESS AND TELEPHONE NUMBER BELOW. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS Expense Information . . . . . . . . . . . . . . 2 The Fund's Financial Highlights . . . . . . . . 2 Investment Objective and Policies . . . . . . . 3 Risk Factors and Investment Techniques . . . . 3 Organization and Management of the Fund . . . . 4 Investment Manager . . . . . . . . . . . . . . 4 Fund Administration and Accounting . . . . . . 4 Transfer Agent . . . . . . . . . . . . . . . . 5 Dividends and Taxes . . . . . . . . . . . . . . 5 Performance Data . . . . . . . . . . . . . . . 5 How to Buy Shares . . . . . . . . . . . . . . . 5 How Your Purchase Price is Determined . . . . . 6 How the Fund Values its Shares . . . . . . . . 6 How to Redeem Shares . . . . . . . . . . . . . 6 Minimum Account Balance Requirements . . . . . 7 Signature Guarantees . . . . . . . . . . . . . 7 Choosing a Distribution Option . . . . . . . . 8 Tax Identification Number . . . . . . . . . . . 8 Certificates . . . . . . . . . . . . . . . . . 8 Exchange Privilege . . . . . . . . . . . . . . 8 Systematic Withdrawal Plan . . . . . . . . . . 9 Automatic Investment Method . . . . . . . . . . 9 Consolidated Account Statements . . . . . . . . 9 Retirement Plans . . . . . . . . . . . . . . . 10 Shareholder Inquiries . . . . . . . . . . . . . 10
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT INVESTMENT MANAGER John S. Anderegg, Jr. Michael G. Landry, President Ivy Mackenzie Ivy Management, Inc. Paul H. Broyhill Keith J. Carlson, Vice President Services Corp. Boca Raton, FL Stanley Channick C. William Ferris, P.O. Box 3022 Frank W. DeFriece, Jr. Secretary/Treasurer Boca Raton, FL 33431-0922 DISTRIBUTOR Roy J. Glauber Michael R. Peers, Chairman 1-800-777-6472 Ivy Mackenzie Michael G. Landry Distributors, Inc. Michael R. Peers LEGAL COUNSEL AUDITORS Via Mizner Financial Plaza Joseph G. Rosenthal Dechert Price & Rhoads Coopers & Lybrand L.L.P. 700 South Federal Highway Richard N. Silverman Boston, MA Ft. Lauderdale, FL Boca Raton, FL 33432 J. Brendan Swan 1-800-456-5111 CUSTODIAN Brown Brothers Harriman & Co. Boston, MA
Throughout the centuries, the castle keep has been a source of long-range vision and strategic advantage. EXPENSE INFORMATION The table and example below are designed to assist you in understanding the various costs and expenses that you will bear directly or indirectly as an investor in the Fund. SHAREHOLDER TRANSACTION EXPENSES
CLASS A, CLASS B AND CLASS C SHARES ----------- Maximum sales load imposed on purchases (as a percentage of offering price)*.......................................................... .. None The Fund has no sales load on reinvested dividends, no deferred sales load, no redemption fees and no exchange fees.**
* Exchanges from the Fund into any other Ivy or Mackenzie fund into which exchanges are permitted may be subject to a sales charge unless previously paid (see "Exchange Privilege"). ** The Fund does not assess a contingent deferred sales charge ("CDSC"). However, if the shares of another Ivy or Mackenzie fund that are subject to a CDSC are exchanged for shares of the Fund, the CDSC may carry over to the investment in the Fund and may be assessed upon redemption (see "How to Redeem Shares" and "Exchange Privilege"). ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
CLASS A, CLASS B AND CLASS C SHARES ----------- Management Fees After Expense Reimbursements*....................... 0.00% 12b-1 Service/Distribution Fees..................................... N/A Other Expenses...................................................... 0.85% ----------- Total Fund Operating Expenses After Expense Reimbursements**........ 0.85% ===========
* Management Fees reflect expense reimbursements. Without expense reimbursements, Management Fees would have been 0.40%. ** Ivy Management, Inc. ("IMI"), as investment adviser, currently limits the Fund's Total Fund Operating Expenses After Expense Reimbursements (excluding taxes, interest, litigation and indemnification expenses and other extraordinary expenses) to an annual rate of 0.85% of the Fund's average net assets. Without the expense reimbursements, Total Fund Operating Expenses for the year ended December 31, 1995 would have been 1.39%. EXAMPLE* (CLASS A, CLASS B AND CLASS C SHARES) The following table lists the expenses an investor would pay on a $1,000 investment in the Fund, assuming (1) 5% annual return and (2) redemption at the end of each time period. The Example further assumes reinvestment of all dividends and distributions, and that the percentage amounts under "Total Fund Operating Expenses After Expense Reimbursements" (above) remain the same each year. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
1 YEAR(1) 3 YEARS 5 YEARS 10 YEARS ----------- ----------- ----------- ----------- $9 $27 $47 $105
* Net of expense reimbursements. See Annual Fund Operating Expenses, above. The information in the table above does not reflect the charge of $10 per transaction that would apply if a shareholder elects to have redemption proceeds wired to his/her bank account. For a more detailed discussion of the Fund's fees and expenses, see "Organization and Management of the Fund" in this Prospectus, and "Investment Advisory and Other Services" in the SAI. THE FUND'S FINANCIAL HIGHLIGHTS Unless otherwise noted, the following table is for fiscal periods ending December 31 of each year. The accounting firm of Coopers & Lybrand L.L.P. has audited the Fund since December 31, 1992. Their report is included in the Fund's Annual Report, which is incorporated by reference into the SAI. The information for fiscal periods prior to December 31, 1992 was audited by other independent accountants. The Fund's Annual Report contains additional information about the Fund's performance. For a copy of the Fund's Annual Report, call 1-800-777-6472. Expense and income ratios have been annualized for periods of less than one year. Total returns do not reflect sales charges, and are not annualized for periods of less than one year. There were no Class B or Class C shares outstanding as of December 31, 1995.
CLASS A ------------------------------------------------- SELECTED PER SHARE DATA 1995 1994 1993 1992 ------- ------- ------- ------- Net asset value, beginning of period................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- Income from investment operations: Net investment income(a).............................................. .05 .04 .02 .03 Less distributions: From net investment income:........................................... (.05) (.04) (.02) (.03) ------- ------- ------- ------- Net asset value, end of period......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= Total return(%)........................................................ 4.80 4.21 2.42 2.81 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............................... $24,609 $26,827 $25,782 $18,839 Ratio of expenses to average net assets: With expense reimbursement(%)......................................... .85 .85 .85 .85 Without expense reimbursement(%)...................................... 1.39 1.24 1.56 1.45 Ratio of net investment income to average net assets(%)(a)............. 4.91 3.29 2.22 2.75 SELECTED PER SHARE DATA 1991 1990 1989 1988 ------- ------- ------- ------- Net asset value, beginning of period................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- Income from investment operations: Net investment income(a).............................................. .05 .07 .09 .07 Less distributions: From net investment income:........................................... (.05) (.07) (.09) (.07) ------- ------- ------- ------- Net asset value, end of period......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= Total return(%)........................................................ 5.16 7.69 8.87 6.89 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............................... $21,675 $26,140 $19,708 $11,789 Ratio of expenses to average net assets: With expense reimbursement(%)......................................... .85 .67 .65 .68 Without expense reimbursement(%)...................................... 1.21 1.22 1.37 1.73 Ratio of net investment income to average net assets(%)(a)............. 5.06 7.43 8.42 6.86 SELECTED PER SHARE DATA 1987(B) ------- Net asset value, beginning of period................................... $ 1.00 ------- Income from investment operations: Net investment income(a).............................................. .01 Less distributions: From net investment income:........................................... (.01) ------- Net asset value, end of period......................................... $ 1.00 ======= Total return(%)........................................................ 1.86 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............................... $6,784 Ratio of expenses to average net assets: With expense reimbursement(%)......................................... .85 Without expense reimbursement(%)...................................... 1.94 Ratio of net investment income to average net assets(%)(a)............. 6.77
--------------- (a) Net investment income is net of expenses reimbursed by IMI. (b) From October 15, 1987 (commencement of operations) to December 31, 1987. 2 INVESTMENT OBJECTIVE AND POLICIES The Fund seeks to obtain as high a level of current income as is consistent with the preservation of capital and liquidity by investing in high-quality, short-term securities. The Fund's investment objective is fundamental and may not be changed without the approval of a majority of the Fund's outstanding voting shares, although the Trustees may make non-material changes in the Fund's objectives without shareholder approval. Except for the Fund's investment objective and those investment restrictions specifically identified as fundamental, all investment policies and practices described in this Prospectus and in the SAI are not fundamental and therefore may be changed by the Trustees without shareholder approval. There can be no assurance that the Fund will achieve its investment objectives. The different types of securities and investment techniques used by the Fund involve varying degrees of risk. For information about the particular risks associated with each type of investment, see "Investment Techniques and Risk Factors," below, and the SAI. Whenever an investment objective, policy or restriction described in this Prospectus or in the SAI states a maximum percentage of assets that may be invested in a security or other asset, or describes a policy regarding quality standards, that percentage limitation or standard will, unless otherwise indicated, apply to the Fund only at the time a transaction takes place. Thus, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in the percentage that results from circumstances not involving any affirmative action by the Fund will not be considered a violation. The Fund invests in money market instruments maturing within thirteen months or less and maintains a portfolio with a dollar-weighted average maturity of 90 days or less. By purchasing such short-term securities, the Fund will attempt to maintain a constant net asset value of $1.00 per share. The Fund's portfolio of investments is actively monitored on a daily basis to maintain competitive yields on investments. The Fund will invest in the following categories of money market instruments: (i) debt securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities; (ii) obligations (including certificates of deposit and bankers' acceptances) of domestic banks and savings and loan associations; (iii) high-quality commercial paper that at the time of purchase is rated at least A-2 by Standard and Poor's Corporation ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's") or, if unrated, is issued or guaranteed by a corporation with outstanding debt rated AA or higher by S&P or Aa or higher by Moody's or which is judged by IMI to be of at least equivalent quality; (iv) short-term corporate notes, bonds and debentures that at the time of purchase are rated at least AA by S&P or Aa by Moody's or that are judged by IMI to be of at least equivalent quality; and (v) repurchase agreements with domestic banks for periods not exceeding seven days and only with respect to U.S. Government securities that throughout the period have a value at least equal to the amount of the loan (including accrued interest). The securities in which the Fund invests must present minimal credit risk and be rated in one of the two highest rating categories for short-term debt obligations by at least two major rating agencies assigning a rating to the securities or issuer, or if only one rating agency has assigned a rating, by that agency or determined to be of equivalent value by IMI. Purchases of securities that are rated by only one rating agency must be previously approved or ratified subsequently by the Trustees. Securities that are rated in the highest category by at least two major rating agencies (or that have been issued by an issuer that is rated with respect to a class of short-term debt obligations, or any security within that class, comparable in priority and quality with such securities) are designated "First Tier Securities." Securities rated in the top two categories by at least two major rating agencies, but which are not rated in the highest category by two or more major rating agencies, are designated "Second Tier Securities." IMI shall determine whether a security presents minimal credit risk under procedures adopted by the Board of Trustees. The Fund may not invest more than 5% of its total assets in the securities of any one issuer, except this limitation shall not apply to U.S. Government securities. Further, the Fund will not invest more than the greater of 1% of its total assets or one million dollars in the securities of a single issuer that were Second Tier Securities when acquired by the Fund. In addition, the Fund may not invest more than 5% of its total assets in securities that are Second Tier Securities when acquired by the Fund. As a fundamental policy, the Fund may not borrow money, except for temporary purposes, and then only in an amount not exceeding 10% of the value of the Fund's total assets. RISK FACTORS AND INVESTMENT TECHNIQUES DEBT SECURITIES, IN GENERAL: Investment in debt securities involves both interest rate and credit risk. Generally, the value of debt instruments rises and falls inversely with fluctuations in interest rates. Bonds with longer maturities generally are more volatile than bonds with shorter maturities. The market value of debt securities also varies according to the relative financial condition of the issuer. In general, lower-quality bonds offer higher yields due to the increased risk that the issuer will be unable to meet its obligations on interest or principal payments at the time called for by the debt instrument. INVESTMENT-GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's and AAA by S&P are judged to be of the best quality (i.e., capacity to pay interest and repay principal is extremely strong). Bonds rated Aa/AA are considered to be of high quality (i.e., capacity to pay interest and repay principal is very strong and differs from the highest rated issues only to a small degree). Bonds rated A are viewed as having many favorable investment attributes, but elements may be present that suggest a susceptibility to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are considered to have an adequate capacity to pay interest and repay principal, but certain protective elements may be lacking (i.e., such bonds lack outstanding investment characteristics and have some speculative characteristics). U.S. GOVERNMENT SECURITIES: U.S. Government securities are obligations of, or guaranteed by, the U.S. Government, its agencies or instrumentalities. Such securities include: (1) direct obligations of the U.S. Treasury (such as Treasury bills, notes, and bonds) and (2) Federal agency obligations guaranteed as to principal and interest by the U.S. Treasury (such as GNMA certificates, which are mortgage-backed securities). When such securities are held to maturity, the payment of principal and interest is unconditionally guaranteed by the U.S. Government, and thus they are of the highest possible credit quality. U.S. Government securities that are not held to maturity are subject to variations in market value caused by fluctuations in interest rates. Mortgage-backed securities are securities representing part ownership of a pool of mortgage loans. Although the mortgage loans in the pool will have maturities of up to 30 years, the actual average life of the loans typically will be substantially less because the mortgages will be subject to principal amortization and may be prepaid prior to maturity. In periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the actual average life of the security. Conversely, rising interest rates tend to decrease the rate of prepayment, thereby lengthening the security's actual average life. Since it is not possible to predict accurately the average life of a particular pool, and 3 because prepayments are reinvested at current rates, the market value of mortgage-backed securities may decline during periods of declining interest rates. BANK OBLIGATIONS: Bank obligations in which the Fund may invest include certificates of deposit, bankers' acceptances, and other short-term debt obligations. Investments in certificates of deposit and bankers' acceptances are limited to obligations of (i) banks having total assets in excess of $1 billion, and (ii) other banks if the principal amount of such obligation is fully insured by the Federal Deposit Insurance Corporation ("FDIC"). Investments in certificates of deposit of savings associations are limited to obligations of Federal or state-chartered institutions whose total assets exceed of $1 billion and whose deposits are insured by the FDIC. COMMERCIAL PAPER: Commercial paper represents short-term unsecured promissory notes issued in bearer form by bank holding companies, corporations and finance companies. Investments in commercial paper are limited to obligations rated Prime 1 by Moody's or A-1 by S&P or, if not rated by Moody's or S&P, issued by companies having an outstanding debt issue currently rated Aaa or Aa by Moody's or AAA or AA by S&P. REPURCHASE AGREEMENTS: Repurchase agreements are agreements under which the Fund buys a money market instrument and obtains a simultaneous commitment from the seller to repurchase the instrument at a specified time and at an agreed-upon yield. The Fund will not enter into a repurchase agreement with more than seven days to maturity if, as a result, more than 10% of the Fund's net assets would be invested in illiquid securities including such repurchase agreements. The Fund may enter into repurchase agreements with banks or broker-dealers deemed to be creditworthy by IMI under guidelines approved by the Board of Trustees. The Fund could experience a delay in obtaining direct ownership of the underlying collateral and might incur a loss if the value of the security should decline. BORROWING: Borrowing may subject the Fund's share price to greater fluctuation. Money borrowed will be subject to interest costs (which may include commitment fees and/or the cost of maintaining minimum average balances). ORGANIZATION AND MANAGEMENT OF THE FUND The Fund is organized as a separate, diversified portfolio of the Trust, an open-end management investment company organized as a Massachusetts business trust on December 21, 1983. The business and affairs of the Fund are managed under the direction of the Trustees. Information about the Trustees, as well as the Trust's executive officers, may be found in the SAI. The Trust has an unlimited number of authorized shares of beneficial interest, and currently has 13 separate portfolios. The Fund has three classes of shares, designated as Class A, Class B and Class C. The purpose of these designations is primarily to enable the transfer agent for the Ivy and Mackenzie funds to track the contingent deferred sales charge period that applies to Class B and Class C shares of other Ivy and Mackenzie funds that are being exchanged for shares of the Fund. In all other relevant respects, the Fund's Class A, Class B and Class C shares are identical (i.e., having the same arrangement for shareholder services and the distribution of securities). Shares of each class are entitled to one vote per share (with proportionate voting for fractional shares), and have equal rights as to voting, redemption, dividends and liquidation. The Trust employs IMI to provide business management and investment advisory services; Mackenzie Investment Management Inc. ("MIMI") to provide administrative and accounting services; Ivy Mackenzie Distributors, Inc. ("IMDI") to distribute the Fund's shares; and Ivy Mackenzie Services Corp. ("IMSC") to provide transfer agent and shareholder-related services for the Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI. As of March 29, 1996, IMI and MIMI had approximately $1.39 billion and $186 million, respectively, in assets under management. MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"), which has been an investment counsel and mutual fund manager in Toronto, Ontario, Canada for more than 25 years. INVESTMENT MANAGER For IMI's business management and investment advisory services, the Fund pays IMI a fee that is accrued daily and paid monthly, based on the Fund's daily net assets. The fee is equal, on an annual basis, to 0.40% of the Fund's average net assets. IMI pays all expenses it incurs in rendering management services to the Fund. The Fund bears its cost of operations. General expenses of the Trust that are not readily identifiable as belonging to a particular series of the Trust (or a particular class thereof) are allocated among and charged to each series based on its relative net asset size. Expenses that are attributable to a particular Fund (or class thereof) will be borne solely by that Fund (or class). IMI will reimburse the Fund to the extent total expenses exceed required limits imposed by state securities regulators. IMI currently limits the Fund's total operating expenses (excluding interest, taxes, litigation and indemnification expenses, and other extraordinary expenses) to an annual rate of 0.85% of the Fund's average net assets. As long as the Fund's expense limitation continues, it may lower the Fund's expenses and increase its yield. The Fund's expense limitation may be terminated or revised at any time, at which time the Fund's expenses may increase and its yield may be reduced. PORTFOLIO MANAGEMENT: The Fund is managed by a team, with each team member having specific responsibilities. The following individuals have responsibilities related to the management of the Fund: Leslie A. Ferris, a Senior Vice President of IMI and Managing Director -- Fixed Income, has been a portfolio manager for the Fund since 1995. Ms. Ferris joined the Ivy Mackenzie fund complex (the "Fund Complex") in 1988 and has 14 years of professional investment experience. She is a Chartered Financial Analyst and holds an MBA degree from The University of Chicago. Prior to joining the Fund Complex, Ms. Ferris was a portfolio manager at Kemper Financial Services Inc. from 1982 to 1988. Michael Borowsky serves as a Portfolio Analyst for the Fund. FUND ADMINISTRATION AND ACCOUNTING MIMI provides various administrative services for the Fund, such as maintaining the registration of Fund shares under state "Blue Sky" laws, assisting in the preparation of Federal and state income tax returns and preparing financial and other information for prospectuses, statements of additional information, and periodic reports to shareholders. MIMI also assists the Trust's legal counsel with SEC registration statements, proxies and other required filings. Under the agreement, the Fund's net assets are subject to a fee, accrued daily and paid monthly, at the annual rate of 0.10%. MIMI also provides certain accounting and pricing services for the Fund (see "Fund Accounting Services" in the SAI for more information). 4 TRANSFER AGENT IMSC is the transfer and dividend-paying agent for the Fund, and also provides certain shareholder-related services. Certain broker-dealers that maintain shareholder accounts with the Fund through an omnibus account provide transfer agent and other shareholder-related services that would otherwise be provided by IMSC if the individual accounts that comprise the omnibus account were opened by their beneficial owners directly (see "Investment Advisory and Other Services" in the SAI). DIVIDENDS AND TAXES Distributions you receive from the Fund are reinvested in additional Fund shares of the same class unless you elect to receive them in cash. If you elect the cash option and the U.S. Postal Service cannot deliver your checks, your election will be converted to the reinvestment option. TAXATION: The following discussion is intended for general information only. You should consult with your tax advisor as to the tax consequences of an investment in the Fund, including the status of distributions from the Fund under applicable state or local law. The Fund intends to qualify annually a regulated investment company under the Code. To qualify, the Fund must meet certain income, distribution and diversification requirements. In any year in which the Fund qualifies as a regulated investment company and timely distributes all of its taxable income, the Fund generally will not pay any Federal income or excise tax. Dividends paid out of the Fund's investment company taxable income (including dividends, interest and net short-term capital gain) will be taxable to a shareholder as ordinary income. If a portion of the Fund's income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Fund may be eligible for the corporate dividends-received deduction. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, are taxable as long-term capital gains, regardless of how long the shareholder has held the Fund's shares. Dividends are taxable to shareholders in the same manner whether received in cash or reinvested in additional Fund shares. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by the Fund in October, November or December with a record date in such a month and paid by the Fund during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. Each year the Fund will notify shareholders of the tax status of dividends and distributions. Investments in securities that are issued at a discount will result in income to the Fund each year equal to a portion of the excess of the face value of the securities over their issue price, even though the Fund receives no cash interest payments from the securities. Shareholders generally are not expected to realize any gain or loss upon a disposition of shares of the Fund, as long as the Fund maintains a constant net asset value per share. In the unlikely event that the Fund were unable to do so, any gain or loss realized by a shareholder upon the sale or other disposition of shares of the Fund, or upon receipt of a distribution in complete liquidation of the Fund, generally would be a capital gain or loss which would be long-term or short-term, generally depending upon the shareholder's holding period for the shares. The Fund may be required to withhold U.S. Federal income tax at the rate of 31% of all taxable distributions payable to shareholders who fail to provide the Fund with their correct taxpayer identification number or to make required certifications, or who have been notified by the Internal Revenue Service ("IRS") that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. Federal income tax liability. Fund distributions may be subject to state, local and foreign taxes. Fund distributions that are derived from interest on obligations of the U.S. Government and certain of its agencies, authorities and instrumentalities may be exempt from state and local taxes in certain states. You should consult with your tax advisor regarding the particular tax consequences of an investment in the Fund. Further information relating to tax consequences is contained in the SAI. PERFORMANCE DATA Comparative performance information may be used from time to time in advertising or marketing the shares of the Fund, including data from Lipper Analytical Services, Inc., Donoghue's Money Fund Report, The Bank Rate Monitor, other industry publications, business periodicals, rating services and market indices. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT INTENDED TO SUGGEST FUTURE RESULTS. The yield of a Fund refers to the income generated by an investment in the Fund over a seven-day period (which period will be stated in the advertisement). This income is then annualized; that is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52 week period and is shown as a percentage of the investment. HOW TO BUY SHARES OPENING AN ACCOUNT: Complete and sign the Account Application on the last page of this Prospectus. Make your check payable to Ivy Money Market Fund. No third party checks will be accepted. Deliver these items to your registered representative or selling broker, or send them to one of the addresses below: Regular Mail: IVY MACKENZIE SERVICES CORP. P.O. BOX 3022 BOCA RATON, FL 33431-0922 Courier: IVY MACKENZIE SERVICES CORP. 700 SOUTH FEDERAL HIGHWAY, SUITE 300 BOCA RATON, FL 33432 The Fund reserves the right to reject, for any reason, any purchase order. 5 MINIMUM INVESTMENT POLICIES: The minimum initial investment is $1,000; the minimum additional investment is $100. Initial or additional amounts for retirement accounts may be less (see "Retirement Plans"). BUYING ADDITIONAL SHARES: You may add to your account at any time through any of the following options: By Mail: Complete the investment slip attached to your statement, or write instructions, including the account registration, Fund number and account number of the shares you wish to purchase. Send your check (payable to Ivy Money Market Fund), along with your investment slip or written instructions, to one of the addresses above. Through your Broker: Deliver the investment slip attached to your statement, or written instructions, along with your payment to your registered representative or selling broker. By Wire: Purchases may also be made by wiring money from your bank account to your Ivy account. Your bank may charge a fee for wiring funds. Before wiring any funds, please call IMSC at 1-800-777-6472. Wiring instructions are as follows: FIRST UNION NATIONAL BANK OF FLORIDA JACKSONVILLE, FL ABA#063000021 ACCOUNT #2090002063833 FOR FURTHER CREDIT TO: YOUR IVY ACCOUNT REGISTRATION YOUR FUND NUMBER AND ACCOUNT NUMBER By Automatic Investment Method: Complete Sections 6A and 7B on the Account Application (see "Automatic Investment Method" on page 9 for more information. DIRECT PURCHASES OF CLASS B AND CLASS C SHARES: Class B and Class C shares may be purchased directly through your election of a systematic withdrawal plan under which specified withdrawal amounts are used to purchase Class B or Class C shares of a different Ivy or Mackenzie fund. This arrangement is designed to take advantage of dollar-cost averaging as a method of investment. To establish this type of arrangement, complete section 6B of the Account Application. HOW YOUR PURCHASE PRICE IS DETERMINED Your purchase price is the net asset value per share ("NAV"). Share purchases will be made at the next determined price after the purchase order is received. The price is effective for orders received by IMSC or by your registered securities dealer prior to the time of the determination of the net asset value. Any orders received after the time of the determination of the net asset value will be entered at the next calculated price. Orders placed with a securities dealer before the net asset value is determined and that are transmitted through the facilities of the National Securities Clearing Corporation on the same day are confirmed at that day's price. Any loss resulting from the dealer's failure to submit an order by the deadline will be borne by that dealer. You will receive an account statement after any purchase, exchange or full liquidation. Statements related to reinvestment of dividends or capital gains, automatic investment plans (see the SAI for further explanation) and/or systematic withdrawal plans will be sent quarterly. HOW THE FUND VALUES ITS SHARES The Fund offers three classes of shares in this Prospectus, designated as Class A, Class B and Class C shares. The NAV per share is the value of one Class A, Class B, or Class C share. The NAV is determined for each Class of shares as of the close of the New York Stock Exchange on each day the Exchange is open by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding, adjusted to the nearest cent. For purposes of determining the aggregate net assets of the Fund, cash and receivables will be valued at their realizable amounts. The Fund values all of its portfolio securities using the amortized cost method, which involves valuing a security at cost on the date of acquisition and thereafter assuming a constant rate of accretion of discount or amortization of premium. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if it sold the instrument. During such periods, the yield to an investor in the Fund may differ somewhat from that obtained in a similar investment company which uses available market quotations to value all of its portfolio securities. HOW TO REDEEM SHARES You may redeem your Fund shares through your registered securities representative, by mail, by telephone or by check writing. All redemptions are made at the NAV next determined after a redemption request has been received in good order. Requests for redemptions must be received by 4:00 p.m. Eastern time to be processed at the NAV for that day. Any redemption request in good order that is received after 4:00 p.m. Eastern time will be processed at the price determined on the following business day. IF SHARES TO BE REDEEMED WERE PURCHASED BY CHECK, PAYMENT OF THE REDEMPTION MAY BE DELAYED UNTIL THE CHECK HAS CLEARED OR FOR UP TO 15 DAYS AFTER THE DATE OF PURCHASE, WHICHEVER IS LESS. The Fund does not assess a CDSC. However, if the shares of another Ivy or Mackenzie fund that are subject to a CDSC are exchanged for shares (of the same class) of the Fund, the CDSC will carry over to the investment in the Fund and may be assessed upon redemption. When shares are redeemed, the Fund generally sends you payment on the next business day. Unless otherwise requested, your redemption proceeds will be mailed in the form of a check to your address of record. Under unusual circumstances, the Fund may suspend redemptions or postpone payment to the extent permitted by Federal securities laws. The proceeds of the redemption may be more or less than the purchase price of your shares, depending upon, among other factors, the market value of the Fund's securities at the time of the redemption. If the redemption is for over $50,000, or the proceeds are to be sent to an address other than the address of record, or an address change has occurred in the last 30 days, it must be requested in writing with a signature guarantee. See "Signature Guarantees" below. If you are not certain of the requirements for a redemption, please contact IMSC at 1-800-777-6472. THROUGH YOUR REGISTERED SECURITIES DEALER: Your Dealer is responsible for promptly transmitting redemption orders. Redemptions requested by dealers will be made at the NAV (less any applicable CDSC) determined at the close of regular trading (4:00 p.m. Eastern time) on the day that a redemption request is received in good order by IMSC. BY MAIL: Requests for redemption in writing are considered to be in "proper or good order" if they contain the following: 6 - Any outstanding certificate(s) for shares being redeemed. - A letter of instruction, including the account registration, the Fund number, the account number, the address and the dollar amount or number of shares to be redeemed. - Signatures of all registered owners whose names appear on the account. - Any required signature guarantees. - Other supporting legal documentation, if required (in the case of estates, trusts, guardianships, corporations, retirement plans or others acting in representative capacities). The dollar amount or number of shares indicated for redemption must not exceed the available shares or NAV of your account at the next-determined prices. If your request exceeds these limits, then the trade will be rejected in its entirety. Mail your request to IMSC at one of the addresses on page 6 of this Prospectus. BY TELEPHONE: Individual and joint accounts may redeem up to $50,000 per day over the telephone by contacting IMSC at 1-800-777-6472. In times of unusual economic or market changes, the telephone redemption privilege may be difficult to implement. If you are unable to execute your transaction by telephone, you may want to consider placing the order in writing and sending it by mail or overnight courier. Checks will be made payable to the current account registration and sent to the address of record. If there has been a change of address in the last 30 days, please use the instructions for redemption requests by mail described above. A signature guarantee would be required. Requests for telephone redemptions will be accepted from the registered owner of the account, the designated registered representative or the registered representative's assistant. Shares held in certificate form cannot be redeemed by telephone. If Section 6E of the Account Application is not completed, telephone redemption privileges will be provided automatically. Although telephone redemptions may be a convenient feature, you should realize that you may be giving up a measure of security that you may otherwise have if you terminated the privilege and redeemed your shares in writing. If you do not wish to make telephone redemptions or let your registered representative do so on your behalf, you must notify IMSC in writing. The Fund employs reasonable procedures that require personal identification prior to acting on redemption instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such procedures, the Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. RECEIVING YOUR PROCEEDS BY FEDERAL FUNDS WIRE: For shareholders who established this feature at the time they opened their account, telephone instructions will be accepted for redemption amounts up to $50,000 ($1,000 minimum) and proceeds will be wired on the next business day to a predesignated bank account. In order to add this feature to an existing account or to change existing bank account information, please submit a letter of instructions including your bank information to IMSC at the address provided above. The letter must be signed by all registered owners, and their signatures must be guaranteed. Your account will be charged a $10.00 fee each time redemption proceeds are wired to your bank. Your bank may also charge you a fee for receiving a Federal Funds wire. Neither IMSC nor the Fund can be responsible for the efficiency of the Federal Funds wire system or the shareholder's bank. BY CHECK WRITING: The check writing privilege is only available to Class A shareholders and is not available for retirement accounts. You may write checks against your Fund account. Checks written must be for a minimum of $100. You may sign up for this option by completing Section 8 of the Account Application. IF YOU ARE REDEEMING SHARES THAT HAVE BEEN PURCHASED BY CHECK, PAYMENT MAY BE DELAYED UNTIL YOUR CHECK HAS CLEARED OR FOR UP TO 15 CALENDAR DAYS AFTER THE DATE OF PURCHASE. Please note that all registered owners named on the account must sign the signature card, and only registered owners may have the check writing privilege on an account. In order to qualify for the check writing privilege, Class A shareholders must maintain a minimum average account balance of $1,000. Shares must be uncertificated (i.e., held by the Fund) for any account requesting check writing privileges. Checks can be reordered by calling IMSC at 1-800-777-6472. Checking activity is reported on your statement, and canceled check copies are returned to you each month. There is no limitation on the number of checks a shareholder may write. When a check is presented for payment, the Fund redeems a sufficient number of shares to cover the amount of the check. Checks written on accounts with insufficient shares will be returned to the payee marked "non-sufficient funds." There may be a nominal charge for each supply of checks, copies of canceled checks, stop payment orders, checks drawn for amounts less than the Fund minimum (i.e., $100) and checks returned for "non-sufficient funds." To pay for these charges, the Fund automatically redeems an appropriate number of the shareholder's Fund shares after the charges are incurred. You may not close your Fund account by writing a check, because any earned dividends will remain in your account. The Fund reserves the right to change, modify or terminate the check writing service at any time upon notification mailed to your address of record. Your account will be charged a $10 fee each time redemption proceeds are wired to your bank. Neither IMSC nor the Fund can be responsible for the efficiency of the Federal Funds wire system or the shareholder's bank. MINIMUM ACCOUNT BALANCE REQUIREMENTS Due to the high cost of maintaining small accounts and subject to state law requirements, the Fund may redeem the accounts of shareholders whose investment, including sales charges paid, has been less than $1,000 for more than 12 months. The Fund will not redeem an account unless the shareholder has been given at least 60 days' advance notice of the Fund's intention to do so. No redemption will be made if a shareholder's account falls below the minimum due to a reduction in the value of the Fund's portfolio securities. This provision does not apply to IRA's, other retirement accounts and UGMA/UTMA accounts. SIGNATURE GUARANTEES For your protection, and to prevent fraudulent redemptions, we require a signature guarantee in order to accommodate the following requests: - Redemption requests over $50,000. 7 - Requests for redemption proceeds to be sent to someone other than the registered shareholder. - Requests for redemption proceeds to be sent to an address other than the address of record. - Registration transfer requests. - Requests for redemption proceeds to be wired to your bank account (if this option was not selected on your original application, or if you are changing the bank wire information). A signature guarantee may be obtained only from an eligible guarantor institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended. An eligible guarantor institution includes banks, brokers, dealers, municipal securities dealers, government securities dealers, government securities brokers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations. The signature guarantee must not be qualified in any way. Notarizations from notary publics are not the same as signature guarantees, and are not accepted. Circumstances other than those described above may require a signature guarantee. Please contact IMSC at 1-800-777-6472 for more information. CHOOSING A DISTRIBUTION OPTION You have the option of selecting the distribution option that best suits your needs: AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital gains are automatically reinvested at NAV in additional shares of the same class of the Fund unless you specify one of the other options. INVESTMENT IN ANOTHER IVY OR MACKENZIE FUND -- Both dividends and capital gains are automatically invested at NAV in another Ivy or Mackenzie fund of the same class. DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will be paid in cash. Capital gains will be reinvested at NAV in additional shares of the same class of the Fund or another Ivy or Mackenzie fund of the same class. DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and capital gains will be paid in cash. If you wish to have your cash distributions deposited directly to your bank account via electronic funds transfer ("EFT"), or if you wish to change your distribution option, please contact IMSC at 1-800-777-6472. If you wish to have your cash distributions go to an address other than the address of record, you must provide IMSC with a letter of instruction, signed by all registered owners with signatures guaranteed. TAX IDENTIFICATION NUMBER In general, to avoid being subject to a 31% U.S. Federal backup withholding tax on dividends, capital gain distributions and, in the event the Fund failed to maintain a constant NAV per share, redemption proceeds, you must furnish the Fund with your certified tax identification number ("TIN") and certify that you are not subject to backup withholding due to prior under-reporting of interest and dividends to the IRS. If you fail to provide a certified TIN, or such other tax-related certifications as the Fund may require, within 30 days of opening your new account, the Fund reserves the right to involuntarily redeem your account and send the proceeds to the address of record. You can avoid the above withholding and/or redemption by correctly furnishing your TIN, and making certain certifications, in Section 2 of the Account Application at the time you open your new account, unless the IRS requires that backup withholding be applied to your account. Certain payees, such as corporations, generally are exempt from backup withholding. Please complete IRS Form W-9 with the Account Application to claim the exemption. If the registration is for a UGMA/UTMA account, please provide the social security number of the minor. Non-U.S. investors who do not have a TIN must provide, with the Account Application, a completed IRS Form W-8. CERTIFICATES In order to facilitate transfers, exchanges and redemptions, most shareholders elect not to receive certificates. Should you wish to have a certificate issued, please contact IMSC at 1-800-777-6472 and request that one be sent to you. (Retirement plan accounts are not eligible for this service.) Please note that if you were to lose your certificate, you would incur an expense to replace it. Certificates for shares valued up to $50,000 will be issued to the current registration and mailed to the address of record. Should you wish to have your certificates mailed to a different address, or registered differently from the current registration, contact IMSC at 1-800-777-6472. EXCHANGE PRIVILEGE Shareholders of the Fund have an exchange privilege with other Ivy and Mackenzie funds. The Fund reserves the right to reject, for any reason, any exchange order. Class A shareholders of the Fund may exchange their outstanding shares for Class A shares of another Ivy or Mackenzie fund on the basis of the relative NAV per Class A share, plus an amount equal to the sales charge payable with respect to the new shares at the time of the exchange. Incremental sales charges are waived for outstanding shares that have been invested for 12 months or longer. Shareholders who have purchased Class B (or Class C) shares of the Fund directly may exchange their Class B (or Class C) shares for Class B (or Class C) shares of another Ivy or Mackenzie fund on the basis of the relative NAV per Class B (or Class C) share (see "Direct Purchases of Class B and Class C Shares" under "How to Buy Shares"), subject to the CDSC schedule (or period) of the fund into which the exchange is being made (beginning with the date of the exchange). Class B and Class C shareholders of another Ivy or Mackenzie fund may exchange their shares for Class B and Class C shares of the Fund. Exchanges from another Ivy or Mackenzie Fund will continue to be subject to the CDSC schedule (or period) of the fund from which the exchange was made, but will reflect the time the shares are held in the Fund. Class A, Class B and Class C shares that have been acquired as a result of the reinvestment of dividends and other distributions will not be charged an initial sales charge or a CDSC when exchanged into another Ivy or Mackenzie fund. Exchanges are considered to be taxable events, and may result in a capital gain or a capital loss for tax purposes. Before executing an exchange, you should obtain and read the prospectus and consider the investment objective of the fund into which the exchange is being made. Shares must be uncertificated in order to execute an exchange. Exchanges are available only in states where they can be legally made. This privilege is not intended to provide shareholders a 8 means by which to speculate on short-term movements in the market. Exchanges are accepted only if the registrations of the two accounts are identical. Amounts to be exchanged must meet minimum investment requirements for the Ivy or Mackenzie fund into which the exchange is made. With respect to Fund shares subject to a CDSC (i.e., Class B or Class C shares acquired through an exchange from another Ivy or Mackenzie fund), if less than all of an investment is exchanged out of the Fund, the shares exchanged will reflect, pro rata, the cost, capital appreciation and/or reinvestment of distributions of the original investment as well as the original purchase date, for purposes of calculating any CDSC for future redemptions of the exchanged shares. An investor who was a shareholder of American Investors Income Fund, Inc. or American Investors Growth Fund, Inc. prior to October 31, 1988, or a shareholder of Ivy Fund prior to December 31, 1991, who became a shareholder of the Fund as a result of a reorganization or merger between the Funds may exchange between funds without paying a sales charge. An investor who was a shareholder of American Investors Income Fund, Inc. or American Investors Growth Fund, Inc. on or after October 31, 1988 who became a shareholder of the Fund as a result or the reorganization between the Funds will receive credit toward any applicable sales charge imposed by any Ivy or Mackenzie fund into which an exchange is made. EXCHANGES BY TELEPHONE: If Section 6D of the Account Application is not completed, telephone exchange privileges will be provided automatically. Although telephone exchanges may be a convenient feature, you should realize that you may be giving up a measure of security that you may otherwise have if you terminated the privilege and exchanged your shares in writing. If you do not wish to make telephone exchanges or let your registered representative do so on your behalf, you must notify IMSC in writing. In order to execute an exchange, please contact IMSC at 1-800-777-6472. Have the account number of your current fund and the exact name in which it is registered available to give to the telephone representative. The Fund employs reasonable procedures that require personal identification prior to acting on exchange instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such procedures, the Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. EXCHANGES IN WRITING: In a letter, request an exchange and provide the following information: - The name of the fund whose shares you currently own. - Your account number - The name(s) in which the account is registered. - The name of the fund into which you wish to exchange your existing shares. - The number of shares or the dollar amount you wish to exchange. The request must be signed by all registered owners. SYSTEMATIC WITHDRAWAL PLAN You may elect the Systematic Withdrawal Plan at any time by completing Section 6B of the Account Application. You can also obtain this application by contacting your registered representative or IMSC at 1-800-777-6472. To be eligible, you must have at least $5,000 in your account. Payments (minimum distribution amount -- $50) from your account can be made monthly, quarterly, semi-annually, annually or on a selected monthly basis, to yourself or any other designated payee. You may elect to have your systematic withdrawal paid directly to your bank account via EFT. Share certificates must be unissued (i.e., held by the Fund) while the Systematic Withdrawal Plan is in effect. A Systematic Withdrawal Plan may not be established if you are currently participating in the Automatic Investment Method. For more information, please contact IMSC at 1-800-777-6472. If payments you receive through the Systematic Withdrawal Plan exceed the dividends and capital appreciation of your account, you will be reducing the value of your account. Additional investments made by shareholders participating in the Systematic Withdrawal Plan must equal at least $1,000 while the plan is in effect. In addition, redemptions are taxable events. Amounts paid to you through the Systematic Withdrawal Plan are derived from the redemption of shares in your account. Any applicable CDSC will be assessed upon redemption. A CDSC will not be assessed on withdrawals not exceeding 12% annually of the initial account balance when the Systematic Withdrawal Plan was started. Should you wish at any time to add a Systematic Withdrawal Plan to an existing account or change payee instructions, you will need to submit a written request, signed by all registered owners, with signatures guaranteed. Retirement accounts are eligible for Systematic Withdrawal Plans. Please contact IMSC at 1-800-777-6472 to obtain the necessary paperwork to establish a plan. If the U.S. Postal Service cannot deliver your checks, or if deposits to a bank account are returned for any reason, your redemptions will be discontinued. AUTOMATIC INVESTMENT METHOD You may authorize an investment to be automatically drawn each month from your bank for investment in Fund shares by completing Sections 6A and 7B of the Account Application. Attach a "voided" check to your account application. At pre-specified intervals, your bank account will be debited and the proceeds will be credited to your Ivy account. The minimum investment under this plan is $50 per month ($25 per month for retirement plans). There is no charge to you for this program. You may terminate or suspend your Automatic Investment Method by telephone at any time by contacting IMSC at 1-800-777-6472. If you have investments being withdrawn from a bank account and we are notified that the account has been closed, your Automatic Investment Method will be discontinued. CONSOLIDATED ACCOUNT STATEMENTS Shareholders with two or more Ivy or Mackenzie fund accounts having the same tax I.D. number will receive a single quarterly account statement, unless otherwise specified. This feature consolidates the activity for each account onto one statement. Requests for quarterly consolidated statements for all other accounts must be submitted in writing and must be signed by all registered owners. 9 RETIREMENT PLANS The Ivy and Mackenzie family of funds offer several tax-sheltered retirement plans that may fit your needs: - IRA (Individual Retirement Account) - 401(k), Money Purchase Pension and Profit Sharing Plans - SEP-IRA (Simplified Employee Pension Plan) - 403(b)(7) Plan Minimum initial and subsequent investments for retirement plans are $25. Investors Bank & Trust, which serves as custodian or trustee under the retirement plan prototypes available from the Fund, charges certain nominal fees for annual maintenance. A portion of these fees is remitted to IMSC, as compensation for its services to the retirement plan accounts maintained with the Fund. Distributions from retirement plans are subject to certain requirements under the Code, and various documents (available from IMSC), including IRS Form W-4P, and information must be provided before the distribution may be made. The Ivy and Mackenzie family of funds and IMSC assume no responsibility to determine whether a distribution satisfies the conditions of applicable tax laws, and will not be responsible for any penalties assessed. For additional information, please contact your broker, tax adviser or IMSC. Please call IMSC at 1-800-777-6472 for complete information kits describing the plans and their benefits, restrictions, provisions and fees. SHAREHOLDER INQUIRIES Inquiries regarding the Fund should be directed to IMSC at 1-800-777-6472. 10 IVY MONEY MARKET FUND ________________________ ACCOUNT APPLICATION ACCOUNT NUMBER Please mail applications and checks to: Mackenzie Ivy Investor Services Corp., P.O. Box 3022, Boca Raton, FL 33431-0922. (This application should not be used for retirement accounts for which Ivy is custodian.) ----------------------------------------------------------------- ----------------------------------------------------------------- -- IVY MONEY MARKET FUND ACCOUNT APPLICATION ----------------------------------------------------------------- ----------------------------------------------------------------- -- FUND USE 101/ 1 / 2 1 / 2 0 / 1 0 / X ONLY ----------------------- --------- --------- ------------ -------- ---------- --------- --------- ------------ Dealer # Branch # Rep # Acct Type Soc Cd Div Cd CG Cd Exc Cd Red Cd ----------------------------------------------------------------- ----------------------------------------------------------------- -- REGISTRATION 1 [ ] Individual _________________________________________________________________ _______________________ [ ] Joint Tenant Owner, Custodian or Trustee [ ] Estate _________________________________________________________________ _______________________ [ ] UGMA/UTMA Co-owner or Minor [ ] Corporation _________________________________________________________________ _______________________ [ ] Partnership Minor's State of Residence [ ] Sole Proprietor _________________________________________________________________ _______________________ [ ] Trust Street __________________ _________________________________________________________________ _______________________ Date of Trust [ ] Other ____________ _________________________________________________________________ _______/__/__/__/__/__/ __________________ City State Zip Code /__/__/__/-/__/__/__/-/__/__/__/__/ /__/__/__/-/__/__/__/-/__/__/__/__/ Phone Number -- Day Phone Number -- Evening ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- TAX ID # 2 /__/__/__/-/__/__/-/__/__/__/__/ of /__/__/-/__/__/__/__/__/__/__/ Citizenship [ ] U.S. [ ] Other _______________ Social Security Number Tax Identification Number Under penalties of perjury, I certify by signing in Section 9 below that: (1) the number shown in this section is my correct taxpayer identification number (TIN), and (2) I am not subject to backup withholding because: (a) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (b) the IRS has notified me that I am no longer subject to backup withholding. (Cross out item (2) if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return.) Please see the "Tax Identification Number" section of the Prospectus for additional information on completing this section. ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- DEALER INFORMATION 3 The undersigned ("Dealer") agrees to all applicable provisions in this Application, guarantees the signature and legal capacity of the Shareholder, and agrees to notify MIISC of any purchases made under a Letter of Intent or Rights of Accumulation. __________________________________________________________ __________________________________________________________ Dealer Name Representative's Name and Number __________________________________________________________ __________________________________________________________ Branch Office Address Representative's Phone Number __________________________________________________________ __________________________________________________________ City State Zip Code Authorized Signature of Dealer ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- INVESTMENTS 4 A. Enclosed is my check ($1,000 minimum) made payable to Ivy Money Market Fund. Please invest it in [ ] Class A [ ] Class B(*) or [ ] Class C(*) shares. $_____________________ (Amount Enclosed) (*) Direct purchases of Class B and Class C shares may be made in conjunction with a systematic withdrawal plan into the same Class of a different Ivy or Mackenzie fund. (See "Direct Purchase of Class B and Class C Shares" under "How To Buy Shares.") ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- DISTRIBUTION OPTIONS 5 A. 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. B. [ ] Reinvest all dividends and capital gains into additional shares of a different Ivy or Mackenzie fund. _____________________________________ /__/__/__/__/__/__/__/__/__/__/ [ ] New Account Fund Name Account Number C. [ ] Pay all dividends in cash and reinvest capital gains into additional shares in this Fund or a different Ivy or Mackenzie fund. _____________________________________ /__/__/__/__/__/__/__/__/__/__/ [ ] New Account Fund Name Account Number D. [ ] Pay all dividends and capital gains in cash. I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D ABOVE, BE: [ ] Sent to the address listed in the registration. [ ] Sent to the special payee listed in Section 7A [ ] (By Mail) 7B [ ] (By E.F.T.) ----------------------------------------------------------------- ----------------------------------------------------------------- --
----------------------------------------------------------------- ----------------------------------------------------------------- -- OPTIONAL SPECIAL FEATURES 6 A. [ ] AUTOMATIC INVESTMENT METHOD (AIM) I wish to invest [ ] once per month. My bank account will be debited on or about the [ ] twice ______________ day of the month(*) [ ] 3 times ______________ day of the month [ ] 4 times ______________ day of the month ______________ day of the month Please invest $_____________ each period starting in the month of _______ in Ivy Money Market Fund. Dollar Amount Month [ ] I have attached a voided check to ensure my correct bank account will be debited. B. [ ] SYSTEMATIC WITHDRAWAL PLANS(*) Class: I wish to automatically withdraw funds from my account in Ivy Money Market Fund: [ ] Class A Shares [ ] Class B Shares [ ] Class C Shares Frequency: [ ] Monthly If monthly, withdraw funds: [ ] One per month [ ] Quarterly [ ] Twice per month [ ] Semi-Annually [ ] 3 times per month [ ] Annually [ ] 4 times per month Payment Method: I request the withdrawl to be: [ ] Sent to the address listed in the registration [ ] Sent to the special payee listed in Section 7A [ ] Invested as part of a dollar-cost averaging program into additional shares of another Ivy or Mackenzie fund (fill out information below) If part of a dollar-cost averaging program: ____________________________________ /__/__/__/__/__/__/__/__/__/__/ Ivy or Mackenzie fund to be invested Account Number Amount/Start Date $ _______________, starting on or about the_______________day of the________________________ month(*) _______________day of the________________________ month _______________day of the________________________ month _______________day of the________________________ month C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS(**) I authorize the Agent to honor telephone instructions for the redemption of Fund shares up to $50,000. Proceeds may be wire transferred to the bank account designated ($1,000 minimum). Shares issued in certificate form may not be redeemed under this privilege. (COMPLETE SECTION 7B) D. [ ] TELEPHONE EXCHANGES(**) [ ] Yes [ ] No I authorize exchanges by telephone among the Ivy and Mackenzie family of funds upon instructions from any person as more fully described in the Prospectus. To change this option once established, written instructions must be received from the shareholder of record or the current registered representative. If neither box is checked, the telephone exchange privilege will be provided automatically. E. [ ] TELEPHONE REDEMPTIONS(**) [ ] Yes [ ] No The Fund or its agents are authorized to honor telephone instructions from any person as more fully described in the Prospectus for the redemption of Fund shares. The amount of the redemption shall not exceed $50,000 and the proceeds are to be payable to the shareholder of record and mailed to the address of record. To change this option once established, written instructions must be received from the shareholder of record or the current registered representative. If neither box is checked, the telephone exchange privilege will be provided automatically. (*) There must be a period of at least seven calendar days between each investment/withdrawal period. (**) This option may not be selected if shares are in certificate form. ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- SPECIAL PAYEE 7 A. MAILING ADDRESS B. FED WIRE / E.F.T. INFORMATION ------------------------------------------------------- ---------------------------------------------------- Please send all disbursements to this special payee ------------------------------------------------------- ---------------------------------------------------- Name of Bank or Individual Financial Institution ------------------------------------------------------- ---------------------------- --------------------- Account Number (If Applicable) ABA # Account # ------------------------------------------------------- ---------------------------------------------------- Street Street ------------------------------------------------------- ---------------------------------------------------- City/State/Zip City/State/Zip (Please attach a voided check) ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- CHECK WRITING ENROLLMENT FORM 8 THIS FEATURE IS AVAILABLE TO CLASS A SHAREHOLDERS ONLY. CHECKS MUST BE WRITTEN FOR A MINIMUM OF $100. Shares purchased in the Fund may be subject to a holding period of up to 15 calendar days before being redeemed by check. Please see the Prospectus for details. HOW TO ENROLL 1. ALL REGISTERED OWNERS MUST SIGN THIS FORM IN THE SPACE PROVIDED BELOW. 2. Check the appropriate Number of Signatures Required box to indicate the number of signatures required when writing checks. NUMBER OF SIGNATURES REQUIRED [ ] One signature is required [ ] More than one signature is required ----------------------------- number of signatures required [ ] All signatures are required IF NONE OF THE ABOVE IS CHECKED THEN ALL SIGNATURES WILL BE REQUIRED --------------------------------------------------------- ------------------------------ Authorized Signature Date --------------------------------------------------------- ------------------------------ Authorized Signature Date --------------------------------------------------------- ------------------------------ Authorized Signature Date ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- SIGNATURES 9 Investors should be aware that the failure to check the "No" under Section 6D and 6E above means that the Telephone Exchanges/Redemptions Privileges will be provided. The Funds employ reasonable procedures that require personal identification prior to acting on exchange/redemption instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such procedures, a Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. Please see "Exchange Privilege" and "How to Redeem Shares" in the Prospectus for more information on these privileges. I certify to my legal capacity to purchase or redeem shares of the Fund for my own account or for the account of the organization named in Section 1. I have received a current Prospectus and understand its terms are incorporated in this application by reference. I am certifying my taxpayer information as stated in Section 2. THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. ----------------------------------------------------------------- ---------- ------------------ Signature of Owner, Custodian, Trustee or Corporate Officer Date ----------------------------------------------------------------- ---------- ------------------ Signature of Joint Owner, Co-Trustee or Corporate Officer Date ----------------------------------------------------------------- ----------------------------------------------------------------- --
(REMEMBER TO SIGN SECTION 9) IMMF-1-496 April 30, 1996 Ivy Short-Term Bond Fund ---------- Prospectus ---------- Ivy Management, Inc. Via Mizner Financial Plaza 700 South Federal Hwy. Boca Raton, FL 33432 1-800-456-5111 Ivy Fund (the "Trust") is a registered investment company currently consisting of thirteen separate portfolios. One portfolio of the Trust, Ivy Short-Term Bond Fund (the "Fund"), is described in this Prospectus. This Prospectus sets forth concisely the information about the Fund that a prospective investor should know before investing. Please read it carefully and retain it for future reference. Additional information about the Fund is contained in the Statement of Additional Information for the Fund dated April 30, 1996 (the "SAI"), which has been filed with the Securities and Exchange Commission ("SEC") and is incorporated by reference into this Prospectus. The SAI is available upon request and without charge from the Trust at the Distributor's address and telephone number below. Investments in the Fund are neither insured nor guaranteed by the U.S. Government or any governmental agency. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS Expense Information . . . . . . . . . . . . . . . . . 2 The Fund's Financial Highlights . . . . . . . . . . . 3 Investment Objectives and Policies . . . . . . . . . 4 Risk Factors and Investment Techniques . . . . . . . 5 Organization and Management of the Fund . . . . . . . 8 Fund Administration and Accounting . . . . . . . . . 8 Transfer Agent . . . . . . . . . . . . . . . . . . . 9 Alternative Purchase Arrangements . . . . . . . . . . 9 Dividends and Taxes . . . . . . . . . . . . . . . . . 9 Performance Data . . . . . . . . . . . . . . . . . . 10 How to Buy Shares . . . . . . . . . . . . . . . . . . 10 How Your Purchase Price is Determined . . . . . . . . 11 How the Fund Values Its Shares . . . . . . . . . . . 11 Initial Sales Charge Alternative - Class A Shares . . 11 Contingent Deferred Sales Charge - Class A Shares . . 12 Qualifying for a Reduced Sales Charge . . . . . . . . 12 Contingent Deferred Sales Charge Alternative - Class B Shares . . . . . . . . . . . . . . . . . . 13 How to Redeem Shares . . . . . . . . . . . . . . . . 14 Check Writing . . . . . . . . . . . . . . . . . . . . 15 Minimum Account Balance Requirements . . . . . . . . 15 Signature Guarantees . . . . . . . . . . . . . . . . 15 Choosing a Distribution Option . . . . . . . . . . . 15 Tax Identification Number . . . . . . . . . . . . . . 16 Certificates . . . . . . . . . . . . . . . . . . . . 16 Exchange Privilege . . . . . . . . . . . . . . . . . 16 Reinvestment Privilege . . . . . . . . . . . . . . . 17 Systematic Withdrawal Plan . . . . . . . . . . . . . 17 Automatic Investment Method . . . . . . . . . . . . . 17 Consolidated Account Statements . . . . . . . . . . . 17 Retirement Plans . . . . . . . . . . . . . . . . . . 17 Shareholder Inquiries . . . . . . . . . . . . . . . . 18
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT INVESTMENT John S. Anderegg, Jr. Michael G. Landry, President Ivy Mackenzie MANAGER Paul H. Broyhill Keith J. Carlson, Vice President Services Corp. Ivy Management, Inc. Stanley Channick C. William Ferris, P.O. Box 3022 Boca Raton, FL Frank W. DeFriece, Jr. Secretary/Treasurer Boca Raton, FL Roy J. Glauber Michael R. Peers, Chairman 33431-0922 DISTRIBUTOR; Michael G. Landry 1-800-777-6472 Ivy Mackenzie Michael R. Peers LEGAL COUNSEL Distributors, Inc. Joseph G. Rosenthal Dechert Price & Rhoads AUDITORS Via Mizner Financial Plaza Richard N. Silverman Boston, MA Coopers & Lybrand L.L.P. 700 South Federal Highway J. Brendan Swan Ft. Lauderdale, FL Boca Raton, FL 33432 CUSTODIAN; 1-800-456-5111 Brown Brothers Harriman & Co. Boston, MA
THROUGHOUT THE CENTURIES, THE CASTLE KEEP HAS BEEN A SOURCE OF LONG-RANGE VISION AND STRATEGIC ADVANTAGE. EXPENSE INFORMATION SHAREHOLDER TRANSACTION EXPENSES
CLASS A CLASS B CLASS I ------- ------- ------- Maximum sales load imposed on purchases (as a percentage of offering price at time of purchase)....................... 3.00%* None None Maximum contingent deferred sales charge (as a percentage of original purchase price)............................... None** 3.00%*** None The Fund has no sales load on reinvested dividends, no redemption fees and no exchange fees.
* Class A Shares of the Fund may be purchased under a variety of plans that provide for the reduction or elimination of the sales charge. ** A contingent deferred sales charge may apply to the redemption of Class A shares that are purchased without an initial sales charge. See "Purchases of Class A Shares at Net Asset Value" and "Contingent Deferred Sales Charge -- Class A Shares." *** The maximum contingent deferred sales charge on Class B shares applies to redemptions during the first year after purchase. The charge declines to 2 1/2% during the second year; 2% during the third year; 1 1/2% during the fourth year; 1% during the fifth year; and 0% in the sixth year and thereafter. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
CLASS A CLASS B CLASS I ------- ------- ------- Management Fees After Expense Reimbursements(1)..... 0.00% 0.00% 0.00% 12b-1 Service/Distribution Fees..................... 0.25% 0.75%(2) 0.00% Other Expenses...................................... 0.68% 0.68% 0.59%(3) -- -- -- Total Fund Operating Expenses After Expense Reimbursements(4).................................. 0.93% 1.43% 0.59% ======= ======= ======
(1) Management Fees reflect expense reimbursements (see note (4) below). Without expense reimbursements, Management Fees for all classes would have been 0.60%. (2) Long-term investors may, as a result of the Fund's 12b-1 fees, pay more than the economic equivalent of the maximum front-end sales charge permitted by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (3) The "Other Expenses" of Class I of the Fund are lower than such expenses for the Fund's other classes because Class I shares bear lower shareholder services fees than Class A and Class B shares. (4) The voluntary portion of the Fund's expense reimbursement may be terminated or revised at any time, at which time the Fund's expenses would increase. Total Fund Operating Expenses for all classes (excluding 12b-1 fees) without expense reimbursement would have been 3.02%. EXAMPLE CLASS A AND CLASS I SHARES* You would pay the following expenses on a $1,000 investment in the Fund, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Class A(1)................................... $ 39 $59 $80 $141 Class I(2)................................... $ 7 $22 $38 $ 85
* Net of expense reimbursements. See Note (4) in the Annual Fund Operating Expense Table above. (1) Assumes deduction of the maximum 3% initial sales charge at the time of purchase and no deduction of a contingent deferred sales charge at the time of redemption. (2) Class I shares are not subject to initial sales charges at the time of purchase, nor are they subject to the deduction of a contingent deferred sales charge at the time of redemption. EXAMPLE (1 OF 2) CLASS B SHARES* You would pay the following expenses on a $1,000 investment in the Fund, assuming (1) 5% annual return and (2) redemption at the end of each time period:
1 YEAR(1) 3 YEARS(2) 5 YEARS(3) 10 YEARS(4) --------- ---------- ---------- ----------- $45 $ 65 $ 88 $ 158
EXAMPLE (2 OF 2) CLASS B SHARES* You would pay the following expenses on a $1,000 investment in the Fund, assuming (1) 5% annual return and (2) no redemption:
1 YEAR 3 YEARS 5 YEARS 10 YEARS(4) ------ ------- ------- ----------- $ 15 $45 $78 $ 158
* Net of expense reimbursements. (1) Assumes deduction of a 3% contingent deferred sales charge at the time of redemption. (2) Assumes deduction of a 2% contingent deferred sales charge at the time of redemption. (3) Assumes deduction of a 1% contingent deferred sales charge at the time of redemption. (4) Ten-year figures assume conversion of Class B shares to Class A shares at the end of the eighth year and, therefore, reflect Class A expenses for years nine and ten. The purpose of the foregoing tables is to provide an investor with an understanding of the various costs and expenses that an investor in the Fund will bear, directly or indirectly. The Examples assume reinvestment of all dividends and distributions and that the percentage amounts under "Total Fund Operating Expenses After Expense Reimbursement" remain the same each year. The assumed annual return of 5% is required by applicable law to be applied by all investment companies and is used for illustrative purposes only. This assumption is not a projection of future performance. The actual expenses for the Fund may be higher or lower than the estimates given. Except as set forth below, the percentages expressing annual fund operating expenses are based on amounts incurred by the Fund during the year ended December 31, 1995. The management fees for the Fund have been adjusted to reflect the expected level of expense reimbursement for the current fiscal year. The information in the table does not reflect the charge of $10.00 per transaction if a shareholder makes a request to have redemption proceeds wired to his or her bank account. For a more detailed discussion of the Fund's fees and expenses, see the following sections of the Prospectus: "Organization and Management of the Fund," "Initial Sales Charge Alternative -- Class A Shares," "Contingent Deferred Sales Charge Alternative -- Class B Shares," and "How to Buy Shares," and the following section of the SAI: "Investment Advisory and Other Services." 2 THE FUND'S FINANCIAL HIGHLIGHTS The Fund results from a reorganization of Mackenzie Short-Term U.S. Government Securities Fund (formerly Mackenzie Adjustable U.S. Government Securities Trust), a series of The Mackenzie Funds Inc., which reorganization was approved by shareholders in December, 1994. From commencement of operations until September 20, 1994 (during which time the Fund was known as Mackenzie Adjustable U.S. Government Securities Trust) the Fund had an investment objective of seeking a high level of current income, consistent with lower volatility of principal. From September 20, 1994 until December 31, 1994 the Fund was known as Mackenzie Short-Term U.S. Government Securities Fund (d/b/a Ivy Short-Term U.S. Government Securities Fund), with the same investment objective as that described in this Prospectus and the SAI. The following information through December 31, 1995 relating to the Fund, operating prior to the reorganization of Mackenzie Short-Term U.S. Government Securities Fund (d/b/a Ivy Short-Term U.S. Government Securities Fund) into Ivy Short-Term U.S. Government Securities Fund, has been audited by Coopers & Lybrand L.L.P., independent accountants. The report of Coopers & Lybrand L.L.P. on the Fund's financial statements appears in the Fund's Annual Report dated December 31, 1995 which is incorporated by reference into the Fund's SAI. The Annual Report contains further information about and management's discussion of the Fund's performance, and is available to shareholders upon request and without charge. The information presented below should be read in conjunction with the financial statements and notes thereto. Expense and income ratios and portfolio turnover rates have been annualized for periods of less than one year. Total returns do not reflect sales charges, and are not annualized for periods of less than one year. Prior to December 31, 1994, Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly owned subsidiary, served as investment adviser to the Fund.
CLASS A ------------------------------- FOR THE FOR THE SIX YEAR ENDED MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------ ------------ SELECTED PER SHARE DATA 1995 1994 ------------ ------------ Net asset value, beginning of period.................................................... $ 9.49 $ 9.71 ----- ----- Income from investment operations: Net investment income(a)........................................................ ....... .54 .23 Net loss on investments (both realized and unrealized)................................. (.02) (.22) ----- ----- Total from investment operations.................................................. .52 .01 ----- ----- Less distributions: From net investment income........................................................... .. .54 .23 From capital paid-in.......................................................... ......... -- -- ----- ----- Total distributions.................................................... ........... .54 .23 ----- ----- Capital contributed by manager......................................................... .26 -- ----- ----- Net asset value, end of period.......................................................... $ 9.73 $ 9.49 ============ ============ Total return(%)........................................................ ................. 8.56(c) .03 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)................................................ $6,027 $8,572 Ratio of total expenses to average net assets: With expense reimbursement and fees paid indirectly(%)................................. .93 1.38 Without expense reimbursement and fees paid indirectly(%).............................. 3.27 2.80 Ratio of net investment income to average net assets(%)(a).............................. 5.53 4.65 Portfolio turnover rate(%).......................................................... .... 54 143 CLASS A --------------------------------------- FOR THE YEAR ENDED JUNE 30, --------------------------------------- SELECTED PER SHARE DATA 1994 1993 1992 ------- ------- ------- Net asset value, beginning of period.................................................... $ 9.92 $ 9.96 $ 9.97 ------- ------- ------- Income from investment operations: Net investment income(a)........................................................ ....... .36 .46 .66 Net loss on investments (both realized and unrealized)................................. (.21) (.04) -- ------- ------- ------- Total from investment operations.................................................. .15 .42 .66 ------- ------- ------- Less distributions: From net investment income........................................................... .. .36 .46 .66 From capital paid-in.......................................................... ......... -- -- -- ------- ------- ------- Total distributions.................................................... ........... .36 .46 .67 ------- ------- ------- Capital contributed by manager......................................................... -- -- -- Net asset value, end of period.......................................................... $ 9.71 $ 9.92 $ 9.96 ======= ======= ======= Total return(%)........................................................ ................. 1.57 4.33 6.80 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)................................................ $12,267 $44,375 $25,259 Ratio of total expenses to average net assets: With expense reimbursement and fees paid indirectly(%)................................. .92 .82 .86 Without expense reimbursement and fees paid indirectly(%).............................. 1.52 1.45 1.30 Ratio of net investment income to average net assets(%)(a).............................. 3.73 4.54 6.43 Portfolio turnover rate(%).......................................................... .... 37 69 106 CLASS A ------------------------------- FOR THE YEAR ENDED JUNE 30, ------------------------------- SELECTED PER SHARE DATA 1991(B) ------- Net asset value, beginning of period.................................................... $10.00 ------- Income from investment operations: Net investment income(a)........................................................ ....... .16 Net loss on investments (both realized and unrealized)................................. (.03) ------- Total from investment operations.................................................. .13 ------- Less distributions: From net investment income........................................................... .. .16 From capital paid-in.......................................................... ......... -- ------- Total distributions.................................................... ........... .16 ------- Capital contributed by manager......................................................... -- ------- Net asset value, end of period.......................................................... $ 9.97 ======= Total return(%)........................................................ ................. 6.65 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)................................................ $13,708 Ratio of total expenses to average net assets: With expense reimbursement and fees paid indirectly(%)................................. .25 Without expense reimbursement and fees paid indirectly(%).............................. 3.00 Ratio of net investment income to average net assets(%)(a).............................. 8.70 Portfolio turnover rate(%).......................................................... .... 7
--------------- (a) Net investment income is net of expenses reimbursed by the Fund's Manager. (b) April 18, 1991 (commencement) to June 30, 1991. (c) Without a capital contribution by the Manager, total return would have been 5.82%.
3
CLASS B ----------------- JANUARY 12, 1995 (COMMENCEMENT) TO DECEMBER 31, 1995 ----------------- Net asset value, beginning of period........................................................... .......... $9.44 --- Income (loss) from investment operations: Net investment income(a)........................................................ ........................ .49 Net income (loss) on investments (both realized and unrealized)......................................... .03 --- Total from investment operations....................................................... ............ .52 --- Less distributions: From net investment income........................................................... ................... .49 --- Capital contributed by manager.......................................................... ................ .26 --- Net asset value, end of period........................................................... ................ $9.73 =================== Total return(%)........................................................ .................................. 8.53(b) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)....................................................... .......... $ 27 Ratio of total expenses to average net assets: With expense reimbursement(%)................................................. .......................... 1.43 Without expense reimbursement(%)................................................. ....................... 3.77 Ratio of net investment income to average net assets(%)(a)............................................... 5.03 Portfolio turnover rate(%).......................................................... ..................... 54 CLASS I ------------ FOR THE YEAR ENDED DECEMBER 31, 1995* ------------ Net asset value, beginning of period........................................................... .......... $ -- --- Income (loss) from investment operations: Net investment income(a)........................................................ ........................ -- Net income (loss) on investments (both realized and unrealized)......................................... -- --- Total from investment operations....................................................... ............ -- --- Less distributions: From net investment income........................................................... ................... -- --- Capital contributed by manager.......................................................... ................ -- --- Net asset value, end of period........................................................... ................ $ -- ============ Total return(%)........................................................ .................................. -- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)....................................................... .......... $ -- Ratio of total expenses to average net assets: With expense reimbursement(%)................................................. .......................... -- Without expense reimbursement(%)................................................. ....................... -- Ratio of net investment income to average net assets(%)(a)............................................... -- Portfolio turnover rate(%).......................................................... ..................... -- CLASS I ------------ FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 ------------ Net asset value, beginning of period........................................................... .......... $ 9.71 --- Income (loss) from investment operations: Net investment income(a)........................................................ ........................ .14 Net income (loss) on investments (both realized and unrealized)......................................... (.22) --- Total from investment operations....................................................... ............ (.08) --- Less distributions: From net investment income........................................................... ................... .14 --- Capital contributed by manager.......................................................... ................ -- --- Net asset value, end of period........................................................... ................ $ 9.49 ============ Total return(%)........................................................ .................................. (.99) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)....................................................... .......... $ -- Ratio of total expenses to average net assets: With expense reimbursement(%)................................................. .......................... 1.13 Without expense reimbursement(%)................................................. ....................... 2.55 Ratio of net investment income to average net assets(%)(a)............................................... 4.90 Portfolio turnover rate(%).......................................................... ..................... 143 CLASS I ----------------- FOR THE PERIOD JULY 3, 1993 (COMMENCEMENT) TO JUNE 30, 1994 ----------------- Net asset value, beginning of period........................................................... .......... $ 9.92 ----- Income (loss) from investment operations: Net investment income(a)........................................................ ........................ .39 Net income (loss) on investments (both realized and unrealized)......................................... (.21) ----- Total from investment operations....................................................... ............ .18 ----- Less distributions: From net investment income........................................................... ................... .39 ----- Capital contributed by manager.......................................................... ................ -- ----- Net asset value, end of period........................................................... ................ $ 9.71 =================== Total return(%)........................................................ .................................. 1.77 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)....................................................... .......... $ 1,495 Ratio of total expenses to average net assets: With expense reimbursement(%)................................................. .......................... .67 Without expense reimbursement(%)................................................. ....................... 1.27 Ratio of net investment income to average net assets(%)(a)............................................... 3.98 Portfolio turnover rate(%).......................................................... ..................... 37
--------------- * (a) (b)
* There were no Class I shares outstanding during the period. (a) Net investment income is net of expenses reimbursed by the Fund's Manager. (b) Without a capital contribution by the Manager, total return would have been 5.78%.
INVESTMENT OBJECTIVES AND POLICIES The Fund is a diversified company which offers investors a convenient way to invest in a managed portfolio of government debt securities. The Fund seeks a high level of current income consistent with a high degree of principal stability. The Fund pursues this objective by investing primarily (at least 65% of its total assets) in short-term U.S. Government securities, including bonds, notes and bills issued by the U.S. Treasury, and securities issued by agencies or instrumentalities of the U.S. Government. Although the Fund may purchase individual securities with a greater maturity, the dollar-weighted average maturity of the Fund's portfolio may not exceed three years. In addition, whenever in IMI's judgment abnormal market or economic conditions warrant, the Fund may, for temporary defensive purposes, invest without limit in short-term U.S. Government Securities (maturing in 13 months or less), certificates of deposit, banker's acceptances, repurchase agreements and commercial paper rated Prime-A by Moody's Investors Services, Inc. ("Moody's") or A-1 by S&P, or, if not rated by Moody's or S&P, issued by companies having an outstanding debt issue currently rated Aa or better by Moody's or AA or better by S&P. The Fund may invest up to 20% of its net assets in debt securities of foreign issuers meeting the credit quality standards described above, including non-U.S. dollar-denominated debt securities, American Depository Receipts ("ADRs"), Eurodollar securities, and debt securities issued, assumed or guaranteed by foreign governments or political subdivisions or instrumentalities thereof. The Fund may also enter into forward foreign currency contracts to protect against the uncertainty in the level of future foreign exchange rates, but not for speculative purposes. The Fund may invest up to 5% of its net assets in dividend paying common stocks (including adjustable rate preferred stocks); zero coupon bonds in accordance with the Fund's credit quality standards; and securities sold on a "when-issued" or firm-commitment basis. The Fund may lend its portfolio securities to increase current income, and borrow from banks as a temporary measure for emergency purposes. The Fund may also invest in mortgage-related securities, including mortgage pass-through securities (such as adjustable rate mortgage securities, or "ARMs") and collateralized mortgage obligations (CMOs). The Fund may invest up to 35% of its assets in corporate debt securities rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P at the time of purchase. The Fund may invest less than 35% of its net assets in corporate debt securities considered medium or lower grade (commonly referred to as "high yield" or "junk" bonds). The Fund will not invest in corporate debt securities that, at the time of investment, are rated less than C by either Moody's or S&P. During the twelve months ended December 31, 1995, based upon the dollar-weighted average ratings of the Fund's portfolio holdings at the end of each month during such period, the Fund had the following percentages of its total assets invested in securities rated in the categories indicated (all ratings are by either S&P or Moody's, whichever rating is higher): 75.1% in securities rated AAA/Aaa; 0% in securities rated AA/Aa; 0% in securities rated A/A; 0% in securities rated BBB/Baa; 7.3% in securities rated BB/Ba; 11.4% in securities rated B/B; and 0% in securities which were unrated. These figures are intended solely to provide disclosure about the Fund's asset composition during the period specified above. The asset composition after this time may or may not be approximately the same as represented by such figures. The Fund can use various techniques to increase or decrease its exposure to changing security prices, interest rates, currency exchange rates, commodity prices, or other factors that affect security values. These techniques may involve derivative transactions such as selling call options and purchasing put and call options on U.S. government securities, interest rate futures, foreign currency futures and foreign currencies that are traded on an exchange or board of trade. IMI can use these practices to adjust the risk and return characteristics of the Fund's portfolio of investments. If IMI judges market conditions incorrectly or employs a strategy that does not correlate well with the Fund's investments, these techniques could result in a loss. These techniques may increase the 4 volatility of the Fund and may involve a small investment of cash relative to the magnitude of the risk assumed. In addition, these techniques could result in a loss if the counterparty to the transaction does not perform as promised. The Fund may only engage in transactions in interest rate futures, currency rate futures and options on interest rate futures and currency futures contracts for hedging purposes. The Fund's investment objectives are fundamental and may not be changed without the approval of a majority of the outstanding voting shares of the Fund. The Trustees may make non-material changes in the Fund's objectives without shareholder approval. Except for the Fund's investment objective and those investment restrictions specifically identified as fundamental, all investment policies and practices described in this Prospectus and in the SAI are non-fundamental and, therefore, may be changed by the Trustees without shareholder approval. There can be no assurance that the Fund's objectives will be met. The different types of securities and investment techniques used by the Fund involve varying degrees of risk. For information about the particular risks associated with each type of investment, see "Risk Factors and Investment Techniques," below, and the SAI. Whenever an investment objective, policy or restriction of the Fund described in this Prospectus or in the SAI states a maximum percentage of assets that may be invested in a security or other asset or describes a policy regarding quality standards, that percentage limitation or standard will, unless otherwise indicated, apply to the Fund only at the time a transaction takes place. Thus, for example, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in the percentage that results from circumstances not involving any affirmative action by the Fund will not be considered a violation. RISK FACTORS AND INVESTMENT TECHNIQUES The following discussion describes in greater detail the different types of securities and investment techniques used by the Fund, as well as the risks associated with such securities and techniques. DEBT SECURITIES, IN GENERAL: Investment in debt securities involves both interest rate and credit risk. Generally, the value of debt instruments rises and falls inversely with 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. The Fund may invest up to 35% of its assets in corporate debt securities rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P at the time of purchase. U.S. GOVERNMENT SECURITIES: U.S. Government securities are obligations of, or guaranteed by, the U.S. Government, its agencies or instrumentalities. Such securities include: (1) direct obligations of the U.S. Treasury (such as Treasury bills, notes, and bonds) and (2) Federal agency obligations guaranteed as to principal and interest by the U.S. Treasury (such as GNMA certificates, which are mortgage-backed securities). When such securities are held to maturity, the payment of principal and interest is unconditionally guaranteed by the U.S. Government, and thus they are of the highest possible credit quality. U.S. Government securities that are not held to maturity are subject to variations in market value caused by fluctuations in interest rates. Mortgage-backed securities are securities representing part ownership of a pool of mortgage loans. Although the mortgage loans in the pool will have maturities of up to 30 years, the actual average life of the loans typically will be substantially less because the mortgages will be subject to principal amortization and may be prepaid prior to maturity. In periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the actual average life of the security. Conversely, rising interest rates tend to decrease the rate of prepayment, thereby lengthening the security's actual average life. Since it is not possible to predict accurately the average life of a particular pool, and because prepayments are reinvested at current rates, the market value of mortgage-backed securities may decline during periods of declining interest rates. INVESTMENT-GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's and AAA by S&P are judged to be of the best quality (i.e., capacity to pay interest and repay principal is extremely strong). Bonds rated Aa/AA are considered to be of high quality (i.e., capacity to pay interest and repay interest is very strong and differs from the highest rated issues only to a small degree). Bonds rated A are viewed as having many favorable investment attributes, but elements may be present that suggest a susceptibility to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. Bonds rated Baa/BBB (considered by Moody's to be "medium grade" obligations) are considered to have an adequate capacity to pay interest and repay principal, but certain protective elements may be lacking (i.e., such bonds lack outstanding investment characteristics and have some speculative characteristics). LOW-RATED DEBT SECURITIES: Securities rated lower than Baa or BBB (and comparable unrated securities), commonly referred to as "high yield" or "junk" bonds, are considered by major credit-rating organizations to have predominately speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. While such debt securities are likely to have some quality and protective characteristics, these are largely outweighed by the risk of exposure to adverse conditions and other uncertainties. Accordingly, investments in such securities, while generally providing for greater income and potential opportunity for gain than investments in higher-rated securities, also entail greater risk (including the possibility of default or bankruptcy of the issuer of such securities) and generally involve greater price volatility than securities in higher rating categories. Investors in the Fund should be willing to accept the risks associated with high-yield securities. IMI seeks to reduce risk through diversification (including investments in foreign securities), credit analysis and attention to current developments and trends in both the economy and financial markets. Should the rating of a portfolio security be downgraded, IMI will determine whether it is in the Fund's best interest to retain or dispose of the security. However, should any individual bond held by the Fund be downgraded below the rating of C, IMI currently intends to dispose of it based on then existing market conditions. See Appendix A to the SAI for a more complete description of the ratings assigned by Moody's and S&P. MORTGAGE-RELATED SECURITIES: The market value of mortgage securities, like that of U.S. Government securities, will generally vary inversely with changes in market interest rates, declining when interest rates rise and rising when interest rates decline. However, mortgage securities, while having less risk of a decline during periods of rapidly rising interest rates, may also have less potential for capital appreciation than other investments of comparable maturities due to the likelihood of increased prepayments of mortgages as interest rates decline and the possibility of a lower rate of return upon reinvestment. In addition, to the extent mortgage securities are purchased at a premium, 5 mortgage foreclosures and unscheduled principal repayments may result in some loss of the holders' principal investment to the extent of premium paid. On the other hand, if mortgage securities are purchased at a discount, both a scheduled payment of principal and an unscheduled prepayment of principal will increase current and total returns and will accelerate the recognition of income which when distributed to shareholders will be taxable as ordinary income. Mortgage pass-through securities are securities representing interests in "pools" of mortgage loans secured by residential or commercial real property in which payments of both interest and principal on the securities are generally made monthly, in effect "passing through" monthly payments made by the individual borrowers on the mortgage loans which underlie the securities (net of fees paid to the issuer or guarantor of the securities). ARMs are pass-through mortgage securities which are collateralized by mortgages with adjustable rather than fixed interest rates. The ARMs in which the Fund invests are issued primarily by GNMA, FNMA and FHLMC and are actively traded in the secondary market. The Fund will not benefit from increases in interest rates to the extent that interest rates rise to the point where they cause the current coupon of adjustable rate mortgages held as investments to exceed the maximum allowable annual or lifetime reset limits (or "cap rates") for a particular mortgage. Also, the Fund's net asset value could vary to the extent that current yields on mortgage securities are different than market yields during interim periods between coupon reset dates. Payment of principal and interest on some mortgage pass-through securities (but not the market value of the securities themselves) may be guaranteed by the full faith and credit of the U.S. Government (in the case of securities guaranteed by GNMA); or guaranteed by agencies or instrumentalities of the U.S. Government (in the case of securities guaranteed by FNMA or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported only by the discretionary authority of the U.S. Government to purchase the agency's obligations). Mortgage-related securities created by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit, which may be issued by governmental entities, private insurers or the mortgage poolers. CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or trusts of financial institutions, government agencies, investment bankers or other similar institutions. CMOs purchased by the Fund may be: (1) collateralized by pools of mortgages in which each mortgage is guaranteed as to payment of principal and interest by an agency or instrumentality of the U.S. Government; (2) collateralized by pools of mortgages in which payment of principal and interest are guaranteed by the issuer and the guarantee is collateralized by U.S. Government securities; or (3) securities in which the proceeds of the issuance are invested in mortgage securities and payment of the principal and interest are supported by the credit of an agency or instrumentality of the U.S. Government. All CMOs purchased by the Fund will be either issued by a U.S. Government agency or rated AAA by S&P or Aaa by Moody's. BANKING INDUSTRY AND SAVING AND LOAN OBLIGATIONS: The bank obligations in which the Fund may invest include certificates of deposit, bankers' acceptances, and other short-term debt obligations. Investments in certificates of deposit and bankers' acceptances are limited to obligations of (i) banks having total assets in excess of $1 billion, and (ii) other banks if the principal amount of such obligation is fully insured by the Federal Deposit Insurance Corporation ("FDIC"). Investments in certificates of deposit of savings associations are limited to obligations of federally or state-chartered institutions that have total assets in excess of $1 billion and whose deposits are insured by the FDIC. COMMERCIAL PAPER: Commercial paper represents short-term unsecured promissory notes issued in bearer form by bank holding companies, corporations, and finance companies. Investments in commercial paper are limited to obligations rated Prime-1 by companies having an outstanding debt issue currently rated Aaa or Aa by Moody's or AAA or AA by S&P. FOREIGN SECURITIES: The foreign securities in which the Fund may invest include non-U.S. dollar-denominated debt securities, Eurodollar securities, and debt securities issued, assumed or guaranteed by foreign governments or political subdivisions or instrumentalities thereof. The Fund may also purchase sponsored or unsponsored ADRs. Eurodollar securities are securities that are issued offshore and which pay interest and principal in U.S. dollars. ADRs are dollar-denominated receipts issued generally by U.S. banks and which represent a deposit with the bank of a foreign company's securities. Unsponsored ADRs differ from sponsored ADRs in that the establishment of unsponsored ADRs is not approved by the issuer of the underlying foreign securities. Ownership of unsponsored ADRs may not entitle the Fund to financial or other reports of the issuer, to which it would be entitled as the owner of sponsored ADRs. ADRs are publicly traded on exchanges or over the counter in the United States. See the Fund's SAI. Investors 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 domestic investments. The Fund may invest in debt securities issued by governments, government-related entities and corporations in foreign countries with emerging or developing economies ("emerging markets"), including the developing countries of Latin America and Eastern Europe. Securities of many issuers in emerging markets may be less liquid and more volatile than securities of issuers operating in developed economies, such as the United States, Canada and most of Europe. The risks described above with respect to investment in foreign countries are heightened when the foreign country is an emerging market. Furthermore, throughout the last decade, many emerging markets have experienced and continue to experience high rates of inflation. In certain countries, inflation has at times accelerated rapidly to hyperinflationary levels, creating a negative interest rate environment and sharply eroding the value of outstanding financial assets in those countries. Although the Fund intends to invest only in nations that the Investment Manager considers to have relatively stable and friendly governments, there is the possibility of expropriation, nationalization or confiscatory taxation, taxation of 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 in 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 in reports about companies in the United States. 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 government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies than in the United States. Foreign securities transactions may be subject to higher brokerage costs than domestic securities transactions. In addition, the foreign securities markets of many of the countries in which the 6 Fund may invest may also be smaller, less liquid and subject to greater price volatility than those in the United States. Further, the Fund may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. OPTIONS AND FUTURES TRANSACTIONS: A put option is a short-term contract that gives the purchaser of the option, in return for a premium, the right to sell the underlying security or currency to the seller of the option at a specified price during the term of the option. A call option is a short-term contract that gives the purchaser of the option, in return for a premium, the right to buy the underlying security or currency from the seller of the option at a specified price during the term of the option. When the Fund writes a put or call option, the Fund will segregate assets, such as cash, U.S. Government securities or other high-grade debt securities, or "cover" its position in accordance with the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund will not write puts with respect to more than 50% of the value of its net assets (calculated at market value at the time of the transaction). The Fund will not write any call options if as a result it would have more than 20% of its net assets (calculated at market value at the time of the writing of the call) subject to being purchased upon the exercise of calls. The Fund may purchase options provided the aggregate premium paid for all options held will not exceed 10% (calculated at market value) of the value of its net assets at the time of purchase. An interest rate futures contract is an agreement between two parties to buy or sell a specified debt security at a set price on a future date. A foreign currency futures contract is an agreement to buy or sell a specified amount of a foreign currency for a set price on a future date. See "Investment Objectives and Policies -- Futures Contracts and Options on Futures Contracts" in the SAI. When the Fund enters into a futures contract, it must make an initial deposit known as an "initial margin," as a partial guarantee of its performance under the contract. As the value of the security or currency fluctuates, either party to the contract is required to make additional margin payments, known as "variation margins," to cover any additional obligation it may have under the contract. In addition, when the Fund enters into a futures contract, it will segregate assets, such as cash, U.S. Government securities or other high-grade debt securities, or "cover" its position in accordance with the 1940 Act. Use of option contracts, foreign currency contracts, futures contracts and options on futures contracts is subject to special risk considerations. The risk of loss from the use of futures is potentially unlimited. A liquid secondary market for any futures or related options contract may not be available when a futures or options position is sought to be closed and the Fund would remain obligated to meet margin requirements until the position is closed. In addition, there may be an imperfect correlation between price movements in the securities or currency on which the futures or options contract is based and in the Fund's portfolio securities being hedged. Use of futures or related options contracts is further dependent on the Investment Manager's ability to predict correctly price movements in the securities or currency being hedged, and no assurance can be given that its judgment will be correct. 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 action affecting trading in, or the prices of, foreign securities. FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. 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. Although the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not engaged in such transactions. Moreover, there may be an imperfect correlation between the Fund's portfolio holdings of securities denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The Fund will enter into such a forward contract only if it is expected that there will be a liquid market in which to close out the contract. However, there can be no assurance that a liquid market will exist in which to close a forward contract, in which case the Fund may suffer a loss. 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. Because interest on zero coupon obligations is not distributed to the Fund on a current basis but is in effect compounded, the value of the securities of this type is subject to greater fluctuations in response to changing interest rates than the value of debt obligations which distribute income regularly. REPURCHASE AGREEMENTS: Repurchase agreements are agreements under which the Fund buys a money market instrument and obtains a simultaneous commitment from the seller to repurchase the instrument at a specified time and at an agreed-upon yield. The Fund will not enter into a repurchase agreement with more than seven days to maturity if, as a result, more than 10% of the Fund's net assets would be invested in illiquid securities including such repurchase agreements. The Fund may enter into repurchase agreements with banks or broker-dealers deemed to be creditworthy by the Investment Manager under guidelines approved by the Board of Trustees. In the unlikely event of failure of the executing bank or broker-dealer, the Fund could experience some delay in obtaining direct ownership of the underlying collateral and might incur a loss if the value of the security should decline, as well as costs in disposing of the security. BORROWING, LENDING, "WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS: The Fund may borrow from a bank up to a limit of 10% of its total assets, but only for temporary or emergency purposes. Borrowing may exaggerate the effect on the Fund's net asset value of any increase or decrease in the value of the Fund's portfolio securities. Money borrowed will be subject to interest costs (which may include commitment fees and/or the cost of maintaining minimum average balances). Loans of securities by the Fund will be collateralized by cash, letters of credit or securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. There may be risks of delay in receiving additional collateral, or risks of delay in recovery of the securities or even loss of rights in the collateral, should the borrower of the securities fail financially. As a non-fundamental policy, loans will not be made if, as a result, the aggregate of all outstanding securities loaned exceeds 30% of the value of the Fund's total assets. The Fund may invest in securities issued on a "when-issued" or firm commitment basis in order to secure an advantageous price and yield to the Fund at the time of entering into the transaction. Purchasing securities on a "when-issued" or firm commitment basis involves a risk of loss if the value of the security to be purchased declines prior to the settlement date. 7 RESTRICTED AND ILLIQUID SECURITIES: The Fund's policy is that restricted and other illiquid securities (including repurchase agreements of more than seven days' duration and other securities which are not readily marketable or which have a limited trading market) may not constitute more than 10% of the value of the Fund's net assets. In addition, as a matter of nonfundamental policy, the Fund may not invest more than 10% of its net assets in securities which are not readily marketable, repurchase agreements maturing in more than seven days, and restricted securities; in no event may the Fund invest more than 5% of its assets in restricted securities. 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. Restricted securities may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act of 1933. Where a registration statement is required, the Fund may be required to bear all or part of the registration expenses. There may be a lapse of time between the Fund's decision to sell a restricted or illiquid security and the point at which the Fund is permitted or able to sell such security. If, during such a period, adverse market conditions were to develop, the Fund might obtain a price less favorable than the price that prevailed when it decided to sell. ORGANIZATION AND MANAGEMENT OF THE FUND The Fund is organized as a separate, diversified portfolio of the Trust, an open-end management investment company organized as a Massachusetts business trust on December 21, 1983. The Fund results from a reorganization of Mackenzie Short-Term U.S. Government Securities Fund, a series of The Mackenzie Funds Inc., into the Fund, a newly created series of the Trust, which reorganization was approved by shareholders in December, 1994. The business and affairs of the Fund are managed under the direction of the Trustees. Information about the Trustees, as well as the Trust's executive officers, may be found in the SAI. The Trust has an unlimited number of authorized shares of beneficial interest, and currently has 13 series of shares. The Trustees have authorized the issuance of three classes of the Fund, designated as Class A, Class B and Class I. Shares of the Fund entitle their holders to one vote per share (with proportionate voting for fractional shares). The shares of each class represent an interest in the same portfolio of investments of the Fund. Each class of shares has a different 12b-1 distribution plan and bears different distribution fees. Shares of each class have equal rights as to voting, redemption, dividends and liquidation but have exclusive voting rights with respect to their Rule 12b-1 distribution plans. As of March 29,1996, M. Fraser, 184 Euclid Avenue, Hamburg, New York 14075, held 2,572.28 (43.23%) of the outstanding Class B shares of the Fund, and is considered to hold a controlling interest (as defined under the 1940 Act) in Class B shares of the Fund. The Trust employs IMI to provide business management and investment advisory services; MIMI to provide administrative and accounting services; Ivy Mackenzie Distributors, Inc. ("IMDI") to distribute the Fund's shares and Ivy Mackenzie Services Corp. ("IMSC") to provide transfer agent and shareholder-related services. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI. Until December 31, 1994, MIMI served as investment adviser to the Fund. As of March 29, 1996, IMI and MIMI had approximately $1.39 billion and $186 million, respectively, in assets under management. MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"), which has been an investment counsel and mutual fund manager in Toronto, Ontario, Canada for more than 25 years. PORTFOLIO MANAGEMENT: The Fund is managed by a team, with each team member having specific responsibilities for management of the Fund: Leslie A. Ferris, a Senior Vice President of IMI and Managing Director-Fixed Income, is portfolio manager for the Fund. Ms. Ferris joined the Ivy/Mackenzie fund complex (the "Fund Complex") in 1988 and has 14 years of professional investment experience. She is a Chartered Financial Analyst and holds an MBA degree from The University of Chicago. Prior to joining Ivy/Mackenzie, Ms. Ferris was a portfolio manager at Kemper Financial Services Inc. from 1982 to 1988. Michael G. Landry, the President and a Director of MIMI and IMI, and the President and a Trustee of the Trust, is the investment strategist for the Fund. Mr. Landry joined the Fund Complex in 1987 and has over 20 years of professional invesment experience. INVESTMENT MANAGEMENT EXPENSES: For management of its investments and business affairs, the Fund pays IMI a monthly fee calculated on the basis of the Fund's average daily net assets at an annual rate of 0.60%. Under the Fund's management agreement, IMI pays all expenses incurred by it in rendering management services to the Fund. The Fund bears its cost of operations. See the SAI. If, however, the Fund's total expenses in any fiscal year exceed the permissible limit applicable to the Fund in any state in which the shares are then qualified for sale, IMI will bear the excess expenses. The ratio of operating expenses after expense reimbursements to average net assets for Class A and Class B shares for the period ended December 31, 1995 was 0.93% and 1.43% (annualized), respectively. Without expense reimbursements, the ratio of operating expenses to average net assets for Class A and Class B Shares for the period ended December 31, 1995 was 3.27% and 3.77% (annualized), respectively. There were no Class I shares outstanding during the year ended December 31, 1995. The assets received by each class of the Fund for the issue or sale of its shares and all income, earnings, profits, losses and proceeds therefrom, subject only to the rights of creditors, are allocated to, and constitute the underlying assets of that class of the Fund. The underlying assets of each class of the Fund are allocated and are charged with the expenses with respect to that class of the Fund and with a share of the general expenses of the Trust. General expenses of the Trust (such as the costs of maintaining the Trust's existence, legal fees, proxy and shareholders' meeting costs, etc.) that are not readily identifiable as belonging to a particular fund or to a particular class of a fund will be allocated among and charged to the assets of that fund on a fair and equitable basis, which may be based on the relative assets of that fund or the nature of the services performed and their relative applicability to that fund. Expenses that relate exclusively to the Fund, such as certain registration fees, brokerage commissions and other portfolio expenses, will be borne directly by the Fund. FUND ADMINISTRATION AND ACCOUNTING The Trust has entered into an Administrative Services Agreement with MIMI pursuant to which MIMI provides various administrative services for the Fund, including maintenance of registration or qualification of Fund shares under state "Blue Sky" laws, assisting in the preparation of Federal and state income tax returns and preparing financial statements of additional information, and periodic reports to shareholders. In addition, MIMI will assist the Trust's legal counsel with SEC registration statements, proxies and other required filings. Under the agreement, the Fund pays MIMI a monthly fee based upon the Fund's average daily net assets at the annual rate of 0.10%. MIMI also provides certain accounting and pricing services for the Fund (see "Fund Accounting Services" in the SAI for more information). 8 TRANSFER AGENT IMSC is the transfer and dividend-paying agent for the Fund and provides certain shareholder and shareholder-related services. Certain broker/dealers that maintain shareholder accounts with the Fund through an omnibus account provide transfer agent and other shareholder-related services that would otherwise be provided by IMSC if the individual accounts that comprise the omnibus account were opened by their beneficial owners directly. (See "Investment Advisory and Other Services" in the SAI). ALTERNATIVE PURCHASE ARRANGEMENTS You can purchase shares of the Fund at a price equal to their net asset value per share, plus a sales charge. At your election, this charge may be imposed either at the time of the purchase (see "Initial Sales Charge Alternative -- Class A shares") or on a contingent deferred basis (see "Contingent Deferred Sales Charge Alternative -- Class B shares"). If you do not specify on your account application which class of shares you are purchasing, it will be assumed that you are investing in Class A shares. CLASS A SHARES: If you elect to purchase Class A shares, you will incur an initial sales charge unless the amount you purchase is $1,000,000 or more. If you purchase $1,000,000 or more of Class A shares, you will not be subject to an initial sales charge, but you will incur a contingent deferred sales charge ("CDSC") if you redeem your shares within 24 months of purchase. See "Contingent Deferred Sales Charge -- Class A Shares". Class A shares are subject to ongoing service fees at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class A shares. Certain purchases of Class A shares qualify for a reduced initial sales charge. See "Qualifying for a Reduced Sales Charge." If you do not specify on your account application which class of shares you are purchasing, it will be assumed that you are investing in Class A shares. CLASS B SHARES: You will not incur a sales charge when you purchase Class B shares, but the shares are subject to a CDSC if you redeem them within five years of purchase. Class B shares are subject to ongoing service and distribution fees at a combined annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares. The ongoing distribution fee will cause these shares to have a higher expense ratio than that of Class A shares. To the extent that any dividends are paid by the Fund, these higher expenses will also result in lower dividends than those paid on Class A shares. CLASS I SHARES: Class I shares are offered only to institutions and certain individuals. They are not subject to an initial or a contingent deferred sales charge nor to ongoing service/distribution fees. FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE: The multi-class structure of the Fund allows you to choose the most beneficial way to buy shares given the amount of your purchase, the length of time you expect to hold your shares and other circumstances. You should consider whether, during the anticipated life of your Fund investment, the accumulated fees on Class B shares would be less than the initial sales charge and accumulated fees on Class A shares purchased at the same time, and to what extent this differential would be offset by the Class A shares' potentially higher yield. Also, sales personnel may receive different compensation depending on which class of shares they are selling. To help you make this determination, the table under the caption "Expense Data Table" at the beginning of this Prospectus gives examples of the charges applicable to each class of shares. Class A shares will normally be more beneficial if you qualify for a reduced sales charge. See "Qualifying for a Reduced Sales Charge." DIVIDENDS AND TAXES Dividends and capital gain distributions received from the fund are reinvested in additional shares of your class unless your elect to receive them in cash. If you elect the cash option and the U.S. Postal Service cannot deliver your checks, your election will be converted to the reinvestment option. Because of the higher expenses associated with Class B shares, any dividend on these shares will be lower than on the Class A and Class I shares. In order to provide a steady cash flow to the Fund's shareholders, the Board of Trustees intends normally to make monthly distributions from the Fund's net investment income to the Fund's Class A, Class B and Class I shareholders based on their relative net asset value. The Fund intends to make a final distribution for each fiscal year of any remaining net investment income and net realized short-term capital gain, as well as undistributed net long-term capital gain realized during the year. An additional distribution may be made of net investment income, net realized short-term capital gains and net realized long-term 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"). If, for any year, the total distributions from the Fund exceed net investment income and net realized capital gain for the Fund, the excess, distributed from the assets of the Fund, will generally be treated as a return of capital. The amount treated as a return of capital will reduce a shareholder's adjusted basis in his or her shares (thereby increasing his or her potential gain or reducing his or her potential loss on the sale of his or her shares) and, to the extent that the amount exceeds this basis, will be treated as a taxable gain. However, if the Fund has current or accumulated earnings and profits, so as to characterize all or a portion of such excess as a dividend for federal income tax purposes, the distributions, to that extent, would normally be taxable as ordinary income (or, if a capital gain dividend, as long-term capital gain). TAXATION: The following discussion is intended for general information only. An investor should consult with his or her own 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. The Fund intends to qualify annually and elect to be treated as a regulated investment company under the Code. To qualify, the Fund must meet certain income, distribution and diversification requirements. In any year in which the Fund qualifies as a regulated investment company and timely distributes all of its taxable income, the Fund generally will not pay any U.S. Federal income or excise tax. Dividends paid out of the Fund's investment company taxable income (including dividends, interest and net short-term capital gain) will be taxable to a shareholder as ordinary income. If a portion of the Fund's income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Fund may be eligible for the corporate dividends-received deduction. Distributions of net capital gains (the excess of net long-term capital gains over net short-term capital losses), if any, designated as capital gain dividends are taxable as long-term capital gains, regardless of how long the shareholder has held the Fund's shares. Dividends are taxable to shareholders in the same manner whether received in cash or reinvested in additional Fund shares. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by a Fund in October, November or December with a record date in such a month and paid by the Fund during January of the following calendar year. Such distributions will be taxable to shareholders in the 9 calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. Each year the Fund will notify shareholders of the tax status of dividends and distributions. Any gain or loss realized by a shareholder upon the sale or other disposition of shares of the Fund, or upon receipt of a distribution in complete liquidation of the Fund, generally will be a capital gain or loss which will be long-term or short-term, generally depending upon the shareholder's holding period for the shares. The Fund may be required to withhold U.S. Federal income tax at the rate of 31% of all taxable distributions payable to shareholders who fail to provide the Fund with their correct taxpayer identification number or to make required certifications, or who have been notified by the IRS that they are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. Federal income tax liability. Further information relating to tax consequences is contained in the SAI. Fund distributions may be subject to state, local and foreign taxes. Fund distributions that are derived from interest on obligations of the U.S. Government and certain of its agencies, authorities and instrumentalities may be exempt from state and local taxes in certain states. Shareholders should consult their own tax advisers regarding the particular tax consequences of an investment in the Fund. PERFORMANCE DATA Performance information (e.g., "total return" and "yield") is computed separately for each class of Fund shares in accordance with formulas prescribed by the SEC. Performance information for each class may be compared in reports and promotional literature to indices such as the Standard and Poor's 500 Stock Index, Dow Jones Industrial Average, and Morgan Stanley Capital International World Index. Advertisements, sales literature and communications to shareholders may also contain statements of the Fund's current yield, various expressions of total return and current distribution rate. Performance figures will vary in part because of the different expense structures of the Fund's different classes. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT INTENDED TO SUGGEST FUTURE RESULTS. "Total return" is the change in value of an investment in the Fund for a specified period, and assumes the reinvestment of all distributions and imposition of the maximum applicable sales charge. "Average annual total return" represents the average annual compound rate of return of an investment in a particular class of Fund shares assuming the investment is held for one year, five years and ten years as of the end of the most recent calendar quarter. Where the Fund provides total return quotations for other periods, or based on investments at various sales charge levels or at net asset value, "total return" is based on the total of all income and capital gains paid to (and reinvested by) shareholders, plus (or minus) the change in the value of the original investment expressed as a percentage of the purchase price. "Current yield" reflects the income per share earned by the Fund's portfolio investments, and is calculated by dividing the Fund's net investment income per share during a recent 30-day period by the maximum public offering price on the last day of that period and then annualizing the result. Dividends or distributions that were paid to the Fund's shareholders are reflected in the "current distribution rate," which is computed by dividing the total amount of dividends per share paid by the Fund during the preceding 12 months by the Fund's current maximum offering price (which includes any applicable sales charge). The "current distribution rate" will differ from the "current yield" computation because it may include distributions to shareholders from sources other than dividends and interest, short term capital gain and net equalization credits and will be calculated over a different period of time. HOW TO BUY SHARES The minimum initial investment is $1,000; the minimum additional investment is $100. Initial or additional investment amounts for retirement accounts may be less. See "Retirement Plans." Accounts in Class I of the Fund can be opened with a minimum initial investment of $5,000,000; the minimum additional investment is $10,000. The minimum initial investment in Class I of the Fund may be spread over the thirteen-month period after an Institution or a high net worth individual opens an account and the Fund, at its discretion, may accept initial and additional investments of small amounts. All purchases must be made in U.S. dollars. Complete the Account Application attached to this Prospectus. Indicate whether you are purchasing Class A, Class B or Class I shares. If you do not specify which class of shares you are purchasing, IMSC will assume you are investing in Class A shares. The Fund reserves the right to reject for any reason any purchase order. OPENING AN ACCOUNT BY CHECK 1. Make your check payable to the fund in which you are investing. 2. Deliver the completed application and check to your registered representative or selling broker, or mail it directly to IMSC. 3. Our address is: IVY MACKENZIE SERVICES CORP. P.O. BOX 3022 BOCA RATON, FL 33431-0922 4. Our courier address is: IVY MACKENZIE SERVICES CORP. 700 SOUTH FEDERAL HIGHWAY, SUITE 300 BOCA RATON, FL 33432 BY WIRE 1. Deliver a completed fund application to your registered representative or selling broker, or mail it directly to IMSC. Before wiring any funds, please contact IMSC at 1-800-777-6472 to verify your account number. 2. Instruct your bank to wire funds to: FIRST UNION NATIONAL BANK OF FLORIDA JACKSONVILLE, FLORIDA ABA #063000021 ACCOUNT #2090002063833 FOR FURTHER CREDIT TO: YOUR IVY ACCOUNT REGISTRATION YOUR FUND NUMBER AND ACCOUNT NUMBER Your bank may charge a fee for wiring funds. THROUGH A REGISTERED SECURITIES DEALER: You may also place an order to purchase shares through your Registered Securities Dealer. 10 BUYING ADDITIONAL CLASS A AND CLASS B SHARES BY CHECK 1. Complete the investment stub attached to your statement or include a note with your investment listing the name of the Fund, the class of shares to purchase, your account number and the name(s) in which the account is registered. 2. Make your check payable to the fund in which you are investing. 3. Mail the account information and check to: IVY MACKENZIE SERVICES CORP. P.O. BOX 3022 BOCA RATON, FL 33431-0922 Our courier address is: IVY MACKENZIE SERVICES CORP. 700 SOUTH FEDERAL HIGHWAY, SUITE 300 BOCA RATON, FL 33432 or deliver it to your registered representative or selling broker. BY WIRE Instruct your bank to wire funds to: FIRST UNION NATIONAL BANK OF FLORIDA JACKSONVILLE, FLORIDA ABA #063000021 ACCOUNT #2090002063833 FOR FURTHER CREDIT TO: YOUR IVY ACCOUNT REGISTRATION YOUR FUND NUMBER AND ACCOUNT NUMBER Your bank may charge a fee for wiring funds. THROUGH A REGISTERED SECURITIES DEALER You may also place an order to purchase shares through your Registered Securities Dealer. BY AUTOMATIC INVESTMENT METHOD ("AIM") 1. Complete the "Automatic Investment Method" and "Wire/EFT Information" sections on the Account Application designating a bank account from which funds may be drawn. Please note that in order to invest using this method, your bank must be a member of the Automated Clearing House system (ACH). The minimum investment under this plan is $50 per month ($25 per month for retirement plans). Please remember to attach a voided check to your account application. 2. At pre-specified intervals, your bank account will be debited and the proceeds will be credited to your account. HOW YOUR PURCHASE PRICE IS DETERMINED Your purchase price for Class A shares of the Fund is the net asset value ("NAV") per share plus a sales charge, which may be reduced or eliminated in certain circumstances. The purchase price per share is known as the public offering price. Your purchase price for Class B and Class I shares of the Fund is the net asset value per share. Your purchase of shares will be made at the next determined price after the purchase order is received. The price is effective for orders received by IMSC or by your registered securities dealer prior to the time of the determination of the net asset value. Any orders received after the time of the determination of the net asset value will be entered at the next calculated price. Orders placed with a securities dealer prior to the time of determination of the net asset value and transmitted through the facilities of the National Securities Clearing Corporation on the same day are confirmed at that day's price. Any loss resulting from the dealer's failure to submit an order by the deadline will be borne by that dealer. You will receive an account statement after any purchase, exchange or full liquidation. Statements related to reinvestment of dividends, capital gains, automatic investment plans (see the SAI for further explanation) and/or systematic withdrawal plans will be sent quarterly. HOW THE FUND VALUES ITS SHARES The NAV per share is the value of one share. The NAV is determined for each Class of shares as of the close of the New York Stock Exchange on each day the Exchange is open by dividing the value of a Fund's net assets attributable to a class by the number of shares of that class that are outstanding, adjusted to the nearest cent. The Trust's Board of Trustees has established procedures to value the Fund's securities in order to determine the NAV. The value of a foreign security is determined 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 New York Stock Exchange, whichever is earlier. If no sale is reported at that time, the average between the current bid and asked price is used. All other securities for which OTC market quotations are readily available are valued at the average between the current bid and asked price. Securities and other assets for which market prices are not readily available are valued at fair market value as determined by IMI and approved in good faith by the Board. Money market instruments are valued at amortized cost, which approximates market value. INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES Shares are purchased at a public offering price equal to their NAV per share plus a sales charge, as set forth below.
SALES CHARGE ----------------------- PORTION OF AS A AS A PUBLIC PERCENTAGE PERCENTAGE OFFERING OF PUBLIC OF NET PRICE OFFERING AMOUNT RETAINED AMOUNT INVESTED PRICE INVESTED BY DEALER ------------------------------------------------------- ---------- ---------- ---------- Less than $25,000...................................... 3.00% 3.09% 2.50% $25,000 but less than $250,000......................... 2.50% 2.56% 2.00% $250,000 but less than $500,000........................ 2.00% 2.04% 1.65% $500,000 and over*..................................... 0.00% 0.00% 0.00%
* A CDSC may apply to the redemption of Class A shares that are purchased without an initial sales charge. See "Contingent Deferred Sales Charge -- Class A Shares." With respect to purchases of $1,000,000 or more made on or after September 20, 1994 through dealers or agents, IMDI may, at the time of purchase, pay such dealers or agents, from its own resources, a commission to compensate such dealers or agents for their distribution assistance in connection with such purchases. The commission would be computed at .75% of the first $3,000,000 invested; .50% of the next $2,000,000 invested; and .25% of the amount invested in excess of $5,000,000. Dealers who receive 90% or more of 11 the sales charge may be deemed to be underwriters as that term is defined in the Securities Act of 1933. Sales charges are not applied to any dividends that are reinvested in additional shares of the Fund. An investor may be charged a transaction fee for Class A and Class I shares purchased or redeemed at net asset value through a broker or agent other than IMDI. IMDI compensates participating brokers who sell Class A shares through the initial sales charge. IMDI retains that portion of the initial sales charge that is not reallowed to the dealers, which it may use to distribute the Fund's Class A shares. Pursuant to separate distribution plans for the Fund's Class A and Class B shares, IMDI bears various promotional and sales related expenses, including the cost of printing and mailing prospectuses to persons other than shareholders. Pursuant to the Fund's distribution plans applicable to its Class A and Class B shares, IMDI currently pays a continuing service fee to qualified dealers at an annual rate of 0.25% of qualified investments. IMDI may from time to time pay a bonus or other incentive to dealers (other than IMDI) which employ a registered representative who sells a minimum dollar amount of the shares of the fund and/or other funds distributed by IMDI during a specified period of time. This bonus or other incentive may take the form of payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives and members of their families to places within or without the United States or other bonuses such as gift certificates or the cash equivalent of such bonus or incentive. CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES Purchases of $1,000,000 or more of Class A shares will be made at net asset value with no initial sales charge, but if the shares are redeemed within 24 months after the end of the calendar month in which the purchase was made (the contingent deferred sales charge period), a contingent deferred sales charge of .75% will be imposed. In order to recover commissions paid to dealers on NAV transfers (as defined in "Purchases of Class A Shares at Net Asset Value"), Class A shares of the Fund are subject to a contingent deferred sales charge of .75% for certain redemptions within 24 months after the date of purchase. The charge will be assessed on an amount equal to the lesser of the current market value or the original purchase cost of the Class A shares redeemed. Accordingly, no CDSC will be imposed on increases in account value above the initial purchase price, including any dividends which have been reinvested in additional Class A shares. In determining whether a CDSC applies to a redemption, the calculation will be determined in a manner that results in the lowest possible rate being charged. Therefore, it will be assumed that the redemption is first made from any shares in your account not subject to the CDSC. The CDSC is waived in certain circumstances. See the discussion below under the caption "Waiver of Contingent Deferred Sales Charge." WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The contingent deferred sales charge is waived for (i) redemptions in connection with distributions not exceeding 12% annually of the initial account balance (i.e., the value of the shareholder's Class A Fund account at the time of the initial distribution) (a) following retirement under a tax qualified retirement plan, or (b) upon attaining age 59 1/2 in the case of an IRA, a custodial account pursuant to section 403(b)(7) of the Code or a Keogh Plan; (ii) redemption resulting from tax-free return of an excess contribution to an IRA; or (iii) any partial or complete redemption following the death or disability (as defined in Section 72(m)(7) of the Code) of a shareholder from an account in which the deceased or disabled is named, provided that the redemption is requested within one year of death or disability. IMDI may require documentation prior to waiver of the contingent deferred sales charge. Class A shareholders may exchange their Class A shares subject to a contingent deferred sales charge ("outstanding Class A shares") for Class A shares of another Ivy or Mackenzie Fund ("new Class A shares") on the basis of the relative net asset value per Class A share, without the payment of any contingent deferred sales charge that would be due upon the redemption of the outstanding Class A shares. The original CDSC rate that would have been charged if the outstanding Class A shares were redeemed will carry over to the new Class A shares received in the exchange, and will be charged accordingly at the time of redemption. QUALIFYING FOR A REDUCED SALES CHARGE RIGHTS OF ACCUMULATION (ROA): Rights of Accumulation ("ROA") is calculated by determining the current market value of all Class A shares in all Ivy or Mackenzie fund accounts (except Ivy Money Market Fund) owned by you, your spouse, and your children under 21 years of age. ROA is also applicable to accounts under a trustee or other single fiduciary (including retirement accounts qualified under Section 401 of the Code). The current market value of each of your accounts as described above is added together and then added to your current purchase amount. If the combined total is equal or greater than a breakpoint amount for the Fund, then you qualify for the reduced sales charge. To reduce or eliminate the sales charge, you must complete Section 4B of the Account Application. LETTER OF INTENT (LOI): A Letter of Intent ("LOI") is a non-binding agreement that states your intention to invest in additional Class A shares, within a thirteen month period after the initial purchase, an amount equal to a breakpoint amount for the Fund. The LOI may be backdated up to 90 days. To sign an LOI, please complete Section 4B of the Account Application. Should the LOI not be fulfilled within the thirteen month period, your account will be debited for the difference between the full sales charge that applies for the amount actually invested and the reduced sales charge actually paid on purchases placed under the terms of the LOI. PURCHASES OF CLASS A SHARES AT NET ASSET VALUE: An investor who was a shareholder of any Ivy Fund on December 31, 1991 or a shareholder of American Investors Income Fund, Inc. or American Investors Growth Fund, Inc. on October 31, 1988 and who became a shareholder of Ivy Bond Fund (formerly Mackenzie Fixed Income Trust) or Ivy Growth Fund as a result of the respective reorganizations of the funds will be exempt from sales charges on the purchase of Class A shares of any Ivy or Mackenzie Fund. This privilege is also available to immediate family members of a shareholder (i.e., the shareholder's children, the shareholder's spouse and the children of the shareholder's spouse). This no-load privilege terminates for the investor if the investor redeems all shares owned. Shareholders and their relatives as described above should call 1-800-235-3322 for information about additional purchases or to inquire about their account. Officers and Trustees of the Trust (and their relatives) and IMI, MIMI, Mackenzie Financial Corporation (of which MIMI is a subsidiary) and their officers, directors, employees and retired employees, and legal counsel and independent accountants (and their relatives) may buy Class A shares of the Fund without an initial sales charge or a contingent deferred sales charge. 12 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 established for the benefit of a person enumerated above, may buy Class A shares of the Fund without an initial sales charge or a contingent deferred sales charge. In addition, certain investment advisers and financial planners who charge a management, consulting or other fee for their services and who place trades for their own accounts or the accounts of their clients may purchase Class A shares of the Fund without an initial sales charge or a contingent deferred sales charge provided such purchases are placed through a broker or agent who maintains an omnibus account with the Fund. Also, clients of these advisers and planners may make purchases under the same conditions if the purchases are through the master account of such adviser or planner on the books of such broker or agent. THIS PROVISION APPLIES TO ASSETS OF RETIREMENT AND DEFERRED COMPENSATION PLANS AND TRUSTS USED TO FUND THOSE PLANS INCLUDING, BUT NOT LIMITED TO, THOSE DEFINED IN SECTION 401(A), 403(B) OR 457 OF THE CODE AND "RABBI TRUSTS" WHOSE ASSETS ARE USED TO PURCHASE SHARES OF THE FUND THROUGH THE AFOREMENTIONED CHANNELS. Class A shares of the Fund may be purchased at net asset value by retirement plans qualified under section 401(a) or 403(b) of the Code and subject to the Employee Retirement Income Security Act of 1974. A contingent deferred sales charge of 0.75% will be imposed on such purchases in the event of certain redemption transactions within 24 months following such purchases. If investments by retirement plans at NAV are made through a dealer who has executed a dealer agreement with respect to the Fund, IMDI may, at the time of purchase, pay such dealer, out of IMDI's own resources, a commission to compensate such dealer for its distribution assistance in connection with such purchase. Commissions would be computed as 0.75% of the first $3 million invested; 0.50% of the next $2 million invested; and 0.25% of the amount invested in excess of $5 million. Please contact IMDI for additional information. Class A shares of the Fund may also be purchased at net asset value, without an initial sales charge, but subject to a contingent deferred sales charge of 0.75% during the first 24 months after the date of purchase (see "Contingent Deferred Sales Charge -- Class A Shares"), by any state, county, or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered management investment company (an "Eligible Governmental Authority"). If an investment by an Eligible Governmental Authority is made at net asset value through a dealer who has executed a dealer agreement with respect to the Fund, IMDI may, at the time of purchase, pay such dealers, from its own resources, a commission to compensate such dealers for their distribution assistance in connection with such purchases. The commission would be computed at .75% of the first $3,000,000 invested; .50% of the next $2,000,000 invested; and .25% of the amount invested in excess of $5,000,000. Please contact IMDI for additional information. Class A shares can also be purchased without an initial sales charge, but subject to a contingent deferred sales charge of .75% in the first 24 months, by trust companies, bank trust departments, credit unions, savings and loans and other similar organizations in their fiduciary capacity or for their own accounts subject to any minimum requirements set by IMDI. Currently, these criteria require that the amount invested or to be invested in the subsequent 13-month period totals at least $250,000. IMDI may, at the time of any such purchase, pay out of IMDI's own resources commissions to dealers which provided distribution assistance in connection with the purchase. Commissions would be computed at .75% of the first $3,000,000 invested, .50% of the next $2,000,000 invested, and .25% of the amount invested in excess of $5,000,000. Class A shares of the Fund may also be purchased without a sales charge in connection with certain liquidation, merger or acquisition transactions involving other investment companies or personal holding companies. The Fund may, from time to time, waive the initial sales charge on its Class A shares sold to clients of various broker-dealers with which IMDI has a selling relationship. This privilege will apply only to Class A Shares of the Fund that are purchased using all or a portion of the proceeds obtained by such clients through redemptions of shares (on which a commission has been paid) of an investment company (other than Mackenzie Series Trust or the Trust), unit investment trust or limited partnership ("NAV transfers"). Some dealers may elect not to participate in this program. Those dealers that do elect to participate in the program must complete certain forms required by IMDI. The normal service fee, as described in the "Initial Sales Charge Alternative -- Class A Shares" and "Contingent Deferred Sales Charge Alternative -- Class B Shares" sections of this Prospectus, will be paid to dealers in connection with these purchases. Additional information on reductions or waivers may be obtained from IMDI at the address listed on the cover of the Prospectus. CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES Class B shares are offered at net asset value per share without a front end sales charge. However, Class B shares redeemed within five years of purchase will be subject to a CDSC at the rates set forth below. This charge will be assessed on an amount equal to the lesser of the current market value or the original purchase cost of the shares being redeemed. Accordingly, you will not be assessed a CDSC on increases in account value above the initial purchase price, including shares derived from dividend reinvestment. In determining whether a CDSC applies to a redemption, the calculation will be determined in a manner that results in the lowest possible rate being charged. It will be assumed that your redemption comes first from shares you have held beyond the 5-year CDSC redemption period or those you acquire through reinvestment of dividends or distributions, and next from the shares you have held the longest during the 5-year period. Proceeds from the contingent deferred sales charge are paid to IMDI. The proceeds are used, in whole or in part, to defray its expenses related to providing the Fund with distribution services in connection with the sale of Class B shares, such as compensating selected dealers and agents for selling these shares. The combination of the contingent deferred sales charge and the distribution and service fees makes it possible for the Fund to sell Class B shares without deducting a sales charge at the time of the purchase. The amount of the contingent deferred sales charge, if any, will vary depending on the number of years from the time you purchase your Class B shares until the time you redeem them. Solely for purposes of determining this holding period, any payments you make during the quarter will be aggregated and deemed to have been made on the last day of the quarter. 13
CONTINGENT DEFERRED SALES CHARGE AS A CLASS B PERCENTAGE OF DOLLAR AMOUNT YEAR SINCE PURCHASE SUBJECT TO CHARGE ----------------------------------------------------------------- ------ ----------------- First............................................................ ...... 3% Second........................................................... ...... 2 1/2% Third............................................................ ...... 2% Fourth........................................................... ...... 1 1/2% Fifth............................................................ ...... 1% Sixth and thereafter................................................... 0%
IMDI currently intends to pay dealers a sales commission of 3% of the sale price of Class B shares that they have sold. IMDI will retain 0.50% of the continuing 0.75% service/distribution fee assessed to Class B shareholders and will receive the entire amount of the contingent deferred sales charge paid by shareholders on the redemption of Class B shares to finance the 3% commission plus related marketing expenses. CONVERSION OF CLASS B SHARES: Your Class B shares and an appropriate portion of both reinvested dividends and capital gains on those shares will be converted into Class A shares automatically no later than the month following eight years after the shares were purchased, resulting in no annual distribution fees. If you exchanged Class B shares into the Fund from another Ivy or Mackenzie Class B shares fund, the calculation will be based on the time the shares in the original fund were purchased. WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The contingent deferred sales charge is waived for (i) redemptions in connection with distributions not exceeding 12% annually of the initial account balance (i.e., the value of the shareholder's Class B Fund account at the time of the initial distribution) (a) following retirement under a tax qualified retirement plan, or (b) upon attaining age 59 1/2 in the case of an IRA, a custodial account pursuant to section 403(b)(7) of the Code or a Keogh Plan; (ii) redemption resulting from tax-free return of an excess contribution to an IRA; or (iii) any partial or complete redemption following the death or disability (as defined in Section 72(m)(7) of the Code) of a shareholder from an account in which the deceased or disabled is named, provided that the redemption is requested within one year of death or disability. The Distributor may require documentation prior to waiver of the contingent deferred sales charge. ARRANGEMENTS WITH BROKER/DEALERS AND OTHERS: IMDI may, at its own expense, pay concessions in addition to those described above to dealers which satisfy certain criteria established from time to time by IMDI. These conditions relate to increasing sales of shares of the Fund over specified periods and to certain other factors. These payments may, depending on the dealer's satisfaction of the required conditions, be periodic and may be up to (i) 0.25% of the value of Fund shares sold by such dealer during a particular period, and (ii) 0.10% of the value of Fund shares held by the dealer's customers for more than one year, calculated on an annual basis. HOW TO REDEEM SHARES You may redeem your Fund shares through your registered securities representative, by mail, by telephone, or by Federal Funds wire. A contingent deferred sales charge may apply to certain Class A share redemptions, and to Class B share redemptions prior to conversion. All redemptions are made at the net asset value next determined after a redemption request has been received in good order. Requests for redemptions must be received by 4:00 p.m. Eastern time to be processed at the net asset value for that day. Any redemption request in good order that is received after 4:00 p.m. Eastern time will be processed at the price determined on the following business day. IF SHARES TO BE REDEEMED WERE PURCHASED BY CHECK, PAYMENT OF THE REDEMPTION MAY BE DELAYED UNTIL THE CHECK HAS CLEARED OR FOR UP TO 15 DAYS AFTER THE DATE OF PURCHASE, WHICHEVER IS LESS. If you own shares of more than one class of the Fund, the Fund will redeem first the shares having the highest 12b-1 fees; any shares subject to a contingent deferred sales charge will be redeemed last unless you specifically elect otherwise. When shares are redeemed, the Fund generally sends you payment on the next business day. Under unusual circumstances, the Fund may suspend redemptions or postpone payment to the extent permitted by federal securities laws. The proceeds of the redemption may be more or less than the purchase price of your shares, depending upon, among other factors, the market value of the Fund's securities at the time of the redemption. If the redemption is for over $50,000, or the proceeds are to be sent to an address other than the address of record, or an address change has occurred in the last 30 days, it must be requested in writing with a signature guarantee. See "Signature Guarantees," below. If you are not certain of the requirements for a redemption, please contact IMSC at 1-800-777-6472. THROUGH YOUR REGISTERED SECURITIES DEALER: The Dealer is responsible for promptly transmitting redemption orders. Redemptions requested by dealers will be made at the net asset value (less any applicable contingent deferred sales charge) determined at the close of regular trading (4:00 p.m. Eastern time) on the day that a redemption request is received in good order by IMSC. BY MAIL: Requests for redemption in writing are considered to be in "proper or good order" if they contain the following: - Any outstanding certificate(s) for shares being redeemed. - A letter of instruction, including the fund name, the account number, the account name(s), the address and the dollar amount or number of shares to be redeemed. - Signatures of all registered owners whose names appear on the account. - Any required signature guarantees. - Other supporting legal documentation, if required (in the case of estates, trusts, guardianships, corporations, retirement plans or other representative capacities). The dollar amount or number of shares indicated for redemption must not exceed the available shares or net asset value of your account at the next- determined prices. If your request exceeds these limits, then the trade will be rejected in its entirety. BY TELEPHONE: Individual and joint accounts may redeem up to $50,000 per day over the telephone by contacting IMSC Corp. at 1-800-777-6472. In times of unusual economic or market changes, the telephone redemption privilege may be difficult to implement. If you are unable to execute your transaction during such times, you may want to consider placing the order in writing and sending it by mail or overnight courier. Checks will be made payable to the current account registration and sent to the address of record. If there has been a change of address in the last 30 days, please use the instructions for redemption requests by mail described above. A signature guarantee would be required. 14 Requests for telephone redemptions will be accepted from the registered owner of the account, the designated registered representative or his/her assistant. Shares held in certificate form cannot be redeemed by telephone. If Section 6E of the Account Application is not completed, telephone redemption privileges will be provided automatically. Although telephone redemptions may be a convenient feature, you should realize that you may be giving up a measure of security that you may otherwise have if you terminated the privilege and redeemed your shares in writing. If you do not wish to make telephone redemptions or let your registered representative or his/her assistant do so on your behalf, you must notify IMSC in writing. The Fund employs reasonable procedures that require personal identification prior to acting on redemption instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such procedures, the Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. BY FEDERAL FUNDS WIRE: For shareholders who established this feature at the time they opened their account, telephone instructions will be accepted for redemption of amounts up to $50,000 ($1,000 minimum) and proceeds will be wired on the next business day to a predesignated bank account. In order to add this feature to an existing account or to change existing bank account information, please submit a letter of instructions including your bank information to IMSC at the address provided above. The letter must be signed by all registered owners, and their signatures must be guaranteed. Your account will be charged a fee of $10 each time that redemption proceeds are wired to your bank. Neither IMSC nor the Fund can be responsible for the efficiency of the Federal Funds wire system or the shareholder's bank. CHECK WRITING Check writing is only available on Class A shares. Checks must be written for a minimum of $500. You may sign up for this option by completing the Check Writing Enrollment Form on the last page of the Account Application. IF THE CLASS A SHARES TO BE REDEEMED HAVE BEEN PURCHASED BY CHECK, AVAILABILITY OF THE SHARES FOR REDEMPTION BY CHECK MAY BE DELAYED UNTIL YOUR CHECK CLEARS OR FOR UP TO 15 CALENDAR DAYS AFTER THE DATE OF PURCHASE, WHICHEVER IS LESS. In order to qualify for check writing, Fund shareholders must maintain a minimum average balance of $1,000. Class A shares must be unissued (held at the Fund) for any account requesting checkwriting privileges. Checks can be reordered by calling IMSC at 1-800-777-6472. Checking activity is reported on your statement, and cancelled check copies are returned to you each month. There is no limitation on the number of checks a shareholder may write. Checks written on the Fund are redemptions of shares and considered taxable events by the IRS. As such, they must be reported on your income tax return. When a check is presented for payment, the Fund redeems a sufficient number of Class A shares to cover the amount of the check. Checks written on accounts with insufficient shares will be returned to the payee marked "non-sufficient funds". There is a nominal charge for each supply of checks, copies of cancelled checks, stop payment orders, checks drawn for amounts less than the Fund minimum (see above) and checks returned for "non-sufficient funds". To pay for these charges, the Fund automatically redeems an appropriate number of the shareholder's Class A shares after the charges are incurred. You may not close your Fund account by writing a check because any earned dividends will remain in your account. Check writing is not available for retirement accounts or accounts in Class B or Class I of the Fund. The Fund reserves the right to change, modify or terminate the check writing service at any time upon notification mailed to the address of record of the shareholder(s). MINIMUM ACCOUNT BALANCE REQUIREMENTS Due to the high cost of maintaining small accounts and subject to state law requirements, the Fund may redeem the accounts of shareholders who have maintained an investment, including sales charges paid, of less than $1,000 for more than 12 months. No redemption will be made unless the shareholder has been given at least 60 day's notice of the Fund's intention to redeem the shares. No redemption will be made if a shareholder's account falls below the minimum due to a reduction in the value of the Fund's portfolio securities. This provision does not apply to IRAs, other retirement accounts and UGMA/UTMA accounts. SIGNATURE GUARANTEES For your protection, and to prevent fraudulent redemptions, we require a signature guarantee in order to accommodate the following requests: - Redemption requests over $50,000. - Requests for redemption proceeds to be sent to someone other than the registered shareholder. - Requests for redemption proceeds to be sent to an address other than the address of record. - Registration transfer requests. - Requests for redemption proceeds to be wired to your bank account (if this option was not selected on your original application, or if you are changing the bank wire information). A signature guarantee may be obtained only from an eligible guarantor institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended. An eligible guarantor institution includes banks, brokers, dealers, municipal securities dealers, government securities dealers, government securities brokers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations. The signature guarantee must not be qualified in any way. Notarizations from notary publics are not the same as signature guarantees, and are not accepted. Circumstances other than those described above may require a signature guarantee. Please contact IMSC at 1-800-777-6472 for more information. CHOOSING A DISTRIBUTION OPTION You have the option of selecting the distribution option that best suits your needs: AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital gains are automatically reinvested at net asset value in additional shares of the same class of the Fund unless you specify one of the other options. 15 INVESTMENT IN ANOTHER IVY OR MACKENZIE FUND -- Both dividends and capital gains are automatically invested at net asset value in another Ivy or Mackenzie Fund of the same class. DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will be paid in cash. Capital gains will be reinvested at net asset value in additional shares of the same class of the fund or another Ivy or Mackenzie Fund of the same class. DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and capital gains will be paid in cash. If you wish to have your cash distributions deposited directly to your bank account via electronic funds transfer, or if you wish to change your distribution option, please contact IMSC at 1-800-777-6472. If you wish to have your cash distributions go to an address other than the address of record, a signature guarantee is required. TAX IDENTIFICATION NUMBER In general, to avoid being subject to a 31% U.S. Federal backup withholding tax on dividends, capital gains distributions and redemption proceeds, you must furnish the Fund with your certified tax identification number ("TIN") and certify that you are not subject to backup withholding due to prior underreporting of interest and dividends to the IRS. If you fail to provide a certified TIN or such other tax-related certifications as the Fund may require, within 30 days of opening your new account, the Fund reserves the right to involuntarily redeem your account and send the proceeds to your address of record. You can avoid the above withholding and/or redemption by correctly furnishing your TIN, and making certain certifications, in Section 2 of the Account Application at the time you open your new account, unless the IRS requires that backup withholding be applied to your account. Certain payees, such as corporations, generally are exempt from backup withholding. Please complete IRS Form W-9 with the new account application to claim this exemption. If the registration is for an UGMA/UTMA account, please provide the social security number of the minor. Non-U.S. investors who do not have a TIN must provide, with their Account Application, a completed IRS Form W-8. CERTIFICATES In order to facilitate transfers, exchanges and redemptions, most shareholders elect not to receive certificates. Should you wish to have a certificate issued, please contact IMSC at 1-800-777-6472 and request that one be sent to you. (Retirement plan accounts are not eligible for this service.) Please note that if you were to lose your certificate, you would incur an expense to replace it. Certificates requested by telephone for shares valued up to $50,000 will be issued to the current registration and mailed to the address of record. Should you wish to have your certificates mailed to a different address, or registered differently from the current registration, you must provide a letter of instruction signed by all registered owners with signatures guaranteed. EXCHANGE PRIVILEGE Shareholders of the Fund have an exchange privilege with other Ivy and Mackenzie funds. Class A shareholders may exchange their outstanding Class A shares for Class A shares of another Ivy or Mackenzie fund on the basis of the net asset value per Class A share, plus an amount equal to the difference between the sales charge previously paid on the outstanding Class A shares and the sales charge payable at the time of the exchange on the new Class A shares. Incremental sales charges are waived for outstanding Class A shares that have been invested for 12 months or longer. Class B shareholders may exchange their outstanding Class B shares for Class B shares of another Ivy or Mackenzie Fund on the basis of the net asset value per Class B share, without the payment of any contingent deferred sales charge that would otherwise be due upon the redemption of Class B shares. Class B shareholders who exercise the exchange privilege would continue to be subject to the Fund's contingent deferred sales charge schedule (or period) following an exchange if such schedule is higher (or longer) than the contingent deferred sales charge for the new Class B shares. Class I shareholders may exchange their outstanding Class I shares for Class I shares of another Ivy or Mackenzie fund on the basis of the net asset value per Class I share. Shares resulting from the reinvestment of dividends and other distributions will not be charged an initial sales charge or a contingent deferred sales charge when exchanged into another Ivy or Mackenzie fund. Exchanges are considered to be taxable events, and may result in a capital gain or a capital loss for tax purposes. Prior to executing an exchange, you should obtain and read the prospectus and consider the investment objective of the fund to be purchased. Shares must be unissued in order to execute an exchange. Exchanges are available only in states where they can be legally made. This privilege is not intended to provide shareholders a means by which to speculate on short-term movements in the market The Fund reserves the right to limit the frequency of exchanges. Exchanges are accepted only if the registrations of the two accounts are identical. Amounts to be exchanged must meet minimum investment requirements for the Ivy or Mackenzie Fund into which the exchange is made. With respect to shares subject to a contingent deferred sales charge, if less than all of an investment is exchanged out of the Fund, the shares exchanged will reflect, pro rata, the cost, capital appreciation and/or reinvestment of distributions of the original investment as well as the original purchase date, for purposes of calculating any contingent deferred sales charge for future redemptions of the exchanged shares. An investor who was a shareholder of American Investors Income Fund, Inc. or American Investors Growth Fund, Inc. prior to October 31, 1988, or a shareholder of the Ivy Fund prior to December 31, 1991, who became a shareholder of the Fund as a result of a reorganization or merger between the Funds may exchange between funds without paying a sales charge. An investor who was a shareholder of American Investors Income Fund, Inc. or American Investors Growth Fund, Inc. on or after October 31, 1988, who became a shareholder of the Fund as a result of the reorganization between the Funds will receive credit toward any applicable sales charge imposed by any Ivy or Mackenzie fund into which an exchange is made. In calculating the sales charge assessed on an exchange, shareholders will be allowed to use the Rights of Accumulation privilege. EXCHANGES BY TELEPHONE: When you fill out the application for your purchase of Fund shares, if Section 6D of the Account Application is not completed, telephone exchange privileges will be provided automatically. Although telephone exchanges may be a convenient feature, you should realize that you may be giving up a measure of security that you may otherwise have if you terminated the privilege and exchanged your shares in writing. If you do not 16 wish to make telephone exchanges or let your registered representative or his/her assistant do so on your behalf, you must notify IMSC in writing. In order to execute an exchange, please contact IMSC at 1-800-777-6472. Have the account number of your current fund and the exact name in which it is registered available to give to the telephone representative. The Fund employs reasonable procedures that require personal identification prior to acting on exchange instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such procedures, the Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. EXCHANGES IN WRITING: In a letter, request an exchange and provide the following information: - The name and class of the fund whose shares you currently own. - Your account number. - The name(s) in which the account is registered. - The name of the fund in which you wish your exchange to be invested. - The number of shares, all shares or the dollar amount you wish to exchange. The request must be signed by all registered owners. REINVESTMENT PRIVILEGE Investors who have redeemed Class A shares of the Fund have the privilege of reinvesting all or a part of the proceeds of the redemption back into Class A shares of the Fund at net asset value (without a sales charge) within 24 months after the date of redemption (with no limit on the number of times this privilege may be used). IN ORDER TO REINVEST WITHOUT A SALES CHARGE, SHAREHOLDERS OR THEIR BROKERS MUST INFORM IMSC THAT THEY ARE EXERCISING THE REINVESTMENT PRIVILEGE AT THE TIME OF REINVESTMENT. The tax status of a gain realized on a redemption generally will not be affected by the exercise of the reinvestment privilege, but a loss realized on a redemption generally may be disallowed by the IRS if the reinvestment privilege is exercised within 30 days after the redemption. In addition, upon a reinvestment, the shareholder may not be permitted to take into account sales charges incurred on the original purchase of shares in computing their taxable gain or loss. SYSTEMATIC WITHDRAWAL PLAN You may elect the Systematic Withdrawal Plan at any time by completing the Account Application, which is attached to this Prospectus. You can also obtain this application by contacting your registered representative or IMSC at 1-800-777-6472. To be eligible, you must have at least $5,000 in your account. Payments (minimum distribution amount -- $50) from your account can be made monthly, quarterly, semi-annually, annually or on a selected monthly basis, to yourself or any other designated payee. You may elect to have your systematic withdrawal paid directly to your bank account via electronic funds transfer ("EFT"). Share certificates must be unissued (held by the Fund) while the plan is in effect. A Systematic Withdrawal Plan may not be established if you are currently participating in the Automatic Investment Method. For more information, please contact IMSC at 1-800-777-6472. If payments you receive through the Systematic Withdrawal Plan exceed the dividends and capital appreciation of your account, you will be reducing the value of your account. Additional investments made by shareholders participating in the Systematic Withdrawal Plan must equal at least $1,000 while the plan is in effect. However, it may not be advantageous to purchase additional Class A or Class B shares when you have a Systematic Withdrawal Plan, because you may be subject to an initial sales charge on your purchase of Class A shares or to a contingent deferred sales charge imposed on your redemptions of Class B shares. In addition, redemptions are taxable events. Amounts paid to you through the Systematic Withdrawal Plan are derived from the redemption of shares in your account. Any applicable contingent deferred sales charge will be assessed upon the redemptions. A contingent deferred sales charge will not be assessed on withdrawals not exceeding 12% annually of the initial account balance when the Systematic Withdrawal Plan was started. Should you wish at any time to add a Systematic Withdrawal Plan to an existing account or change payee instructions, you will need to submit a written request, signed by all registered owners, with signatures guaranteed. Retirement accounts are eligible for Systematic Withdrawal Plans. Please contact IMSC at 1-800-777-6472 to obtain the necessary paperwork to establish a plan. If the U.S. Postal Service cannot deliver your checks, or if deposits to a bank account are returned for any reason, your redemptions will be discontinued. AUTOMATIC INVESTMENT METHOD You may authorize an investment to be automatically drawn each month from your bank for investment in Fund shares under the "Automatic Investment Method" and "Fed Wire/EFT" sections of the Account Application. There is no charge to you for this program. You may terminate or suspend your Automatic Investment Method by telephone at any time by contacting IMSC at 1-800-777-6472. If you have investments being withdrawn from a bank account and we are notified that the account has been closed, your Automatic Investment Method will be discontinued. CONSOLIDATED ACCOUNT STATEMENTS Shareholders with two or more Ivy or Mackenzie Fund accounts will receive a single quarterly account statement, unless otherwise specified. This feature consolidates the activity for each account onto one statement. Requests for quarterly consolidated statements for all other accounts must be submitted in writing and must be signed by all registered owners. RETIREMENT PLANS The Ivy Mackenzie Funds offer several tax sheltered retirement plans that may fit your needs: - IRA (Individual Retirement Account) - 401(k) Plan Money Purchase Pension Plan Profit Sharing Plan - SEP-IRA (Simplified Employee Pension Plan) - 403(b)(7) Plan Minimum initial and subsequent investments for retirement plans are $25.00. 17 Investors Bank & Trust, which serves as custodian or trustee under the retirement plan prototypes available from the Fund, charges certain nominal fees for annual maintenance. A portion of these fees is remitted to MIMI, as compensation for its services to the retirement plan accounts maintained with the Fund. Distributions from retirement plans are subject to certain requirements under the Code, including withholding requirements, and various documents (available from IMSC), including IRS Form W-4P, and information must be provided before the distribution may be made. The Ivy Mackenzie Funds and IMSC assume no responsibility to determine whether a distribution satisfies the conditions of applicable tax laws, and will not be responsible for any penalties assessed. For additional information, please contact your broker, tax adviser or IMSC. Please call IMSC at 1-800-777-6472 for complete information kits describing the plans, their benefits, restrictions, provisions and fees. SHAREHOLDER INQUIRIES Inquiries regarding the Fund should be directed to IMSC at 1-800-777-6472. 18 IVY SHORT-TERM BOND FUND ________________________ ACCOUNT APPLICATION ACCOUNT NUMBER USE THIS APPLICATION FOR CLASS A, CLASS B AND CLASS I Please mail applications and checks to: Mackenzie Ivy Investor Services Corp., P.O. Box 3022, Boca Raton, FL 33431-0922. (This application should not be used for retirement accounts for which Ivy is custodian.) ----------------------------------------------------------------- ----------------------------------------------------------------- -- IVY SHORT-TERM BOND FUND ACCOUNT APPLICATION ----------------------------------------------------------------- ----------------------------------------------------------------- -- FUND USE 101/ 1 / 2 1 / 2 0 / 1 0 / X ONLY ----------------------- --------- --------- ------------ -------- ---------- --------- --------- ------------ Dealer # Branch # Rep # Acct Type Soc Cd Div Cd CG Cd Exc Cd Red Cd ----------------------------------------------------------------- ----------------------------------------------------------------- -- REGISTRATION 1 [ ] Individual _________________________________________________________________ _______________________ [ ] Joint Tenant Owner, Custodian or Trustee [ ] Estate _________________________________________________________________ _______________________ [ ] UGMA/UTMA Co-owner or Minor [ ] Corporation _________________________________________________________________ _______________________ [ ] Partnership Minor's State of Residence [ ] Sole Proprietor _________________________________________________________________ _______________________ [ ] Trust Street __________________ _________________________________________________________________ _______________________ Date of Trust [ ] Other ____________ _________________________________________________________________ _______/__/__/__/__/__/ __________________ City State Zip Code /__/__/__/-/__/__/__/-/__/__/__/__/ /__/__/__/-/__/__/__/-/__/__/__/__/ Phone Number -- Day Phone Number -- Evening ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- TAX ID # 2 /__/__/__/-/__/__/-/__/__/__/__/ of /__/__/-/__/__/__/__/__/__/__/ Citizenship [ ] U.S. [ ] Other _______________ Social Security Number Tax Identification Number Under penalties of perjury, I certify by signing in Section 9 below that: (1) the number shown in this section is my correct taxpayer identification number (TIN), and (2) I am not subject to backup withholding because: (a) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (b) the IRS has notified me that I am no longer subject to backup withholding. (Cross out item (2) if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return.) Please see the "Tax Identification Number" section of the Prospectus for additional information on completing this section. ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- DEALER INFORMATION 3 The undersigned ("Dealer") agrees to all applicable provisions in this Application, guarantees the signature and legal capacity of the Shareholder, and agrees to notify the Manager of any purchases made under a Letter of Intent or Rights of Accumulation. __________________________________________________________ __________________________________________________________ Dealer Name Representative's Name and Number __________________________________________________________ __________________________________________________________ Branch Office Address Representative's Phone Number __________________________________________________________ __________________________________________________________ City State Zip Code Authorized Signature of Dealer ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- INVESTMENTS 4 A. Enclosed is my check for $__________________ ($1,000 minimum, except $5,000,000 for Class I) made payable to Ivy Short-Term Bond Fund. Please invest it in Class A [ ] Class B [ ] or Class I [ ] shares. B. I qualify for an elimination of the sales charge due to the following privilege (applies only to Class A shares): [ ] New Letter of Intent (if ROA or 90-day backdate privilege is applicable, provide account(s) information below). [ ] ROA with the account(s) listed below. [ ] Existing Letter of Intent with account(s) listed below. ____________________________________ /__/__/__/__/__/__/__/__/__/__/ [ ] or New Fund Name Account Number ____________________________________ /__/__/__/__/__/__/__/__/__/__/ [ ] or New Fund Name Account Number If establishing a Letter of Intent, you will need to purchase Class A shares over a thirteen-month period in accordance with the provisions in the Prospectus. The aggregate amount of these purchases will be at least equal to $500,000. C. FOR DEALER USE ONLY Confirmed trade orders: /__/__/__/__/__/__/ /__/__/__/__/__/__/ - /__/__/__/ /__/__/__/__/__/__/ Confirm Number Number of Shares Trade Date ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- DISTRIBUTION OPTIONS 5 I would like to reinvest dividends and capital gains into additional shares of the same class in this account at net asset value unless a different option is checked below. A. [ ] Reinvest all dividends and capital gains into additional shares in this Fund or a different Ivy or Mackenzie fund. _____________________________________ /__/__/__/__/__/__/__/ [ ] New Account Fund Name Account Number B. [ ] Pay all dividends in cash and reinvest capital gains into additional shares of the same class in this account or an account in a different Mackenzie or Ivy fund. _____________________________________ /__/__/__/__/__/__/__/ [ ] New Account Fund Name Account Number C. [ ] Pay all dividends and capital gains in cash. I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN B OR C ABOVE, BE: [ ] Sent to the address listed in the registration. [ ] Sent to the special payee listed in Section 7A [ ] (By Mail) 7B [ ] (By E.F.T.) ----------------------------------------------------------------- ----------------------------------------------------------------- --
----------------------------------------------------------------- ----------------------------------------------------------------- -- OPTIONAL SPECIAL FEATURES 6 A. [ ] AUTOMATIC INVESTMENT METHOD (AIM) I wish to invest [ ] once per month. My bank account will be debited on or about the [ ] twice ______________ day of the month [ ] 3 times ______________ day of the month [ ] 4 times ______________ day of the month ______________ day of the month(*) Please invest $_____________ each period starting in the month of _______ in Class A [ ] or Class B [ ] of Ivy Short-Term Dollar Amount Month Bond Fund. [ ] I have attached a voided check to ensure my correct bank account will be debited. (*) There must be a period of at least seven calendar days between each investment period. B. [ ] SYSTEMATIC WITHDRAWAL PLANS* I wish to automatically withdraw funds from my [ ] Monthly [ ] Quarterly [ ] Semiannually [ ]Annually account in Class A [ ] or Class B [ ] of Ivy Short-Term Bond Fund. I request the distribution be: [ ] Sent to the address listed in the registration. [ ] Once [ ] Twice [ ] 3 times [ ] 4 times per month [ ] Sent to the special payee listed in Section 7. [ ] Invested into additional shares of the same class of a different Ivy or Mackenzie fund. ------ ------------------------------------------------------ Fund Name /_/_/_/_/_/_/_/_/_/_/ Account Number Amount $ _______________, starting on or about the_______________day of the________________________ Minimum $50 month _______________day of the________________________ month _______________day of the________________________ month(**) (choose one) NOTE: Account minimum: $5,000 in shares at current offering price) (**) There must be a period of at least seven calendar days between each withdrawal period. C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS(*) I authorize the Agent to honor telephone instructions for the redemption of Fund shares up to $50,000. Proceeds may be wire transferred to the bank account designated ($1,000 minimum, except $10,000 minimum for Class I). Shares issued in certificate form may not be redeemed under this privilege. (COMPLETE SECTION 7B) D. [ ] TELEPHONE EXCHANGES(*) [ ] Yes [ ] No I authorize exchanges by telephone among The Ivy and Mackenzie family of funds upon instructions from any person as more fully described in the Prospectus. To change this option once established, written instruction must be received from the shareholder of record or the current registered representative. If neither box is checked, the telephone exchange privilege will be provided automatically. E. [ ] TELEPHONE REDEMPTIONS(*) [ ] Yes [ ] No The Fund or its agents are authorized to honor telephone instructions from any person as more fully described in the Prospectus for the redemption of Fund shares. The amount of the redemption shall not exceed $50,000 and the proceeds are to be payable to the shareholder of record and mailed to the address of record. To change this option once established, written instruction 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. *MAY NOT BE USED IF SHARES ARE ISSUED IN CERTIFICATE FORM. ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- SPECIAL PAYEE 7 A. MAILING ADDRESS B. FED WIRE / E.F.T. INFORMATION ------------------------------------------------------- ---------------------------------------------------- Please send all disbursements to this special payee ------------------------------------------------------- ---------------------------------------------------- Name of Bank or Individual Financial Institution ------------------------------------------------------- ---------------------------- --------------------- Account Number (if applicable) ABA # Account # ------------------------------------------------------- ---------------------------------------------------- Street Street ------------------------------------------------------- ---------------------------------------------------- City/State/Zip City/State/Zip (Please attach a voided check) ----------------------------------------------------------------- ----------------------------------------------------------------- -- (Remember to Sign Section 9) ----------------------------------------------------------------- ----------------------------------------------------------------- -- CHECK WRITING IVY SHORT TERM BOND FUND ENROLLMENT FORM (checks must be written for a minimum of $500) 8 Check writing privileges are available to Class A shareholders only. Shares purchased in the Fund may be subject to a holding period of up to 15 calendar days before being redeemed by check. Please see the Prospectus for details. HOW TO ENROLL 1. ALL REGISTERED OWNERS MUST SIGN THIS FORM IN THE SPACE PROVIDED BELOW. 2. Check the appropriate Number of Signatures Required box to indicate the number of signatures required when writing checks. NUMBER OF SIGNATURES REQUIRED [ ] All signatures are required [ ] One signature is required [ ] More than one signature is required -------------------------------------- number of signatures required IF NONE OF THE ABOVE IS CHECKED THAN ALL SIGNATURES WILL BE REQUIRED ----------------------------------------------- -------------------- Authorized Signature Date ----------------------------------------------- -------------------- Authorized Signature Date ----------------------------------------------------------------- ----------------------------------------------------------------- -- ----------------------------------------------------------------- ----------------------------------------------------------------- -- SIGNATURES 9 Investors should be aware that failure to check "No" under Section 6D or 6E above means that the Telephone Exchange/Redemptions Privileges will be provided. The Fund employs reasonable procedures that require personal identification prior to acting on exchange/redemption instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such procedures, the Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. Please see "Exchange Privilege" and "How to Redeem Shares" in the Prospectus for more information on these privileges. I certify to my legal capacity to purchase or redeem shares of the Fund for my own account or for the account of the organization named in Section 1. I have received a current Prospectus and understand its terms are incorporated in this application by reference. I am certifying my taxpayer information as stated in Section 2. THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATE REQUIRED TO AVOID BACKUP WITHHOLDING. ----------------------------------------------------------------- ---------- ------------------ Signature of Owner, Custodian, Trustee or Corporate Officer Date ----------------------------------------------------------------- ---------- ------------------ Signature of Joint Owner, Co-Trustee or Corporate Officer Date ----------------------------------------------------------------- ----------------------------------------------------------------- --
ISTBF-1-496 IVY MONEY MARKET FUND a series of IVY FUND Via Mizner Financial Plaza, Suite 300 700 South Federal Highway Boca Raton, Florida 33432 STATEMENT OF ADDITIONAL INFORMATION April 30, 1996 _________________________________________________________________ Ivy Fund (the "Trust") is a diversified, open-end management investment company that consists of thirteen fully managed portfolios. This Statement of Additional Information describes one of these portfolios: Ivy Money Market Fund (the "Fund"). The other twelve portfolios of the Trust are described in separate Statements of Additional Information. This Statement of Additional Information ("SAI") is not a prospectus, and should be read in conjunction with the prospectus for the Fund dated April 30, 1996 (the "Prospectus"), which may be obtained upon request and without charge from the Trust at the Distributor's address and telephone number listed below. INVESTMENT MANAGER Ivy Management, Inc. ("IMI") Via Mizner Financial Plaza, Suite 300 700 South Federal Highway Boca Raton, Florida 33432 Telephone: (800) 777-6472 DISTRIBUTOR Ivy Mackenzie Distributors, Inc. Via Mizner Financial Plaza, Suite 300 700 South Federal Highway Boca Raton, Florida 33432 Telephone: (800) 456-5111 TABLE OF CONTENTS PAGE INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . 4 U.S. GOVERNMENT SECURITIES . . . . . . . . . . . . . . . 4 COMMERCIAL PAPER . . . . . . . . . . . . . . . . . . . . 5 BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . 5 INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . 6 ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . . . . . 7 ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . 8 AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . 9 EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . 9 RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . 10 INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) . . . . . . . 11 DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE ORGANIZATIONS ("403(B)(7) ACCOUNT") . . . . . . . . . . . . . . . . . . 13 SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . 13 SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . 13 GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . 14 BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . 15 TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . 17 PERSONAL INVESTMENTS BY EMPLOYEES OF IMI . . . . . . . . 21 INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . 23 BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES . . 23 DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . 25 CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . 28 FUND ACCOUNTING SERVICES . . . . . . . . . . . . . . . . 28 TRANSFER AND DIVIDEND PAYING AGENT . . . . . . . . . . . 28 ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . 28 AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . 29 CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . 29 NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . 31 REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 32 TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . 33 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . 34 DEBT SECURITIES ACQUIRED AT A DISCOUNT . . . . . . . . . 35 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 35 DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . 36 BACKUP WITHHOLDING . . . . . . . . . . . . . . . . . . . 37 OTHER INFORMATION . . . . . . . . . . . . . . . . . . . 37 CALCULATION OF YIELD . . . . . . . . . . . . . . . . . . . . 37 STANDARDIZED YIELD QUOTATIONS . . . . . . . . . . . . . 37 OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . 38 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 39 APPENDIX A DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND COMMERCIAL PAPER RATINGS . . . . . . . 40 INVESTMENT OBJECTIVE AND POLICIES The Trust is a diversified open-end management investment company organized as a Massachusetts business trust on December 21, 1983. The Fund's investment objective and general investment policies are described in the Prospectus. Additional information concerning the Fund's investments is set forth below. U.S. GOVERNMENT SECURITIES The Fund may invest in 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). The payment of principal and interest on these securities is unconditionally guaranteed by the U.S. Government, and thus they are of the highest possible credit quality. Such securities are subject to variations in market value due to fluctuations in interest rates, but, if held to maturity, will be paid in full. Mortgage-backed securities are securities representing part ownership of a pool of mortgage loans. For example, GNMA certificates are such securities on 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 GNMA certificates typically will be substantially less because the mortgages will be subject to normal principal amortization and may be prepaid prior to maturity. Prepayment rates vary widely and may be affected by changes in market interest rates. In periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the actual average life of the GNMA certificates. Conversely, when interest rates are rising, the rate of prepayments tends to decrease, thereby lengthening the actual average life of the GNMA certificates. Accordingly, it is not possible to predict accurately the average life of a particular pool. Reinvestment of prepayments 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, GNMA certificates can be less effective than typical bonds of similar maturities at "locking in" yields during periods of declining interest rates. GNMA certificates 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; and 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, and Student Loan Marketing Association. COMMERCIAL PAPER The Fund may invest in high-quality commercial paper. Commercial paper represents short-term unsecured promissory notes issued in bearer form by bank holding companies, corporations and finance companies. The Fund may invest in commercial paper that, on the date of investment, is rated at least A-2 by Standard & Poor's Corporation ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's") or, if not rated by S&P or Moody's, issued by companies having an outstanding debt issue rated AAA or AA by S&P or Aaa or Aa by Moody's, or judged by IMI to be of at least equivalent quality. BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS The Fund may invest in bank obligations, which may include certificates of deposit, bankers' acceptances and other short- term debt obligations. Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank for a definite period of time and earning a specified return. Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn by an importer or exporter to pay for specific merchandise, that are "accepted" by a bank, meaning, in effect, that the bank unconditionally agrees to pay the face value of the instrument on maturity. The Fund may invest in certificates of deposit of large domestic banks (i.e., banks that at the time of their most recent annual financial statements show total assets in excess of $1 billion), including foreign branches of such domestic banks, and of smaller banks as described below. The Fund will not invest in certificates of deposit of foreign banks. Investment in certificates of deposit issued by foreign branches of domestic banks involves investment risks that are different in some respects from those associated with investment in certificates of deposit issued by domestic banks, including the possible imposition of withholding taxes on interest income, the possible adoption of foreign governmental restrictions which might adversely affect the payment of principal and interest on such certificates of deposit, or other adverse political or economic developments. In addition, it might be more difficult to obtain and enforce a judgment against a foreign branch of a domestic bank. Although the Trust recognizes that the size of a bank is important, this fact alone is not necessarily indicative of its creditworthiness. The Fund may invest in certificates of deposit issued by banks and savings and loan institutions that at the time of their most recent annual financial statements had total assets of less than $1 billion, provided that (i) the principal amounts of such certificates of deposit are insured by an agency of the U.S. Government, (ii) at no time will the Fund hold more than $100,000 principal amount of certificates of deposit of any one such bank, and (iii) at the time of acquisition, no more than 10% of the Fund's assets (taken at current value) are invested in certificates of deposit of such banks having total assets not in excess of $1 billion. INVESTMENT RESTRICTIONS The Fund's investment objectives as set forth in the Prospectus under "Investment Objective and Policies," together with the investment restrictions set forth below, are fundamental policies of the Fund and may not be changed without the approval of a majority (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund's outstanding voting shares. Under these restrictions, the Fund may not: (i) borrow money, except for temporary purposes where investment transactions might advantageously require it. Any such loan may not be for a period in excess of 60 days, and the aggregate amount of all outstanding loans may not at any time exceed 10% of the value of the total assets of the Fund at the time any such loan is made; (ii) purchase securities on margin; (iii) sell securities short; (iv) lend any funds or other assets, except that this restriction shall not prohibit (a) the entry into repurchase agreements or (b) the purchase of publicly distributed bonds, debentures and other securities of a similar type, or privately placed municipal or corporate bonds, debentures and other securities of a type customarily purchased by institutional investors or publicly traded in the securities markets; (v) participate in an underwriting or selling group in connection with the public distribution of securities except for its own capital stock; (vi) invest more than 5% of the value of its total assets in the securities of any one issuer (except obligations of domestic banks or the U.S. Government, its agencies, authorities and instrumentalities); (vii) hold more than 10% of the voting securities of any one issuer (except obligations of domestic banks or the U.S. Government, its agencies, authorities and instrumentalities); (viii) purchase from or sell to any of its officers or trustees, or firms of which any of them are members or which they control, any securities (other than capital stock of the Fund), but such persons or firms may act as brokers for the Fund for customary commissions to the extent permitted by the 1940 Act; (ix) purchase or sell real estate or commodities and commodity contracts; (x) purchase the securities of any other open-end investment company, except as part of a plan of merger or consolidation; (xi) make an investment in securities of companies in any one industry (except obligations of domestic banks or the U.S. Government, its agencies, authorities, or instrumentalities) if such investment would cause investments in such industry to exceed 25% of the market value of the Fund's total assets at the time of such investment; or (xii) issue senior securities, except as appropriate to evidence indebtedness which it is permitted to incur, and except to the extent that shares of the separate classes or series of the Trust may be deemed to be senior securities. Under the 1940 Act, the Fund is permitted, subject to the above investment restrictions, to borrow money only from banks. The Trust has no current intention of borrowing amounts in excess of 5% of the Fund's assets. The Fund will continue to interpret fundamental investment restriction (ix) as prohibiting investment in real estate limited partnership interests; this restriction shall not, however, prohibit investment in readily marketable securities of companies that invest in real estate or interests therein, including real estate investment trusts. ADDITIONAL RESTRICTIONS The Fund has adopted the following additional restrictions, which are not fundamental and which may be changed without shareholder approval to the extent permitted by applicable law, regulation or regulatory policy. Under these restrictions, the Fund may not: (i) invest in oil, gas or other mineral leases or exploration or development programs; (ii) invest more than 5% of the value of its total assets in the securities of unseasoned issuers, including their predecessors, which have been in operation for less than three years; (iii) invest more than 5% of the value of its total assets in the securities of issuers which are not readily marketable; (iv) engage in the purchase and sale of puts, calls, straddles or spreads (except to the extent described in the Prospectus and in this SAI); (v) invest in companies for the purpose of exercising control of management; (vi) purchase any security which it is restricted from selling to the public without registration under the Securities Act of 1933; or (vii) invest more than 5% of its total assets in warrants, valued at the lower of cost or market, or more than 2% of its total assets in warrants, so valued, which are not listed on either the New York or American Stock Exchanges. Whenever an investment objective, policy or restriction set forth in the Prospectus or this SAI states a maximum percentage of assets that may be invested in any security or other asset or describes a policy regarding quality standards, such percentage limitation or standard shall, unless otherwise indicated, apply to the Fund only at the time a transaction is entered into. Accordingly, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in the percentage which results from circumstances not involving any affirmative action by the Fund (such as a change in market conditions or a change in the Fund's asset level or other circumstances beyond the Fund's control) will not be considered a violation. ADDITIONAL RIGHTS AND PRIVILEGES The Trust offers to investors (and except as noted below, bears the cost of providing) the following rights and privileges. The Trust reserves the right to amend or terminate any one or more of such 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 apply to other funds distributed by Ivy Mackenzie Distributors, Inc. ("IMDI")(formerly known as Mackenzie Ivy Funds Distribution, Inc.), which funds are not described in this SAI. These funds are: Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy International Bond Fund, Ivy Latin America Strategy Fund, Ivy New Century Fund and Ivy Short-Term Bond Fund the other twelve series of the Trust; and Mackenzie California Municipal Fund, Mackenzie Limited Term Municipal Fund, Mackenzie Florida Limited Term Municipal Fund, Mackenzie National Municipal Fund and Mackenzie New York Municipal Fund, the five series of Mackenzie Series Trust (collectively, with the Fund, the "Ivy Mackenzie Funds"). Before exercising any right or privilege that may relate to any of these funds, investors should obtain the fund's current prospectus. AUTOMATIC INVESTMENT METHOD The Automatic Investment Method is available for all Trust shareholders. The minimum initial and subsequent investment pursuant to this plan 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. The Automatic Investment Method may be discontinued at any time upon receipt of telephone instructions by Ivy Mackenzie Services Corp. (formerly known as Mackenzie Ivy Investor Services Corp.) or written notice to IMSC from the investor. See "Automatic Investment Method" in the New Account Application. EXCHANGE OF SHARES As described in the Fund's Prospectus, shareholders of the Fund have an exchange privilege with certain other Ivy and Mackenzie Funds. Before effecting an exchange, shareholders of the Fund should obtain and read the currently effective prospectus for the Ivy or Mackenzie Fund into which the exchange is to be made. The minimum amount which may be exchanged into an Ivy or Mackenzie Fund in which shares are not already held is $1,000. No exchange out of the Fund (other than by a complete exchange of all shares of the Fund) may be made if it would reduce the shareholder's interest in the Fund to less than $1,000. Each exchange of Fund shares will be made on the basis of the relative net asset value per share of each Ivy or Mackenzie Fund (into which the exchange is being made) next computed following receipt of telephone instructions by IMSC or a properly executed request by IMSC. An exchange from the Fund into any other funds into which exchanges are permitted may be subject to a sales charge, unless such sales charge has already been paid. Exchanges, whether written or telephonic, must be received by IMSC by the close of regular trading on the New York Stock Exchange (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. This exchange privilege may be modified or terminated at any time, upon at least 60 days' notice when such notice is required by rules adopted by the Securities and Exchange Commission ("SEC"). See "Redemptions." An exchange of shares in any fund of the Ivy Mackenzie Funds for shares in another fund generally will result in a taxable gain or loss. Generally, any such taxable gain or loss 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 of the Fund may be purchased in connection with several types of tax-deferred retirement plans. Shares of more than one fund distributed by IMDI may be purchased in a single application establishing a single plan account, and shares held in such an account may be exchanged among the funds in the Ivy Mackenzie Funds in accordance with the terms of the applicable plan and the exchange privilege available to all shareholders. Initial and subsequent purchase payments in connection with tax- deferred retirement plans must be at least $25 per participant. The following fees will be charged to individual shareholder accounts as described in the retirement prototype plan document: Retirement Plan New Account Fee No fee Retirement Plan Annual Maintenance Fee $10.00 per account For shareholders whose retirement accounts are diversified across more than two funds in the Ivy Mackenzie Funds, the annual maintenance fee will be limited to not more than $20. The following discussion describes in general terms 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 (IRAS). Shares of the Trust may be used as a funding medium for an Individual Retirement Account ("IRA"). Eligible individuals may establish an IRA by adopting a model custodial account available from IMI, which may impose a charge for establishing the account. Individuals may wish to consult their tax advisers before investing IRA assets in a fund which primarily distributes exempt-interest dividends. An individual who has not reached age 70-1/2 and who receives compensation or earned income is eligible to contribute to an IRA, whether or not he or she is an active participant in a retirement plan. An individual who receives a distribution from another IRA, a qualified retirement plan, a qualified annuity plan or a tax-sheltered annuity or custodial account ("403(b) plan") that qualifies for "rollover" treatment is also eligible to establish an IRA by rolling over the distribution either directly or within 60 days after its receipt. Tax advice should be obtained in connection with planning a rollover contribution to an IRA. In general, an eligible individual may contribute up to the lesser of $2,000 or 100% of his or her compensation or earned income to an IRA each year. If a husband and wife are both employed, and both are under age 70-1/2, each may set up his or her own IRA within these limits. If both earn at least $2,000 per year, the maximum potential contribution is $4,000 per year for both. However, if one spouse has (or elects to be treated as having) no earned income for IRA purposes for a year, the other spouse may contribute to an IRA on his or her behalf. In such a case, the working spouse may contribute up to the lesser of $2,250 or 100% or his or her compensation or earned income for the year to IRAs for both spouses, provided that no more than $2,000 is contributed to the IRA of either spouse. 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 (and 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 government plan. If he or she (or his or her spouse) is an active participant, a full deduction is only available if he or she has adjusted gross income that is no greater than a specified level ($40,000 for married couples filing a joint return, $25,000 for single individuals, and $0 for a married individual filing a separate return). The deduction is phased out ratably for active participants with adjusted gross income between certain levels ($40,000 and $50,000 for married individuals filing a joint return, $25,000 and $35,000 for single individuals, and $0 and $10,000 for married individuals filing separate returns). Individuals with income above the specified phase-out level may not deduct their IRA contributions. Rollover contributions are not includible in income for Federal income tax purposes and, therefore, are not deductible from it. Generally, earnings on an IRA are not subject to current Federal income tax until distributed. Distributions attributable to tax-deductible contributions and to IRA earnings are taxed as ordinary income. Distributions of non-deductible contributions are not subject to Federal income tax. In general, distributions from an IRA to an individual before he or she reaches age 59-1/2 are subject to a nondeductible penalty tax equal to 10% of the taxable amount of the distribution. The 10% penalty tax does not apply to amounts withdrawn from an IRA after the individual reaches age 59-1/2, becomes disabled or dies, 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. 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. Extremely large distributions in any one year from an IRA (or from an IRA and other retirement plans) may also result in a penalty tax. QUALIFIED PLANS. For those self-employed individuals who wish to purchase shares of one or more of the funds in the Ivy Mackenzie Funds through a qualified retirement plan, a Retirement Plan is available from IMI. 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 Retirement Plan. 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 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. 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 Fund in conjunction with such an arrangement. The special application for a 403(b)(7) Account is available from IMI. 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 has (1) reached age 55 and separated from service; (2) died or become disabled; (3) used the withdrawal to pay tax-deductible medical expenses; (4) taken 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) rolled 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. SYSTEMATIC WITHDRAWAL PLAN A shareholder may establish a Systematic Withdrawal Plan (the "Withdrawal Plan") by telephone instructions to IMSC or by delivery to IMSC of a written election to so redeem, accompanied by a surrender to IMSC of all share certificates then outstanding in the name of such shareholder, properly endorsed by him. A Withdrawal Plan may not be established if the investor is currently participating in the Automatic Investment Method. The Withdrawal Plan may involve the use of principal and, to the extent that it does, depending on the amount withdrawn, the investor's principal may be depleted. A redemption under the Withdrawal Plan is a taxable event. Investors contemplating participation in the Withdrawal Plan should consult their tax advisers. Additional investments in the Fund made by investors participating in the Withdrawal Plan must equal at least $1,000 each while the Withdrawal Plan is in effect. An investor may terminate his 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, the Withdrawal Plan will terminate automatically. The Trust or MIMI may terminate the Withdrawal Plan at any time after reasonable notice to shareholders. GROUP SYSTEMATIC INVESTMENT PROGRAM Shares of the Fund may be purchased in connection with investment programs established by employee or other groups using systematic payroll deductions or other systematic payment arrangements. The Trust does not itself organize, offer or administer any such programs. However, it may, depending upon the size of the program, waive the minimum initial and additional investment requirements for purchases by individuals in conjunction with programs organized and offered by others. Unless shares of the Fund are purchased in conjunction with IRAs (see "How to Buy Shares" in the Prospectus), such group systematic investment programs are not entitled to special tax benefits under the Code. The Trust reserves the right to refuse any purchase or suspend the offering of shares in connection with group systematic investment programs at any time and to restrict the offering of shareholder privileges, such as Check Writing and other optional privileges, as described in the Prospectus, to shareholders using group systematic investment programs. With respect to each shareholder account established on or after September 15, 1972 under a group systematic investment program, The Trust and IMI each currently charge a maintenance fee of $3.00 (or portion thereof) for each twelve-month period (or portion thereof) the account is maintained. The Trust may collect such fee (and any fees due to IMI) through a deduction from distributions to the shareholders involved or by causing on the date the fee is assessed a redemption in each such shareholder account sufficient to pay such fee. The Trust reserves the right to change these fees from time to time without advance notice. BROKERAGE ALLOCATION Subject to the overall supervision of the President and the Board of Trustees of the Trust, IMI places orders for the purchase and sale of the Fund's portfolio securities. All portfolio transactions are effected at the best price and execution obtainable. Purchases and sales of debt securities are usually principal transactions and therefore, brokerage commissions are usually not required to be paid by the Fund for such purchases and sales, although the price paid generally includes undisclosed compensation to the dealer. The prices paid to underwriters of newly-issued securities usually include a concession paid by the issuer to the underwriter, and purchases of after-market securities from dealers normally reflect the spread between the bid and asked prices. In connection with over-the-counter ("OTC") transactions, IMI attempts to deal directly with the principal market makers, except in those circumstances where IMI believes that better prices 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 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 provided by brokers through whom the Trust effects securities transactions may be used by IMI in servicing all of its accounts. In addition, not all of these services may be used by IMI in connection with the services it provides to the Fund or the Trust. IMI may consider sales of Fund shares as a factor in the selection of broker- dealers and may select broker-dealers that provide it with research services. IMI will not, however, execute brokerage transactions other than at the best price and execution. The Fund may, under some circumstances, accept securities in lieu of cash as payment for Fund shares. The Fund will consider accepting securities only to increase its holdings in a portfolio security or to take a new portfolio position in a security that IMI deems to be a desirable investment for the Fund. While no minimum has been established, it is expected that the Fund will not accept securities having an aggregate value of less than $1 million. The Trust may reject in whole or in part any or all offers to pay for Fund shares with securities and may discontinue accepting securities as payment for Fund shares at any time without notice. The Trust will value accepted securities in the manner and at the same time provided for valuing portfolio securities of the Fund, and Fund shares will be sold for net asset value determined at the same time the accepted securities are valued. The Trust will accept only securities which are 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 applicable laws of certain states. During the fiscal years ended December 31, 1993, 1994 and 1995, the Fund paid no brokerage commissions. TRUSTEES AND OFFICERS The Trustees and Executive Officers of the Trust, their business addresses and principal occupations during the past five years are: POSITION WITH THE BUSINESS AFFILIATIONS NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS John S. Anderegg, Jr. Trustee Chairman, Dynamics 60 Concord Street Research Corp. instruments Wilmington, MA 01887 and controls); Director, Age: 72 Burr-Brown Corp. (operational amplifiers); Director, Metritage Incorporated (level measuring instruments); Trustee of Mackenzie Series Trust (1992-present). Paul H. Broyhill Trustee Chairman, BMC Fund, Inc. 800 Hickory Blvd. (1983-present); Chairman, Golfview Park Broyhill Family Foundation, Lenoir, NC 28645 Inc. (1983-Present); Age: 72 Chairman and President, Broyhill Investments, Inc. (1983-present); Chairman, Broyhill Timber Resources (1983-present); Management of a personal portfolio of fixed-income and equity investments (1983-present); Trustee of Mackenzie Series Trust (1988-present); Director of The Mackenzie Funds Inc. (1988-1995). Stanley Channick Trustee President, The Whitestone 11 Bala Avenue Corporation (insurance Bala Cynwyd, PA 19004 agency); President, Scott Age: 71 Management Company (administrative services for insurance companies); President, The Channick Group (consultants to insurance companies and national trade associations); Trustee of Ivy Fund (1984-1993); Director of The Mackenzie Funds Inc. (1994-1995). Frank W. DeFriece, Jr. Trustee Director, Manager and Vice The Landmark Centre President, Massengill- 113 Landmark Lane, DeFriece Foundation Suite B (charitable organization) Bristol, TN 37625 (1950-present); Trustee and Age: 75 Second Vice Chairman, East Tennessee Public Communications Corp. (WSJK- TV) (1984-present); Trustee of Mackenzie Series Trust (1985-present); Director of The Mackenzie Funds Inc. (1987-1995). Roy J. Glauber Trustee Mallinckrodt Professor of Age: 70 Physics, Harvard University (since 1974); Trustee of Ivy Fund (1961- 1991); Trustee of Mackenzie Series Trust (1994- present). Michael G. Landry Trustee President, Chairman and 700 South Federal Hwy. and Director of Mackenzie Suite 300 President Investment Boca Raton, FL 33432 Management Inc. Age: 49 (1987-present); President [*Deemed to be an and Director of "interested person" Ivy Management, Inc. (1992- of the Trust, as present); Chairman and defined under the Director of Mackenzie Ivy 1940 Act.] Investor Services Corp. (1993-present); Director and President of Mackenzie Ivy Funds Distribution, Inc. (1993-1994); Chairman and Director of Mackenzie Ivy Funds Distribution, Inc. (1994-present); Director and President of The Mackenzie Funds Inc. (1987-1995); Trustee and President of Mackenzie Series Trust (1987- present). Michael R. Peers Trustee Chairman of the Board, 737 Periwinkle Way and Ivy Management, Inc. Sanibel, FL 33957 Chairman (1984-1991); Chairman Age: 66 of the of the Board, Ivy Fund [*Deemed to be an Board (1974-present); Private "interested person" Investor. of the Trust, as defined under the 1940 Act.] Joseph G. Rosenthal Trustee Chartered Accountant 110 Jardin Drive (1958-present); Trustee Unit #12 of Mackenzie Series Concord, Ontario Canada Trust (1985-present); L4K 2T7 Director of The Mackenzie Age: 61 Funds Inc. (1987-1995). Richard N. Silverman Trustee Formerly President, 18 Bonnybrook Road Hy-Sil Manufacturing Waban, MA 02168 Company, a division of Age: 71 Van Leer, U.S.A., Inc. (gift packaging materials and metalized film products); Formerly Director, Waters Manufacturing Co. (manufacturer of electronic parts); Director, Panorama Television Network. J. Brendan Swan Trustee President, Airspray 4701 North Federal Hwy. International, Inc.; Suite 465 Joint Managing Director, Pompano Beach, FL 33064 Airspray International Age: 65 B.V. (an environmentally sensitive packaging company); Director, The Mackenzie Funds Inc. (1992- 1995); Trustee of Mackenzie Series Trust (1992- present). Keith J. Carlson Vice Senior Vice President 700 South Federal Hwy. President and Director of Mackenzie Suite 300 Investment Management, Boca Raton, FL 33432 Inc. (1994-present); Age: 39 Senior Vice President, Secretary and Treasurer of Mackenzie Investment Management Inc. (1985- 1994); Senior Vice President and Director of Ivy Management, Inc. (1994- present); Senior Vice President, Treasurer and Director of Ivy Management, Inc. (1992-1994); Vice President of The Mackenzie Funds Inc. (1987-1995); President and Director of Mackenzie Ivy Investor Services Corp. (1993- 2/14/96); Vice President of Mackenzie Series Trust (1994-present); Treasurer of Mackenzie Series Trust (1985-1994); President and Director of Mackenzie Ivy Funds Distribution, Inc. (1994-present); Executive Vice President and Director of Mackenzie Ivy Funds Distribution, Inc. (1993- 1994). C. William Ferris Secretary/ Senior Vice President, 700 South Federal Hwy. Treasurer Secretary/Treasurer Suite 300 and Director of Boca Raton, FL 33432 Mackenzie Investment Age: 51 Management Inc. (1994- present); Senior Vice President, Finance and Administration/Compliance Officer of Mackenzie Investment Management Inc. (1989-1994); Senior Vice President, Secretary/ Treasurer and Clerk of Ivy Management, Inc. (1994- present); Senior Vice President, Finance and Administration/Compliance Officer of Ivy Management, Inc. (1992-1994); Senior Vice President, Secretary/ Treasurer and Clerk of Ivy Management, Inc. (1989- 1994); Senior Vice President, Secretary/ Treasurer of Mackenzie Ivy Funds Distribution, Inc. (1994-present); Secretary/ Treasurer and Director of Mackenzie Ivy Funds Distribution, Inc. (1993- 1994); Secretary/Treasurer and Director of Mackenzie Ivy Investor Services Corp. (1993-2/14/96); President and Director of Mackenzie Ivy Investor Services Corp. (2/14/96-present); Secretary/ Treasurer of The Mackenzie Funds Inc. (1993- 1995); Secretary/Treasurer of Mackenzie Series Trust (1994-present). As of March 23, 1996,the Officers and Trustees of the Trust as a group owned beneficially or of record 3.2% of the outstanding Class A and Class B shares of the Fund. There were no Class C shares of the Fund outstanding as of such date. PERSONAL INVESTMENTS BY EMPLOYEES OF IMI Employees of IMI are permitted to make personal securities transactions, subject to requirements and restrictions set forth in IMI's Code of Ethics. The Code of Ethics contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of investment advisory clients such as the Fund. Among other things, the Code of Ethics, which generally complies with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing, prohibits certain types of transactions absent prior approval, imposes time periods during which personal transactions may not be made in certain securities, and requires the submission of duplicate broker confirmations and monthly reporting of securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process. Exceptions to these and other provisions of the Code of Ethics may be granted in particular circumstances after review by appropriate personnel. COMPENSATION TABLE IVY FUND (FISCAL YEAR ENDED DECEMBER 31, 1995) TOTAL PENSION OR COMPENSA- RETIREMENT TION FROM BENEFITS ESTIMATED TRUST AND AGGREGATE ACCRUED AS ANNUAL FUND COM- COMPENSA- PART OF BENEFITS PLEX PAID NAME, TION FUND UPON TO POSITION FROM TRUST EXPENSES RETIREMENT TRUSTEES John S. 7,112 N/A N/A 8,000 Anderegg, Jr. (Trustee) Paul H. 7,112 N/A N/A 8,000 Broyhill (Trustee) Stanley -0- N/A N/A 8,000 Channick[*] (Trustee) Frank W. 7,112 N/A N/A 8,000 DeFriece, Jr. (Trustee) Roy J. -0- N/A N/A 8,000 Glauber[*] (Trustee) Michael G. -0- N/A N/A -0- Landry (Trustee and President) Michael R. -0- N/A N/A -0- Peers (Trustee and Chairman of the Board) Joseph G. 7,112 N/A N/A 8,000 Rosenthal (Trustee) Richard N. 8,000 N/A N/A 8,000 Silverman (Trustee) J. Brendan 7,112 N/A N/A 8,000 Swan (Trustee) Keith J. -0- N/A N/A -0- Carlson (Vice President) C. William -0- N/A N/A -0- Ferris (Secretary/Treasurer) [*] Appointed as a Trustee of the Trust at a meeting of the Board of Trustees held on February 6, 1996. INVESTMENT ADVISORY AND OTHER SERVICES BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES Ivy Management, Inc. provides business management and investment advisory services to the Fund pursuant to a Business Management and Investment Advisory Agreement with the Trust (the "Agreement"), which was approved by the shareholders of the Fund on December 30, 1991. Prior to approval by shareholders, the Agreement was approved on October 28, 1991 by the Board of Trustees, including a majority of the Trustees who are neither "interested persons" (as defined in the 1940 Act) of the Trust nor have any direct or indirect financial interest in the operation of the distribution plan (see "Distribution Services") or in any related agreement (the "Independent Trustees"). IMI also acts as manager and investment adviser to the following investment companies registered under the 1940 Act: Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy International Bond Fund, Ivy Latin America Strategy Fund, Ivy New Century Fund and Ivy Short- Term Bond Fund. IMI is a wholly owned subsidiary of MIMI. MIMI currently acts as manager of and investment adviser to the following investment companies registered under the 1940 Act: Mackenzie National Municipal Fund, Mackenzie California Municipal Fund, Mackenzie New York Municipal Fund, Mackenzie Limited Term Municipal Fund and Mackenzie Florida Limited Term Municipal Fund. 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 Toronto Stock Exchange. MFC is registered in Ontario as a mutual fund dealer and advises Ivy Canada Fund. The Agreement obligates IMI to make investments for the account of the Fund in accordance with its best judgment and within the investment objectives and restrictions set forth in the Fund's current Prospectus, the 1940 Act and the provisions of the Code relating to regulated investment companies, subject to policy decisions adopted by the Trust's Board of Trustees. IMI also determines the securities to be purchased or sold by the Fund and places orders with brokers or dealers who deal in such securities. Under the Agreement, IMI also provides certain business management services. IMI is obligated to (1) coordinate with the Fund's Custodian and monitor the services it provides to the Fund; (2) coordinate with and monitor any other third parties furnishing services to the Fund; (3) provide the Fund with the necessary office space, telephones and other communications facilities as are adequate for the Fund's needs; (4) provide the services of individuals competent to perform administrative and clerical functions which are not performed by employees or other agents engaged by the Fund or by IMI acting in some other capacity pursuant to a separate agreement or arrangement with the Fund; (5) maintain or supervise the maintenance by third parties of such books and records of the Trust as may be required by applicable Federal or state law; (6) authorize and permit IMI's directors, officers and employees who may be elected or appointed as trustees or officers of the Trust to serve in such capacities; and (7) take such other action with respect to the Trust, after approval by the Trust, as may be required by applicable law, including without limitation the rules and regulations of the SEC and of state securities commissions and other regulatory agencies. For business management and investment advisory services, the Fund pays IMI a monthly fee based on the Fund's average daily net assets during the preceding month at an annual rate of 0.40%. For the fiscal years ended December 31, 1995, 1994 and 1993, the Fund paid IMI $110,748, $107,960 and $91,931, respectively (of which IMI reimbursed $148,768, $105,984 and $164,323, respectively, pursuant to the voluntary expense limitation described below). The Trust pays the following expenses under the Agreement: (1) the fees and expenses of the Trust's Independent Trustees; (2) the salaries and expenses of any of the Trust's officers or employees who are not affiliated with IMI; (3) interest expenses; (4) taxes and governmental fees, including any original issue taxes or transfer taxes applicable to the sale or delivery of shares or certificates therefor; (5) brokerage commissions and other expenses incurred in acquiring or disposing of portfolio securities; (6) the expenses of registering and qualifying shares for sale with the SEC and with various state securities commissions; (7) accounting and legal costs; (8) insurance premiums; (9) fees and expenses of the Trust's custodian and transfer agent and any related services; (10) expenses of obtaining quotations of portfolio securities and of pricing shares; (11) expenses of maintaining the Trust's legal existence and of shareholders' meetings; (12) expenses of preparation and distribution to existing shareholders of periodic reports, proxy materials and prospectuses; and (13) fees and expenses of membership in industry organizations. The Agreement provides that if the Fund's total expenses in any fiscal year exceed the permissible limit applicable to the Fund in any state in which its shares are then qualified for sale, IMI will bear the excess expenses. At the present time, the most restrictive state expense limitation provision limits the Fund's annual expenses (excluding interest, taxes, distribution expenses, brokerage commissions and extraordinary expenses, and other expenses subject to approval by state securities administrators) to 2.5% of the first $30 million of its average daily net assets, 2.0% of the next $70 million and 1.5% of its average daily net assets over $100 million. IMI has agreed to limit the Fund's total operating expenses (excluding interest, taxes, brokerage commissions, litigation and indemnification expenses, and other extraordinary expenses) to an annual rate of 0.85% of the Fund's average daily net assets. This voluntary expense limitation may be terminated or revised at any time, at which time the Fund's expense may increase and its yield may be reduced, depending on the total assets of the Fund. On August 25, 1995, the Board of Trustees, including a majority of the Independent Trustees, last approved the continuance of the Agreement. The Agreement will continue in effect with respect to the Fund for more than the initial two- year period only so long as the continuance is specifically approved at least annually (i) by the vote of a majority of the Independent Trustees and (ii) either (a) by the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund or (b) by the vote of a majority of the entire Board of Trustees. If the question of continuance of the Agreement (or adoption of any new agreement) is presented to shareholders, continuance (or adoption) shall be effected only if approved by the affirmative vote of a majority of the outstanding voting securities of the Fund. See "Capitalization and Voting Rights." The Agreement may be terminated with respect to the Fund at any time, without payment of any penalty, by a vote of a majority of the Board of Trustees, 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 serves as the exclusive distributor of the Fund shares under an Amended and Restated Distribution Agreement with the Trust dated October 23, 1993 (the "Distribution Agreement"). [FN][Effective October 1, 1993, IMDI, a wholly-owned subsidiary of MIMI, succeeded to and is continuing MIMI's broker-dealer activities. The provisions of the Trust's previous Distribution Agreement with MIMI remain unchanged by the succession.] The Distribution Agreement was last approved by the Board of Trustees on August 25, 1996. IMDI distributes Fund shares through broker- dealers who are members of the National Association of Securities Dealers, Inc. and who have executed dealer agreements with IMDI. IMDI distributes Fund shares on a continuous basis, but reserves the right to suspend or discontinue distribution on such basis. IMDI is not obligated to sell any specific amount of Fund shares. Pursuant to the Distribution Agreement, the Fund bears, among other expenses, the expenses of registering and qualifying its shares for sale under federal and state securities laws and preparing and distributing to existing shareholders periodic reports, proxy materials and Prospectuses. Shares of the Fund are sold at the Fund's net asset value per share without a sales load. The Distribution Agreement will continue in effect for successive one-year periods, provided that such continuance is specifically approved at least annually by the vote of a majority of the Independent Trustees, cast in person at a meeting called for that purpose and by the vote of either a majority of the entire Board of Trustees or a majority of the outstanding voting securities of the Fund. The Distribution Agreement may be terminated with respect to the Fund at any time, without payment of any penalty, by IMDI on 60 days' written notice to the Trust 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. If the Distribution Agreement is terminated (or not renewed) with respect to one or more funds of the Trust, it may continue in effect with respect to any fund as to which it has not been terminated (or has been renewed). RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule 18f-3 under the 1940 Act, which permits a registered open-end investment company whose shares are registered on Form N-1A to issue multiple classes of shares in accordance with a written plan approved by the investment company's board of directors/trustees and filed with the SEC. At a meeting held on December 1-2, 1995, the Board of Trustees of the Trust adopted a multi-class plan on behalf of the Fund and authorized the redesignation of the Fund's shares into Class A and Class B, respectively. On February 29, 1996, the Trustees resolved by written consent to establish a new class of shares, designated as "Class C," for all Ivy Fund portfolios (other than Ivy Short-Term Bond Fund). The purpose of the Class B redesignation (and the Class C designation) of shares for the Fund is primarily to enable the transfer agent for the Ivy and Mackenzie funds to track the contingent deferred sales charge period that applies to Class B and Class C shares of Ivy and Mackenzie funds (other than the Fund) that are being exchanged for shares of the Fund. In all other relevant respects, the Fund's Class A, Class B and Class C shares are identical (i.e., having the same arrangement for shareholder services and the distribution of securities). CUSTODIAN Brown Brothers Harriman & Co. ("Brown Brothers"), a private bank and member of the principal securities exchanges, located at 40 Water Street, Boston, Massachusetts 02109, acts as custodian for the Trust's securities and cash pursuant to a Custodian Agreement with the Trust. Its primary responsibility is to maintain custody of the cash and securities in the Fund's portfolio. 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, Brown Brothers Harriman & Co. has entered into subcustodial agreements for the holding of the Fund's foreign securities. Brown Brothers may receive, as partial payment for its services, a portion of the Trust's brokerage business, subject to its ability to provide best price and execution. FUND ACCOUNTING SERVICES Pursuant to a Fund Accounting Services Agreement that became effective March 1, 1992, MIMI provides certain accounting and pricing services for the Fund, including bookkeeping and computation of daily net asset value. As compensation for those services, the Fund pays MIMI a monthly fee of 0.10% of the Fund's average daily net assets, plus out-of-pocket expenses as incurred. For the fiscal years ended December 31, 1993, 1994 and 1995, the Fund paid MIMI $27,783, $30,023 and $30,957, respectively, for such services. TRANSFER AND DIVIDEND PAYING AGENT IMSC, a wholly owned subsidiary of MIMI, acts as the Fund's transfer agent pursuant to a Transfer Agency and Shareholder Services Agreement. For transfer agency and shareholder services, the Fund pays IMSC an annual fee of $22.00 per open account and $4.36 for each account that is closed. The Fund also reimburses IMSC monthly for out-of-pocket expenses. For the fiscal year ended December 31, 1995, such fees and expenses for the Fund totalled $124,309. Certain broker-dealers that maintain shareholder accounts with the Fund through an omnibus account provide transfer agent and other shareholder-related serrvices that would otherwise be provided by IMSC if the indivudual 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 (eg. 10%) fee, based on the average daily net asset value of the omnibus account (or a combination thereof). ADMINISTRATOR MIMI provides certain administrative services to the Fund pursuant to an Administrative Services Agreement, in exchange for a monthly fee at the annual rate of .10% of the Fund's average daily net assets. For the fiscal years ended December 31, 1995, 1994 and 1993, the Fund paid MIMI $27,687, $26,990 and $22,981, respectively, for such services. AUDITORS Coopers & Lybrand L.L.P., independent certified public accountants, 200 East Las Olas Boulevard, Suite 1700, Ft. Lauderdale, Florida 33301, has been selected as auditors for the Trust. The audit services performed by Coopers & Lybrand L.L.P. include audits of the annual financial statements of each of the funds of the Trust. Other services provided primarily relate to filings with the SEC and the preparation of the Trust's tax returns. 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 the Fund are fully paid, non-assessable, redeemable and fully transferable. Shares do not have preemptive rights or subscription rights. The Amended and Restated Declaration of Trust permits the Trustees to create separate series or portfolios and to divide any series or portfolio into one or more classes. The Trustees have authorized thirteen series, each of which represents a separate investment portfolio. The Trustees have further authorized the issuance of Classes A, B and C shares for the Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy International Bond Fund and Ivy Latin America Strategy Fund and Ivy New Century Fund, as well as Classes A, B and I for Ivy Short-Term Bond Fund, Class I for Ivy International Fund and Ivy Bond Fund, and Class D shares for Ivy Growth with Income Fund [FN][The Class D shares of Ivy Growth with Income Fund were initially issued as "Ivy Growth with Income Fund -- Class C" to shareholders of Mackenzie Growth & Income Fund, a former series of the Company, in connection with the reorganization between that fund and Ivy Growth with Income Fund, and are not offered for sale to the public. On February 29, 1996, the Trustees of the Trust resolved by written consent to establish a new class of shares designated as "Class C" for all Ivy Fund portfolios (other than Ivy Short-Term Bond Fund), and to redesignate the shares of beneficial interest of "Ivy Growth with Income Fund--Class C" as shares of beneficial interest of "Ivy Growth with Income Fund-- Class D," which establishment and redesignation, respectively, are to become effective on April 30, 1996. The voting, dividend, liquidation and other rights, preferences, powers, restrictions, limitations, qualifications, terms and conditions of the Class D shares of Ivy Growth with Income Fund, as set forth in Ivy Fund's Declaration of Trust, as amended from time to time, will not be changed by this redesignation.]. 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 Amended and Restated Declaration of Trust. Shares of the Fund entitle their holders to one vote per share (with proportionate voting for fractional shares). Shareholders of the Trust vote separately by Fund on any matter submitted to shareholders, except when otherwise required by the 1940 Act, in which case the shareholders of all funds of the Trust affected by the matter in question will vote together. Approval of an investment advisory agreement and a change in fundamental policies would be regarded as matters requiring separate voting by the shareholders of each fund of the Trust. If the Trustees determine that a matter does not affect the interests of the Fund, then the shareholders of the Fund will not be entitled to vote on that matter. Matters that affect the Trust in general, such as ratification of the selection of independent public accountants, will be voted upon collectively by the shareholders of all of the funds that comprise the Trust. As used in this SAI and the Fund's Prospectus, the phrase "majority vote of the outstanding shares" of the Fund means the vote of the lesser of: (1) 67% of the shares of the Fund (or of the Trust) present at a meeting if the holders of more than 50% of the outstanding shares are present in person or by proxy; or (2) more than 50% of the outstanding shares of the Fund (or of the Trust). With respect to the submission to shareholder vote of a matter requiring separate voting by the Fund, the matter shall have been effectively acted upon with respect to the Fund if a majority of the outstanding voting securities of the Fund votes for the approval of the matter, notwithstanding that: (1) the matter has not been approved by a majority of the outstanding voting securities of any other fund of the Trust; or (2) the matter has not been approved by a majority of the outstanding voting securities of the Trust. Under Massachusetts law, the Trust's shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Amended and Restated Declaration of Trust disclaims liability of the shareholders, Trustees or officers of the Trust for acts or obligations of the Trust, which are binding only on the assets and property of the Trust, and requires that notice of the disclaimer be given in each contract or obligation entered into or executed by the Trust or its Trustees. The Amended and Restated Declaration of Trust provides for indemnification out of fund property for all loss and expense of any shareholder of a Fund held personally liable for the obligations of that Fund. The risk of a shareholder of the Trust incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust itself would be unable to meet its obligations and, thus, should be considered remote. No series of the Trust is liable for the obligations of any other series of the Trust. 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 of Trustees, in which case the holders of the remaining shares would not be able to elect any Trustees. To the knowledge of the Trust, as of March 29, 1996, no shareholder owned beneficially or of record 5% or more of the Fund's outstanding shares, except that of the outstanding Class B shares of the Fund, Janney Montgomery Scott (custodian) FBO Elisa Pierce Lynch c/o Clark Capital Management, 1735 Market Street, Philadelphia, PA 19103, owned of record 108,518.910 shares (7.12%), A G Edwards & Sons (custodian) FBO Helen Strauss, 402 West Borough Lane, Safety Harbor, FL 34695, owned of record 100,731.360 shares (6.61%), Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, owned of record 87,616.640 shares (5.75%), and Albert Chang, 311 2nd Street, Suite 103, Kirkland, WA 98033, owned of record 87,323.840 shares (5.73%). NET ASSET VALUE The market price at any given time for each Fund share is its net asset value. The net asset value per share for the Fund is computed by dividing the value of the total assets of the Fund, less all of its liabilities, by the total number of shares of the Fund outstanding. For the purposes of determining the aggregate net assets of the Fund, cash and receivables will be valued at their realizable amounts. Pursuant to a rule of the SEC, the Fund's portfolio securities are valued using the amortized cost method of valuation in a neffort to maintain a constant net asset value of $1.00 per share, which the Board of Trustees has determined to be in the best interest of the Fund and its shareholders. The amortized cost method involves valuing a security at cost on the date of acquisition and thereafter assuming a constant rate of accretion of discount or amortization of premium. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if it sold the instrument. During such periods, the yield to an investor in the Fund may differ somewhat from that obtained in a similar investment company which uses available market quotations to value all of its portfolio securities. Portfolio securities are valued and net asset value per share of the Fund is determined as of the close of regular trading on the Exchange (normally 4:00 p.m., Eastern time) every Monday through Friday (exclusive of national business holidays). The Trust's offices will be closed, and net asset value will not be calculated, on the following national business holidays: New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. On those days when either or both of the Fund's Custodian or the New York Stock Exchange close early as a result of such day being a partial holiday or otherwise, the right is reserved to advance the time on that day by which purchase and redemption requests must be received. Fund shares will not be sold during any period when the determination of the Fund's net asset value is suspended pursuant to rules or orders of the SEC or by the Board of Trustees whenever in its judgment it is in the best interest of the Fund to do so. REDEMPTIONS Shares of the Fund are redeemed at their net asset value next determined after a redemption request in proper form has been received by IMSC. The Fund does not assess a contingent deferred sales charge. However, if shares of another Ivy or Mackenzie Fund that are subject to a contingent deferred sales charge are exchanged for shares of the Fund, the contingent deferred sales charge will carry over to the investment in the Fund and may be assessed upon redemption. Unless a shareholder requests that the proceeds of any redemption be wired to his or her bank account, payment for shares tendered for redemption is made by check within seven days after tender in proper form, except that the Trust reserves the right to suspend the right of redemption or to postpone the date of payment upon redemption, to the extent permitted by Federal securities laws, (i) for any period during which the Exchange is closed (other than customary weekend and holiday closing) or during which trading on the Exchange is restricted, (ii) for any period during which an emergency exists as determined by the SEC as a result of which disposal of securities owned by the Fund is not reasonably practicable or it is not reasonably practicable for the Fund fairly to determine the value of its net assets, or (iii) for such other periods as the SEC may by order permit for the protection of the Fund's shareholders. Under unusual circumstances, when the Board of Trustees deems it in the best interest of the Fund's shareholders, the Fund may pay for shares repurchased or redeemed, in whole or in part, in securities of the Fund taken at current value. If any such redemption in kind is to be made, the Fund intends to make an election pursuant to Rule 18f-1 under the 1940 Act. This will require the Fund to redeem with cash at a shareholder's election in any case where the redemption involves less than $250,000 (or 1% of the Fund's net asset value at the beginning of each 90-day period during which such redemptions are in effect, if that amount is less than $250,000). If payment is made in the form of Fund securities, the redeeming shareholder may incur brokerage costs in converting such securities to cash. Subject to state law restrictions, the Trust may redeem those accounts of shareholders who have maintained an investment of less than $1,000 ($250 for retirement plans) in the Fund for a period of more than 12 months. All accounts below that minimum will be redeemed simultaneously when MIMI deems it advisable. The $1,000 balance will be determined by actual dollar amounts invested by the shareholder, unaffected by market fluctuations. The Trust will notify any such shareholder by certified mail of its intention to redeem such account, and the shareholder shall have 60 days from the date of such letter to invest such additional sum 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 proceeds thereof to the shareholder. However, those shareholders who are investing pursuant to the Automatic Investment Method or Group Systematic Investment Program 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 would have to "rollover" any sum so redeemed into another qualified plan within 60 days. The Trustees of the Trust may change the minimum account size. If a shareholder has given authorization for telephonic redemption privilege, shares can be redeemed and proceeds sent by Federal wire to a single previously designated bank account. Delivery of the proceeds of a wire redemption request of $250,000 or more may be delayed by the Fund for up to seven days if deemed appropriate under then-current market conditions. The Trust reserves the right to change this minimum or to terminate the telephonic redemption privilege without prior notice. The Trust cannot be responsible for the efficiency of the Federal wire system of the shareholder's dealer of record or bank. The shareholder is responsible for any charges by the shareholder's bank. The Fund employs reasonable procedures that require personal identification prior to acting on redemption or exchange instructions communicated by telephone to confirm that such instructions are genuine. In the absence of such procedures, the Fund may be liable for any losses due to unauthorized or fraudulent telephone instructions. TAXATION The following is a general discussion of certain tax rules thought to be applicable with respect to the Fund. It is merely a summary and is not an exhaustive discussion of all possible situations or of all potentially applicable taxes. Accordingly, shareholders and prospective shareholders should consult a competent tax advisor about the tax consequences to them of investing in the Fund. GENERAL. The Fund intends to be taxed as a regulated investment company under Subchapter M of the Code. Accordingly, the Fund must, among other things, (a) derive in each taxable year at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities or currencies; (b) derive in each taxable year less than 30% of its gross income from the sale or other disposition of certain assets held less than three months, namely: (i) stock or securities; (ii) options, futures, or forward contracts (other than those on foreign currencies); or (iii) foreign currencies (or options, futures, or forward contracts on foreign currencies) that are not directly related to the Fund's principal business of investing in stock or securities (or options and futures with respect to stock or securities) (the "30% Limitation"); and (c) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of the Fund's assets is represented by cash, U.S. Government securities, the securities of other regulated investment companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. Government securities and the securities of other regulated investment companies). As a regulated investment company, the Fund generally will not be subject to U.S. Federal income tax on its income and gains that it distributes to shareholders, if at least 90% of its investment company taxable income (which includes, among other items, dividends, interest and the excess of any short-term capital gains over long-term capital losses) for the taxable year is distributed. The Fund intends to distribute all such income. Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax at the Fund level. To avoid the tax, the Fund must distribute during each calendar year (1) at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (2) at least 98% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for the calendar year, and (3) all ordinary income and capital gains for previous years that were not distributed during such years. To avoid application of the excise tax, the Fund intends to make distributions in accordance with the calendar year distribution requirements. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by the Fund in October, November or December of the year with a record date in such a month and paid by the Fund during January of the following year. Such distributions will be taxable to shareholders in the calendar year the distributions are declared, rather than the calendar year in which the distributions are received. DEBT SECURITIES ACQUIRED AT A DISCOUNT. Some of the debt securities (with a fixed maturity date of more than one year from the date of issuance) that may be acquired by the Fund may be treated as debt securities that are issued originally at a discount. Generally, the amount of the original issue discount ("OID") is treated as interest income and is included in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when the debt security matures. Some of the debt securities (with a fixed maturity date of more than one year from the date of issuance) that may be acquired by the Fund in the secondary market may be treated as having market discount. Generally, gain recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the "accrued market discount" on such debt security. In addition, the deduction of any interest expenses attributable to debt securities having market discount may be deferred. Market discount generally accrues in equal daily installments. The Fund may make one or more of the elections applicable to debt securities having market discount, which could affect the character and timing of recognition of income. Some debt securities (with a fixed maturity date of one year or less from the date of issuance) that may be acquired by the Fund may be treated as having acquisition discount, or OID in the case of certain types of debt securities. Generally, the Fund will be required to include the acquisition discount, or OID, in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when the debt security matures. The Fund may make one or more of the elections applicable to debt securities having acquisition discount, or OID, which could affect the character and timing of recognition of income. The Fund generally will be required to distribute dividends to shareholders representing discount on debt securities that is currently includible in income, even though cash representing such income may not have been received by the Fund. Cash to pay such dividends may be obtained from sales proceeds of securities held by the Fund. DISTRIBUTIONS. Distributions of investment company taxable income are taxable to a U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends paid by the Fund to a corporate shareholder, to the extent such dividends are attributable to dividends received from U.S. corporations by the Fund, may qualify for the dividends received deduction. However, the revised alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction. Distributions of net capital gains (the excess of net long-term capital gains over net short-term capital losses), if any, designated by the Fund as capital gain dividends, are taxable as long-term capital gains, whether paid in cash or in shares, regardless of how long the shareholder has held the Fund's shares and are not eligible for the dividends received deduction. Shareholders receiving distributions in the form of newly issued shares will have a cost basis in each share received equal to the net asset value of a share of the Fund on the reinvestment date. Shareholders will be notified annually as to the U.S. Federal tax status of distributions and shareholders receiving distributions in the form of newly issued shares will receive a report as to the net asset value of the shares received. If the net asset value of shares is reduced below a shareholder's cost as a result of a distribution by the Fund, such distribution generally will be taxable even though it represents a return of invested capital. Investors should be careful to consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a distribution which generally will be taxable to them. DISPOSITION OF SHARES. Upon a redemption, sale or exchange of his or her shares, a shareholder generally will realize a taxable gain or loss depending upon his or her basis in the shares. Such gain or loss will be treated as capital gain or loss if the shares are capital assets in the shareholder's hands and generally 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 a portion of their sales loads into account for purposes of determining the amount of gain or loss realized on the disposition of their shares. This prohibition generally applies where (1) the shareholder incurs a sales load in acquiring the shares of 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. BACKUP WITHHOLDING. The Fund will be required to report to the Internal Revenue Service (the "IRS") all distributions and, in certain circumstances, gross proceeds from the redemption of the Fund's shares, except in the case of certain exempt shareholders. All such distributions and proceeds will be subject to withholding of Federal income tax at a rate of 31% ("backup withholding") in the case of non-exempt shareholders if (1) the shareholder fails to furnish the Fund with and to certify the shareholder's correct taxpayer identification number or social security number, (2) the IRS notifies the shareholder or the Fund that the shareholder has failed to report properly certain interest and dividend income to the IRS and to respond to notices to that effect, or (3) when required to do so, the shareholder fails to certify that he or she is not subject to backup withholding. If the withholding provisions are applicable, any such distributions or proceeds, whether reinvested in additional shares or taken in cash, will be reduced by the amounts required to be withheld. OTHER INFORMATION. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder's particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly from those summarized above. This discussion does not purport to deal with all of the tax consequences applicable to the Fund or its shareholders. Shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund. CALCULATION OF YIELD The Fund's yield quotations as they may appear in the Prospectus, this SAI, advertising or sales literature are calculated by standard methods prescribed by the SEC. STANDARDIZED YIELD QUOTATIONS. The Fund's current yield quotation is computed by determining the net change, exclusive of capital changes (i.e., realized gains and losses from the sale of securities and unrealized appreciation and depreciation), in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the base period, subtracting a hypothetical charge reflecting expense deductions from the hypothetical account, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return. This base period return is then multiplied by 365/7 with the resulting yield figure carried to the nearest 100th of 1%. The determination of net change in account value reflects the value of additional shares purchased with dividends from the original share, dividends declared on both the original share and any such additional shares, and all fees, other than non-recurring account or sales charges, that are charged to all shareholder accounts in the Fund in proportion to the length of the base period. For any account fees that vary with the size of the account in the Fund, the account fee used for purposes of the yield computation is assumed to be the fee that would be charged to the mean account size of the Fund. The distribution rate will differ from the current yield computation because it may include distributions to shareholders from sources other than dividends and interest, short-term capital gains and net equalization credits. The Fund's current yield for the seven-day period ended December 31, 1995 was 4.74%. IMI currently reimburses the Fund to limit ordinary operating expenses to 0.85% of average net assets. Without reimbursement, the Fund's current yield for this period would have been 3.65%. OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The foregoing computation methods are prescribed for advertising and other communications subject to SEC Rule 482. Communications not subject to this rule may contain a number of different measures of performance, computation methods and assumptions, including but not limited to: historical total returns; results of actual or hypothetical investments; changes in dividends, distributions or share values; or any graphic illustration of such data. These data may cover any period of the Trust's existence and may or may not include the impact of sales charges, taxes or other factors. Performance quotations for the Fund will vary from time to time depending on market conditions, the composition of the Fund's portfolio and operating expenses of the Fund. The voluntary expense reimbursement by IMI with respect to the Fund has the effect of increasing yields of the Fund. These factors and possible differences in the methods used in calculating yields should be considered when comparing performance information regarding the Fund to information published for other investment companies and other investment vehicles. Yields should also be considered relative to changes in the value of the Fund's shares and the risk associated with the Fund's investment objective and policies. At any time in the future, yields may be higher or lower than past yields and there can be no assurance that any historical yield quotation will continue in the future. The Fund may also cite endorsements or use for comparison its performance rankings and listings reported in such newspapers or business or consumer publications as, among others: AAII Journal, Barron's, Boston Business Journal, Boston Globe, Boston Herald, Business Week, Consumer's Digest, Consumer Guide Publications, Changing Times, Financial Planning, Financial World, Forbes, Fortune, Growth Fund Guide, Houston Post, Institutional Investor, International Fund Monitor, Investor's Daily, Los Angeles Times, Medical Economics, Miami Herald, Money Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source Book, Mutual Fund Values, National Underwriter Nelson's Director of Investment Managers, New York Times, Newsweek, No Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension World, Pensions and Investment Age, Personal Investor, Rugg and Steele, Time, U.S. News and World Report, USA Today, The Wall Street Journal, and Washington Post. FINANCIAL STATEMENTS The Fund's Portfolio of Investments as of December 31, 1995, the Statement of Assets and Liabilities as of December 31, 1995, the Statement of Operations for the fiscal year ended December 31, 1995, the Statement of Changes in Net Assets for the fiscal years ended December 31, 1994 and 1995,the Financial Highlights, Notes to Financial Statements, and Report of Independent Accountants are included in the Fund's December 31, 1995 Annual Report to Shareholders, which is incorporated by reference into this SAI. APPENDIX A DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND COMMERCIAL PAPER RATINGS[FN][ From "Moody's Bond Record," November 1994 Issue (Moody's Investor Service, New York, 1994), and "Standard & Poor's Municipal Ratings Handbook," October 1994 Issue (McGraw Hill, New York, 1994).] 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. 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 considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Bonds rated Baa by Moody's are considered medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. (b) COMMERCIAL PAPER. The Prime rating is the highest commercial paper rating assigned by Moody's. Among the factors considered by Moody's in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer's industry or industries and an appraisal of speculative-type risks which may be inherent in certain areas; (3) evaluation of the issuer's products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of ten years; (7) financial strength of a parent company and the relationships which exist with the issuer; and (8) recognition by management of obligations which may be present or may arise as a result of public interest questions and preparations to meet such obligations. Issuers within this Prime category may be given ratings 1, 2 or 3, depending on the relative strengths of these factors. The designation of Prime-1 indicates the highest quality repayment capacity of the rated issue. 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 by S&P is considered by S&P to be the highest grade obligation. Capacity to pay interest and repay principal is extremely strong. Debt rated AA is judged by S&P to have a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. Debt rated A by S&P has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. Debt rated BBB by S&P is regarded by S&P as having an adequate capacity to pay interest and repay principal. Although such bonds normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal than debt in higher rated categories. (b) COMMERCIAL PAPER. An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Commercial paper rated A by S&P has the following characteristics: (i) liquidity ratios are adequate to meet cash requirements; (ii) long-term senior debt rating should be A or better, although in some cases BBB credits may be allowed if other factors outweigh the BBB; (iii) the issuer should have access to at least one additional channel of borrowing; (iv) basic earnings and cash flow should have an upward trend with allowances made for unusual circumstances; and (v) typically the issuer's industry should be well established and the issuer should have a strong position within its industry and the reliability and quality of management should be unquestioned. Issues rated A are further referred to by use of numbers 1, 2 and 3 to denote relative strength within this highest classification. For example, the A-1 designation indicates that the degree of safety regarding timely payment of debt is strong. 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. PART C. OTHER INFORMATION Item 24: Financial Statements and Exhibits (a) Financial Statements: Contained in Part A: Financial Highlights Incorporated by reference in Part B: December 31, 1995 Annual Report to Shareholders of Ivy Short-Term Bond Fund: - Portfolio of Investments at December 31, 1995 - Statement of Assets and Liabilities as of December 31, 1995 - Statement of Operations for the Year ended December 31, 1995 - Statement of Changes in Net Assets for the Year ended December 31, 1995 and for the six months ended December 31, 1994 - Financial Highlights - Notes to Financial Statements - Report of Independent Accountants December 31, 1995 Annual Report to Shareholders of Ivy Money Market Fund: - Portfolio of Investments at December 31, 1995 - Statement of Assets and Liabilities as of December 31, 1995 - Statement of Operations for the Year ended December 31, 1995 - Statement of Changes in Net Assets for the Years ended December 31, 1995 and December 31, 1994 - Financial Highlights - Notes to Financial Statements - Report of Independent Accountants (b) Exhibits: 1. (a) Amended and Restated Declaration of Trust dated December 10, 1992 filed with Post- Effective Amendment No. 71 to Registration Statement No. 2-17613 and incorporated by reference herein. (b) Amendment to Amended and Restated Declaration of Trust filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (c) Amendment to Amended and Restated Declaration of Trust filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (d) Establishment and Designation of Additional Series (Ivy Emerging Growth Fund) filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (e) Redesignation of Shares (Ivy Growth with Income Fund--Class A) and Establishment and Designation of Additional Class (Ivy Growth with Income Fund--Class C) filed with Post- Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (f) Redesignation of Shares (Ivy Emerging Growth Fund--Class A, Ivy Growth Fund--Class A and Ivy International Fund--Class A) filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (g) Establishment and Designation of Additional Series (Ivy China Region Fund) filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (h) Establishment and Designation of Additional Class (Ivy China Region Fund--Class B, Ivy Emerging Growth Fund--Class B, Ivy Growth Fund--Class B, Ivy Growth with Income Fund-- Class B and Ivy International Fund--Class B) filed with Post-Effective Amendment No. 74 for Registration Statement No. 2-17613 and incorporated by reference herein. (i) Establishment and Designation of Additional Class (Ivy International Fund--Class I) filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (j) Establishment and Designation of Series and Classes (Ivy Latin American Strategy Fund-- Class A and Class B, Ivy New Century Fund-- Class A and Class B) filed with Post- Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (k) Establishment and Designation of Series and Classes (Ivy International Bond Fund--Class A and Class B) filed with Post-Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (l) Establishment and Designation of Series and Classes (Ivy Bond Fund, Ivy Canada Fund, Ivy Global Fund, Ivy Short-Term U.S. Government Securities Fund (now known as Ivy Short-Term Bond Fund) -- Class A and Class B) filed with Post-Effective Amendment No. 77 to Registration Statement No. 2-17613 and incorporated by reference herein. (m) Redesignation of Ivy Short-Term U.S. Government Securities Fund as Ivy Short-Term Bond Fund filed with Post-Effective Amendment No. 81 to Registration Statement No. 2-17613 and incorporated by reference herein. (n) Redesignation of Shares (Ivy Money Market Fund--Class A and Ivy Money Market Fund-- Class B) filed with Post-Effective Amendment No. 84 to Registration Statement No. 2-17613 and incorporated by reference herein. (o) Form of Establishment and Designation of Additional Class (Ivy Bond Fund--Class C; Ivy Canada Fund--Class C; Ivy China Region Fund-- Class C; Ivy Emerging Growth Fund--Class C; Ivy Global Fund--Class C; Ivy Growth Fund-- Class C; Ivy Growth with Income Fund--Class C; Ivy International Fund--Class C; Ivy Latin America Strategy Fund--Class C; Ivy International Bond Fund--Class C; Ivy Money Market Fund--Class C; Ivy New Century Fund-- Class C) filed with Post-Effective Amendment No. 84 to Registration Statement No. 2-17613 and incorporated by reference herein. 2. By-Laws, as amended and filed with Post-Effective Amendment No. 48 to Registration Statement No. 2- 17613 and incorporated by reference herein. 3. Not Applicable 4. (a) Specimen Securities for Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund and Ivy Money Market Fund filed with Post-Effective Amendment No. 49 to Registration Statement No. 2-17613 and incorporated by reference herein. (b) Specimen Security for Ivy Emerging Growth Fund filed with Post-Effective Amendment No. 70 to Registration Statement No. 2-17613 and incorporated by reference herein. (c) Specimen Security for Ivy China Region Fund filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (d) Specimen Security for Ivy Latin American Strategy Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (e) Specimen Security for Ivy New Century Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (f) Specimen Security for Ivy International Bond Fund filed with Post-Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (g) Specimen Securities for Ivy Bond Fund, Ivy Canada Fund, Ivy Global Fund, and Ivy Short- Term U.S. Government Securities Fund filed with Post-Effective Amendment No. 77 to Registration Statement No. 2-17613 and incorporated by reference herein. 5. (a) Master Business Management and Investment Advisory Agreement between Ivy Fund and Ivy Management Inc. and Supplements for Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund and Ivy Money Market Fund filed with Post-Effective Amendment No. 68 to Registration Statement No. 2-17613 and incorporated by reference herein. (b) Subadvisory Contract by and among Ivy Fund, Ivy Management Inc. and Boston Overseas Investors, Inc. filed with Post-Effective Amendment No. 68 to Registration Statement No. 2-17613 and incorporated by the reference herein. (c) Assignment Agreement relating to Subadvisory Contract filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (d) Business Management and Investment Advisory Agreement Supplement for Ivy Emerging Growth Fund filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (e) Business Management and Investment Advisory Agreement Supplement for Ivy China Region Fund filed with Post-Effective Amendment No. 71 to Registration Statement No. 2-17613 and incorporated by reference herein. (f) Form of Business Management and Investment Advisory Supplement for Ivy Latin America Strategy Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (g) Form of Business Management and Investment Advisory Agreement Supplement for Ivy New Century Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (h) Form of Business Management and Investment Advisory Agreement Supplement for Ivy International Bond Fund filed with Post- Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (i) Business Management and Investment Advisory Agreement Supplement for Ivy Bond Fund, Ivy Global Fund and Ivy Short-Term U.S. Government Securities Fund filed with Post- Effective Amendment No. 81 to Registration Statement No. 2-17613 and incorporated by reference herein. (j) Master Business Management Agreement between Ivy Fund and Ivy Management Inc. filed with Post-Effective Amendment No. 81 to Registration Statement No. 2-17613 and incorporated by reference herein. (k) Form of Supplement to Master Business Agreement between Ivy Fund and Ivy Management Inc.--Ivy Canada Fund filed with Post- Effective Amendment No. 77 to Registration Statement No. 2-17613 and incorporated by reference herein. (l) Form of Investment Advisory Agreement between Ivy Fund and Mackenzie Financial Corporation filed with Post-Effective Amendment No. 77 to Registration Statement No. 2-17613 and incorporated by reference herein. 6. (a) Dealer Agreement, as amended and filed with Post-Effective Amendment No. 70 to Registration Statement No. 2-17613 and incorporated by reference herein. (b) Amended and Restated Distribution Agreement filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (c) Amendment to Amended and Restated Distribution Agreement filed with Post- Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (d) Addendum to Amended and Restated Distribution Agreement (Ivy Money Market Fund--Class A and Ivy Money Market Fund--Class B) filed with Post-Effective Amendment No. 84 to Registration Statement No. 2-17613 and incorporated by reference herein. (e) Form of Addendum to Amended and Restated Distribution Agreement (Class C) filed with Post-Effective Amendment No. 84 to Registration Statement No. 2-17613 and incorporated by reference herein. 7. Not Applicable 8. Custodian Agreement between Ivy Fund and Brown Brothers Harriman & Co. filed with Post-Effective Amendment No. 74 to Registration No. 2-17613 and incorporated by reference herein. 9. (a) Master Administrative Services Agreement between Ivy Fund and Mackenzie Investment Management Inc. and Supplements for Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund and Ivy Money Market Fund filed with Post-Effective Amendment No. 68 to Registration Statement No. 2-17613 and incorporated by reference herein. (b) Addendum to Administrative Services Agreement Supplement for Ivy International Fund filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (c) Administrative Services Agreement Supplement for Ivy Emerging Growth Fund filed with Post- Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (d) Administrative Services Agreement Supplement for Ivy China Region Fund filed with Post- Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (e) Administrative Services Agreement Supplement for Class I Shares of Ivy International Fund filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (f) Master Fund Accounting Services Agreement between Ivy Fund and Mackenzie Investment Management Inc. and Supplements for Ivy Growth Fund, Ivy Emerging Growth Fund and Ivy Money Market Fund filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (g) Fund Accounting Services Agreement Supplement for Ivy Growth with Income Fund filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (h) Fund Accounting Services Agreement Supplement for Ivy China Region Fund filed with Post- Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (i) Transfer Agency and Shareholder Services Agreement between Ivy Fund and Ivy Management Inc. filed with Post-Effective Amendment No. 71 to Registration Statement No. 2-17613 and incorporated by reference herein. (j) Addendum to Transfer Agency and Shareholder Services Agreement filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (k) Assignment Agreement relating to Transfer Agency and Shareholder Services Agreement filed with Post-Effective Amendment No. 74 to Registration Statement No. 2-17613 and incorporated by reference herein. (l) Form of Administrative Services Agreement Supplement for Ivy Latin America Strategy Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (m) Form of Administrative Services Agreement Supplement for Ivy New Century Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (n) Form of Fund Accounting Services Agreement Supplement for Ivy Latin America Strategy Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (o) Form of Fund Accounting Services Agreement Supplement for Ivy New Century Fund filed with Post-Effective Amendment No. 75 to Registration Statement No. 2-17613 and incorporated by reference herein. (p) Form of Administrative Services Agreement Supplement for Ivy International Bond Fund filed with Post-Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (q) Form of Fund Accounting Services Agreement Supplement for International Bond Fund filed with Post-Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (r) Addendum to Transfer Agency and Shareholder Services Agreement filed with Post-Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (s) Addendum to Transfer Agency and Shareholder Services Agreement filed with Post-Effective Amendment No. 77 to Registration Statement No. 2-17613 and incorporated by reference herein. (t) Administrative Services Agreement Supplement for Ivy Bond Fund, Ivy Global Fund and Ivy Short-Term U.S. Government Securities Fund filed with Post-Effective Amendment No. 81 to Registration Statement No. 2-17613 and incorporated by reference herein. (u) Fund Accounting Services Agreement Supplement for Ivy Bond Fund, Ivy Global Fund and Ivy Short-Term U.S. Government Securities Fund filed with Post-Effective Amendment No. 81 to Registration Statement No. 2-17613 and incorporated by reference herein. (v) Form of Administrative Services Agreement Supplement for Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy International Bond Fund, Ivy Latin America Strategy Fund, Ivy Money Market Fund and Ivy New Century Fund filed with Post-Effective Amendment No. 84 to Registration Statement No. 2-17613 and incorporated by reference herein. (w) Form of Addendum to Transfer Agency and Shareholder Services Agreement filed with Post-Effective Amendment No. 84 to Registration Statement No. 2-17613 and incorporated by reference herein. 10. Opinion and Consent of Dechert Price & Rhoads, filed herewith. 11. Consent of Coopers & Lybrand L.L.P., filed herewith. 12. Reports of Coopers & Lybrand L.L.P., filed herewith, and the following Financial Statements filed electronically on February 29, 1996 and incorporated by reference herein: (a) Annual Report to Shareholders of Ivy Money Market Fund for the year ended December 31, 1995 (b) Annual Report to Shareholders of Ivy Short- Term Bond Fund for the year ended December 31, 1995 13. Not applicable 14. Not applicable 15. (a) Amended and Restated Distribution Plan for Class A shares of Ivy China Region Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund and Ivy Emerging Growth Fund filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (b) Distribution Plan for Class B shares of Ivy China Region Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund and Ivy Emerging Growth Fund filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (c) Distribution Plan for Class C shares of Ivy Growth with Income Fund filed with Post- Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (d) Form of Rule 12b-1 Related Agreement filed with Post-Effective Amendment No. 73 to Registration Statement No. 2-17613 and incorporated by reference herein. (e) Supplement to Master Amended and Restated Distribution Plan for Ivy Fund Class A Shares filed with Post-Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (f) Supplement to Distribution Plan for Ivy Fund Class B Shares filed with Post-Effective Amendment No. 76 to Registration Statement No. 2-17613 and incorporated by reference herein. (g) Supplement to Master Amended and Restated Distribution Plan for Ivy Fund Class A Shares filed with Post-Effective Amendment No. 77 to Registration Statement No. 2-17613 and incorporated by reference herein. (h) Supplement to Distribution Plan for Ivy Fund Class B Shares filed with Post-Effective Amendment No. 77 to Registration Statement No. 2-17613 and incorporated by reference herein. (i) Form of Supplement to Distribution Plan for Ivy Growth with Income Fund Class C Shares (Redesignation as Class D Shares) filed with Post-Effective Amendment No. 84 to Registration Statement No. 2-17613 and incorporated by reference herein. (j) Form of Distribution Plan for Class C shares of Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy International Bond Fund, Ivy Latin America Strategy Fund and Ivy New Century Fund filed with this Post-Effective Amendment No. 85 to Registration Statement No. 2-17613. 16. Schedule of Computation of Standardized Performance Quotations filed with Post-Effective Amendment No. 71 to Registration Statement No. 2- 17613 and incorporated by reference herein. 17. Financial Data Schedules filed with this Post- Effective Amendment No. 85 to Registration Statement No. 2-17613. 18. (a) Plan adopted pursuant to Rule 18f-3 under the Investment Company Act of 1940 filed with Post-Effective Amendment No. 83 to Registration Statement No. 2-17613 and incorporated by reference herein. (b) Form of Amended and Restated Plan adopted pursuant to Rule 18f-3 under the Investment Company Act of 1940 filed with this Post- Effective Amendment No. 85 to Registration Statement No. 2-17613. 25. Persons Controlled by or Under Common Control with Registrant - Not applicable 26. Number of Holders of Securities (the inception date for Class C shares is April 30, 1996, and therefore there were no Class C shareholders of any Fund as of the date shown below). Fund: Date Class Record Holders Ivy Bond Fund 1/31/96 Class A 5,319 Class B 195 Class C -0- Ivy Canada Fund 1/31/96 Class A 2,941 Class B 102 Ivy China Region 1/31/96 Class A 2,302 Class B 1,213 Ivy Emerging 1/31/96 Class A 3,800 Growth Fund Class B 1,718 Ivy Global Fund 1/31/96 Class A 1,518 Class B 378 Ivy Growth Fund 1/31/96 Class A 32,531 Class B 210 Ivy Growth with 1/31/96 Class A 5,156 Income Fund Class B 766 Class C* 90 Ivy International 1/31/96 Class A 16,002 Fund Class B 6,726 Class I 171 Ivy International 1/31/96 Class A -0- Bond Fund Class B -0- Ivy Latin America 1/31/96 Class A 262 Strategy Fund Class B 133 Ivy Money Market 1/31/96 Class A 2,578 Fund Class B 118 Ivy New Century 1/31/96 Class A 372 Fund Class B 133 Ivy Short-Term 1/31/96 Class A 280 Bond Fund Class B 6 Class I -0- * Effective April 30, 1996, Class C shares of Ivy Growth with Income Fund will be redesignated as "Ivy Growth with Income- - Class D". 27. Indemnification The information required by this item is incorporated by reference to Item 27 of Part C of Post-Effective Amendment No. 48 to Registrant's Registration Statement on Form N-1A under the Securities Act of 1933 (File No. 2-17613). Mackenzie Investment Management Inc. ("Mackenzie") has agreed to indemnify certain disinterested Trustees of the Fund for legal fees and court costs, not exceeding $250,000 in the aggregate, except to the extent that indemnification is otherwise provided by the Fund or such fees or costs are covered by insurance. Mackenzie is not obligated to indemnify any such Trustee if he is finally adjudicated by the SEC or any court to have acted in bad faith or with gross negligence or willful misconduct with respect to any Board action in connection with Mackenzie's purchase of all of the outstanding capital stock of Ivy Management, Inc. Mackenzie has also agreed to indemnify the selling shareholders, consisting of William M. Watson and a company controlled by Michael R. Peers (Trustees and Officers of Ivy Fund), against a variety of matters with respect to the sale of such stock to Mackenzie. 28. Business and Other Connections of Investment Adviser Information Regarding Adviser and Subadviser Under Advisory Arrangements. Reference is made to the Form ADV of each of Ivy Management, Inc., the adviser to the Trust, Mackenzie Financial Corporation, the adviser to Ivy Canada Fund, and Northern Cross Investments Limited (the successor to Boston Overseas Investors, Inc.), the subadviser to Ivy International Fund. The list required by this Item 28 of officers and directors of Ivy Management, Inc. and Northern Cross Investments Limited, together with information as to any other business profession, vocation or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated by reference to Schedules A and D of each firm's respective Form ADV. 29. Principal Underwriters (a) Mackenzie Ivy Funds Distribution, Inc. ("MIFDI"), Via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, Florida 33432, Registrant's distributor, is a subsidiary of Mackenzie Investment Management Inc. ("MIMI"), Via Mizner Financial Plaza, 700 South Federal Highway, Suite 300, Boca Raton, Florida 33432. MIFDI also serves as the distributor for Mackenzie Series Trust. MIFDI is the successor to MIMI's distribution activities. (b) The information required by this Item 29 regarding each director, officer or partner of MIFDI is incorporated by reference to Schedule A of Form BD filed by MIFDI pursuant to the Securities Exchange Act of 1934. (c) Not applicable 30. Location of Accounts and Records The information required by this item is incorporated by reference to Item 7 of Part II of Post-Effective Amendment No. 46 to Registration Statement No. 2-17613. 31. Not applicable 32. Undertakings (a) Not applicable (b) Not applicable (c) Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of Registrant's latest annual report to shareholders, upon request and without charge. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment No. 85 to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 85 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, in the Commonwealth of Massachusetts, on the 25th day of April, 1996. IVY FUND By: MICHAEL G. LANDRY* President *By: JOSEPH R. FLEMING Attorney-in-fact Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 85 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURES TITLE DATE MICHAEL G. LANDRY* Trustee and 4/25/96 President (Chief Executive Officer) JOHN S. ANDEREGG, JR.* Trustee 4/25/96 PAUL H. BROYHILL* Trustee 4/25/96 STANLEY CHANNICK* Trustee 4/25/96 FRANK W. DEFRIECE, JR.* Trustee 4/25/96 ROY J. GLAUBER* Trustee 4/25/96 MICHAEL R. PEERS* Trustee and 4/25/96 Chairman of the Board JOSEPH G. ROSENTHAL* Trustee 4/25/96 RICHARD N. SILVERMAN* Trustee 4/25/96 J. BRENDAN SWAN* Trustee 4/25/96 C. WILLIAM FERRIS* Treasurer (Chief 4/25/96 Financial Officer) *By: JOSEPH R. FLEMING Attorney-in-fact * Executed pursuant to powers of attorney filed with Post- Effective Amendments Nos. 69, 73, 74 and 84 to Registration Statement No. 2-17613. EXHIBIT INDEX 10 Opinion and Consent of Dechert Price & Rhoads 11 Consent of Coopers & Lybrand L.L.P. 12 Reports of Coopers & Lybrand L.L.P. relating to the Financial Statements and Financial Highlights included in the December 31, 1995 Annual Reports to Shareholders of Ivy Money Market Fund and Ivy Short-Term Bond Fund 15(j) Form of Distribution Plan for Class C shares of Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy International Bond Fund, Ivy Latin America Strategy Fund and Ivy New Century Fund 17 Financial Data Schedules 18(b) Form of Amended and Restated Plan adopted pursuant to Rule 18f-3 under the Investment Company Act of 1940 EX-99.B10 2 EXHIBIT 10 April 25, 1996 Ivy Fund Via Mizner Financial Plaza 700 South Federal Highway Suite 300 Boca Raton, Florida 33432 Dear Sirs: As counsel for Ivy Fund (the "Trust"), we are familiar with the registration of the Trust under the Investment Company Act of 1940, as amended (the "1940 Act") (File No. 811-1028), and the registration statement relating to its shares of beneficial interest (the "Shares") filed under the Securities Act of 1933, as amended (File No. 2-17613)(the "Registration Statement"). We have also examined such other records of the Trust, agreements, documents and instruments as we deemed appropriate. Based upon the foregoing, it is our opinion that the Shares have been duly authorized and, when issued and sold at the public offering price contemplated by the Registration Statement and delivered by the Trust against receipt of the net asset value of the Shares, will be issued as fully paid and nonassessable Shares of the Trust. We consent to the filing of this opinion on behalf of the Trust with the Securities and Exchange Commission in connection with the filing of Post-Effective Amendment No. 85 to the Registration Statement. Very truly yours, DECHERT PRICE & RHOADS EX-99.B11 3 EXHIBIT 11 CONSENT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees of Ivy Fund We hereby consent to the incorporation by reference and inclusion in Post-Effective Amendment No. 85 to the Registration Statement on Form N-1A (File No. 2-17613, hereafter the "Registration Statement") of Ivy Fund of our reports dated February 16, 1996, on our audits of the financial statements and financial highlights of Ivy Money Market Fund and Ivy Short-Term Bond Fund appearing in the December 31, 1995 Annual Reports to Shareholders of the Funds, which annual reports are incorporated by reference in Post-Effective Amendment No. 85 to the Registration Statement. We also consent to the reference to our Firm under the caption "Financial Highlights" in each Fund's Prospectus and "Auditors" in each Fund's Statement of Additional Information. COOPERS & LYBRAND L.L.P. Fort Lauderdale, Florida April 25, 1996 EX-99.B12 4 EXHIBIT 12 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Trustees of Ivy Money Market Fund (the Fund) We have audited the accompanying statement of assets and liabilities of the Fund, including the schedule of portfolio investments, as of December 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended December 31, 1991, were audited by other auditors, whose report, dated January 31, 1992, expressed an unqualified opinion on the selected per share data and ratios. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Fort Lauderdale, Florida February 16, 1996 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Trustees of Ivy Short-Term Bond Fund (the Fund) We have audited the accompanying statement of assets and liabilities of the Fund, including the schedule of portfolio investments, as of December 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for the six month period ended December 31, 1994 and for the year ended December 31, 1995, and the financial highlights for each of the periods indicated. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for the six month period ended December 31, 1994 and for the year ended December 31, 1995, and the financial highlights for each of the periods indicated, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Fort Lauderdale, Florida February 16, 1996 EX-99.B15J 5 EXHIBIT 15(J) DISTRIBUTION PLAN FOR IVY FUND CLASS C SHARES WHEREAS, Ivy Fund (the "Trust") is registered as an open-end investment company under the Investment Company Act of 1940, as amended (the "Act"), and consists of one or more separate investment portfolios (the "Portfolios") as may be established and designated from time to time; WHEREAS, the Trust and Mackenzie Ivy Funds Distribution, Inc. (the "Distributor"), a broker-dealer registered under the Securities Exchange Act of 1934, have entered into a Distribution Agreement pursuant to which the Distributor acts as a distributor of shares of the Trust for sale to the public; and WHEREAS, the Board of Trustees of the Trust has determined to adopt a Plan (the "Plan"), in accordance with the requirements of the Act, and determined that there is a reasonable likelihood that the Plan will benefit the Trust and its shareholders. NOW THEREFORE, the Trust hereby adopts the Plan to apply only to its Class C shares on the following terms and conditions: 1. The Plan will pertain to the Class C shares of Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy International Fund, Ivy International Bond Fund, Ivy Latin America Strategy Fund and Ivy New Century Fund, and to the Class C shares of those Portfolios as shall be designated from time to time by the Board of Trustees in any supplement to the Plan ("Supplement"). 2. The Trust shall pay the Distributor a fee for distribution of the Class C shares of each Portfolio at the annual rate of 0.75% of that Portfolio's average daily net assets attributable to that Portfolio's Class C shares. Such fee shall be calculated and accrued daily and paid monthly or at such other intervals as the Trustees shall determine, subject to any applicable restriction imposed by rules of the National Association of Securities Dealers, Inc. If this Plan is terminated, the Trust will owe no payments to the Distributor other than any portion of the distribution fee accrued through the effective date of termination but unpaid as of such date. 3. The amount set forth in paragraph 2 of this Plan shall be paid for the Distributor's services as distributor of the Class C shares of a Portfolio in connection with any activities or expenses primarily intended to result in the sale of the Class C shares of a Portfolio, including but not limited to, compensation to broker-dealers that have entered into a Dealer Agreement with the Distributor, bonuses and other incentives paid to broker-dealers, compensation to and expenses of employees of the Distributor who engage in or support distribution of a Portfolio's Class C shares; telephone expenses; interest expense[FN][Only to the extent not prohibited by a regulation or order of the Securities and Exchange Commission]; printing of prospectuses and reports for other than existing shareholders; preparation, printing and distribution of sales literature and advertising materials; and profit on the foregoing. 4. The Trust will reimburse the Distributor for payments made to brokers, which are unaffiliated with the Distributor, in connection with account maintenance and personal services to shareholders (the "Service Fee"). The services for which the Service Fee may be made include, among others, advising clients or customers regarding the purchase, sale or retention of Class C shares of a Portfolio, answering routine inquiries concerning a Portfolio, assisting shareholders in changing options or enrolling in specific plans and providing shareholders with information regarding the Portfolio and related developments. The Distributor will be reimbursed for such payments, subject to any applicable restriction imposed by the Rules of the National Association of Securities Dealers, Inc., up to an amount equal on an annual basis to 0.25% of the average daily net asset value of outstanding Class C shares of a Portfolio which are registered in the name of a broker as nominee or held in a shareholder account that designates a broker as broker of record. Service Fees for which the Distributor will be reimbursed may also be used to compensate certain entities in addition to brokers, such as banks and investment advisers, for rendering certain shareholder liaison services similar to those services rendered for Service Fees, pursuant to a related agreement between the Distributor and such entity. 5. The Plan shall not take effect with respect to Class C of a Portfolio until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding voting securities of Class C of that Portfolio. With respect to the submission of the Plan for such a vote, it shall have been effectively approved with respect to Class C of a Portfolio if a majority of the outstanding voting securities of Class C of the Portfolio votes for approval of the Plan, notwithstanding that the matter has not been approved by a majority of the outstanding voting securities of the Trust or of any other Portfolio or class. 6. The Plan shall not take effect until it has been approved, together with any related agreements and supplements, by votes of a majority of both (a) the Board of Trustees of the Trust, and (b) those Trustees of the Trust who are not "interested persons" (as defined in the Act) and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to it (the "Plan Trustees") cast in person at a meeting (or meetings) called for the purpose of voting on the Plan and such related agreements. 7. The Plan shall continue in effect so long as such continuance is specifically approved at least annually in the manner provided for approval of the Plan in paragraph 6. 8. Any person authorized to direct the disposition of monies paid or payable by the Trust pursuant to the Plan or any related agreement shall provide to the Trust's Board of Trustees, and the Board shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. 9. Any agreement related to the Plan shall be in writing and shall provide: (a) that such agreement may be terminated at any time as to a Portfolio, without payment of any penalty, by vote of a majority of the Plan Trustees or by vote of a majority of the outstanding voting securities of Class C of the Portfolio, on not more than sixty (60) days' written notice to any other party to the agreement; and (b) that such agreement shall terminate automatically in the event of its assignment. 10. The Plan may be terminated at any time with respect to Class C of a Portfolio, without payment of any penalty, by vote of a majority of the Plan Trustees, or by vote of a majority of the outstanding voting securities of Class C of the Portfolio. 11. The Plan may be amended at any time with respect to Class C of a Portfolio by the Board of Trustees, provided that (a) any amendment to increase materially the costs which the Portfolio may bear for distribution (including the Service Fee) pursuant to the Plan shall be effective only upon approval by a vote of a majority of the outstanding voting securities of Class C of the Portfolio, and (b) any material amendments of the terms of the Plan shall become effective only upon approval as provided in paragraph 6 hereof. 12. While the Plan is in effect, the selection and nomination of Trustees who are not interested persons (as defined in the Act) of the Trust shall be committed to the discretion of the Trustees who are not interested persons. 13. The Trust shall preserve copies of the Plan, any related agreement and any report made pursuant to paragraph 8 hereof, for a period of not less than six (6) years from the date of the Plan, such agreement or report, as the case may be, the first two (2) years of which shall be in an easily accessible place. 14. It is understood and expressly stipulated that neither the holders of shares of the Trust nor any Trustee, officer, agent or employees of the Trust shall be personally liable hereunder, nor shall any resort be had to other private property for the satisfaction of any claim or obligation hereunder, but the Trust only shall be liable. 15. This Distribution Plan shall become effective as of the date on which the Registration Statement pertaining to the Class C shares of the Funds, filed with the Securities and Exchange Commission on or about February 29, 1996 pursuant to Rule 485(a) under the Securities Act of 1933, first becomes effective. IN WITNESS WHEREOF, the Trust has adopted this Distribution Plan as of the 10th day of February, 1996. IVY FUND By: ______________________________ Michael G. Landry, President EX-99.B18B 6 EXHIBIT 18(B) IVY FUND PLAN PURSUANT TO RULE 18F-3 UNDER THE INVESTMENT COMPANY ACT OF 1940 (As Amended and Restated on April 30, 1996) I. INTRODUCTION In accordance with Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act"), this Plan describes the multi-class structure that will apply to certain series of Ivy Fund (each, a "Fund" and collectively, the "Funds"), including the separate class arrangements for the service and distribution of shares, the method for allocating the expenses and income of each Fund among its classes, and any related exchange privileges and conversion features that apply to the different classes. II. THE MULTI-CLASS STRUCTURE Each of the following Funds is authorized to issue three classes of shares, identified as Class A, Class B and Class C, respectively: Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy Latin America Strategy Fund, Ivy Money Market Fund [[FN1: The separation of Ivy Money Market Fund shares into three separate classes has been authorized as a means of enabling the Funds' transfer agent to track the contingent deferred sales charge period that applies to Class B and Class C shares of other Ivy or Mackenzie Funds that are being exchanged for shares of Ivy Money Market Fund. In all other relevant respects, the three classes of Ivy Money Market Fund shares are identical (i.e., having the same arrangement for shareholder services and the distribution of securities), and are not subject to any sales load other than in connection with the redemption of Class B or Class C shares of that have been acquired pursuant to an exchange from another Ivy or Mackenzie Fund. (See Section III.D.)]], Ivy International Fund, Ivy International Bond Fund and Ivy New Century Fund. Ivy Bond Fund and Ivy International Fund are also authorized to issue a fourth class of shares, identified as Class I. Ivy Short-Term Bond Fund is authorized to issue Class A, Class B and Class I shares. Shares of each class of a Fund represent an equal pro rata interest in the underlying assets of that Fund, and generally have identical voting, dividend, liquidation, and other rights, preferences, powers, restrictions, limitations, qualifications and terms and conditions, except that: (a) each class shall have a different designation; (b) each class shall bear certain class- specific expenses, as described more fully in Section III.C.2., below; (c) each class shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement; and (d) each class shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. Each class of shares shall also have the distinct features described in Section III, below. III. CLASS ARRANGEMENTS A. FRONT-END SALES CHARGES AND CONTINGENT DEFERRED SALES CHARGES Class A shares shall be offered at net asset value plus a front-end sales charge. The front-end sales charge shall be in such amount as is disclosed in each Fund's current prospectus and shall be subject to reductions for larger purchases and such waivers or reductions as are determined or approved by the Board of Trustees. Class A shares generally will not be subject to a CDSC, although a CDSC may be imposed in certain limited cases as disclosed in each Fund's current prospectus or prospectus supplement. Class B and Class C shares shall be offered at net asset value without the imposition of a front-end sales charge. A CDSC in such amount as is described in each Fund's current prospectus or prospectus supplement shall be imposed on Class B and Class C shares, subject to such waivers or reductions as are determined or approved by the Board of Trustees. Class I shares are not subject to a front-end sales charge or a CDSC. B. RULE 12B-1 PLANS Each Fund (other than Ivy Money Market Fund) has adopted a service and distribution plan pursuant to Rule 12b-1 under the 1940 Act (a "12b-1 plan") under which it pays to Ivy Mackenzie Distributors, Inc. (the "Distributor") an annual fee based on the average daily net assets value of the Fund's outstanding Class A, Class B and Class C shares, respectively.[[FN2: Class I shares are not subject to Rule 12b-1 service or distribution fees.]] The maximum fees currently charged to each Fund under its 12b-1 plan are set forth in the table below, and are expressed as a percentage of the Fund's average daily net assets.[[FN3: Fees for services in connection with the Rule 12b-1 plans will be consistent with any applicable restriction imposed by the National Association of Securities Dealers, Inc.]] The services that the Distributor provides in connection with each Rule 12b-1 plan for which service fees[[FN4: Each Fund pays the Distributor at the annual rate of up to 0.25% of the average daily net asset value attributable to its Class A, Class B and Class C shares, respectively. Ivy Canada Fund pays an additional service-related fee of 0.15% of the average daily net asset value attributable to its Class A shares. In addition, each Fund (other than Ivy Canada Fund and Ivy Short-Term Bond Fund) pays the Distributor a fee for other distribution services at the annual rate of 0.75% of the Fund's average daily net assets attributable to its Class B and Class C shares. Ivy Canada Fund and Ivy Short-Term Bond Fund pay the Distributor an additional amount for other distribution services at the annual rate of 0.60% and 0.50%, respectively, of average daily net assets attributable to their respective Class B and Class C shares.]] are paid include, among other things, advising clients or customers regarding the purchase, sale or retention of a Fund's Class A, Class B or Class C shares, answering routine inquiries concerning the Fund, assisting shareholders in changing options or enrolling in specific plans and providing shareholders with information regarding the Fund and related developments. The other distribution services provided by the Distributor in connection with each Fund's Rule 12b-1 plan include any activities primarily intended to result in the sale of the Fund's Class B and Class C shares. For such distribution services, the Distributor is paid for, among other things, compensation to broker-dealers and other entities that have entered into agreements with the Distributor; bonuses and other incentives paid to broker-dealers or such other entities; compensation to and expenses of employees of the Distributor who engage in or support distribution of a Fund's Class B or Class C shares; telephone expenses; interest expense (only to the extent not prohibited by a regulation or order of the SEC); printing of prospectuses and reports for other than existing shareholders; and preparation, printing and distribution of sales literature and advertising materials. RULE 12b-1 FEES CLASS B AND CLASS A CLASS A CLASS C SHARES SHARES SHARES (SERVICE AND (SERVICE (DISTRIBUTION DISTRIBUTION FUND NAME FEE) FEES) FEES) Ivy Bond Fund 0.25% 0.00% 1.00% Ivy Canada Fund 0.25% 0.15% 1.00% Ivy China Region 0.25% 0.00% 1.00% Fund Ivy Emerging 0.25% 0.00% 1.00% Growth Fund Ivy Global Fund 0.25% 0.00% 1.00% Ivy Growth Fund 0.25% 0.00% 1.00% Ivy Growth with 0.25% 0.00% 1.00% Income Fund Ivy International 0.25% 0.00% 1.00% Bond Fund Ivy International 0.25% 0.00% 1.00% Fund Ivy Latin America 0.25% 0.00% 1.00% Strategy Fund Ivy Money Market 0.00% 0.00% 0.00% Fund[FN5] Ivy New Century 0.25% 0.00% 1.00% Fund Ivy Short-Term 0.25% 0.00% 0.75%[FN6] Bond Fund [FN5] See footnote 1. [FN6] Ivy Short-Term Bond Fund has no Class C shares. C. ALLOCATION OF EXPENSES AND INCOME 1. "TRUST" AND "FUND" EXPENSES The gross income, realized and unrealized capital gains and losses and expenses (other than "Class Expenses," as defined below) of each Fund shall be allocated to each class on the basis of its net asset value relative to the net asset value of the Fund. Expenses so allocated include expenses of Ivy Fund that are not attributable to a particular Fund or class of a Fund ("Trust Expenses") and expenses of a Fund not attributable to a particular class of the Fund ("Fund Expenses"). Trust Expenses include, but are not limited to, Trustees' fees and expenses; insurance costs; certain legal fees; expenses related to shareholder reports; and printing expenses. Fund Expenses include, but are not limited to, certain registration fees (i.e., state registration fees imposed on a Fund-wide basis and SEC registration Fees ); custodial fees; transfer agent fees; advisory fees; fees related to the preparation of separate documents of a particular Fund, such as a separate prospectus; and other expenses relating to the management of the Fund's assets. 2. "CLASS" EXPENSES The types of expenses attributable to a particular class ("Class Expenses") include: (a) payments pursuant to the Rule 12b-1 plan for that class; (b) transfer agent fees attributable to a specific class[[FN7: Class I shares of Ivy Bond Fund, Ivy Short-Term Bond Fund and Ivy International Fund are lower than the corresponding expenses for such Funds' other classes of shares, because Class I shares bear lower transfer agency fees and bear no distribution or service fees. For example, while Class A, Class B and Class C shares bear an annual transfer agency fee of $20.75 per open account, Class I shares bear an annual transfer agency fee of only $10.25 per open account. In addition, Class I shares of Ivy Bond Fund and Ivy International Fund bear lower administrative services fees relative to these Funds' other classes of shares (i.e., Class I shares of the Funds pay a monthly administrative services fee based upon each Fund's average daily net assets at the annual rate of only 0.01%, while Class A, Class B and Class C shares of these two Funds pay such a fee at the annual rate of 0.10%).]]; (c) printing and postage expenses related to preparing and distributing shareholder reports, prospectuses and proxy materials; (d) registration fees (other than those set forth in Section C.1. above); (e) the expense of administrative personnel and services as required to support the shareholders of a specific class; (f) litigation or other legal expenses relating solely to a specific class of shares; (g) Trustees' fees incurred as a result of issues relating to a specific class of shares; and (h) the expense of holding meetings solely for shareholders of a specific class. Expenses described in subpart (a) of this paragraph must be allocated to the class for which they are incurred. All other expenses described in this paragraph may (but need not) be allocated as Class Expenses, but only if Ivy Fund's Board of Trustees' determines, or Ivy Fund's President and Secretary/Treasurer have determined, subject to ratification by the Board of Trustees, that the allocation of such expenses by class is consistent with applicable legal principles under the 1940 Act and the Internal Revenue Code of 1986, as amended. In the event that a particular expense is no longer reasonably allocable by class or to a particular class, it shall be treated as a Trust Expense or Fund Expense, and in the event a Trust Expense or Fund Expense becomes reasonably allocable as a Class Expense, it shall be so allocated, subject to compliance with Rule 18f-3 and to approval or ratification by the Board of Trustees. 3. WAIVERS OR REIMBURSEMENTS OF EXPENSES Expenses may be waived or reimbursed by any adviser to Ivy Fund, by Ivy Fund's underwriter or any other provider of services to Ivy Fund without the prior approval of Ivy Fund's Board of Trustees. D. EXCHANGE PRIVILEGES Shareholders of each Fund have exchange privileges with the other Funds and with the five funds that comprise Mackenzie Series Trust (together, with the Funds, the "Ivy and Mackenzie Funds").[[FN8: Other exchange privileges, not described herein, exist under certain other circumstances, as described in each Fund's current prospectus or prospectus supplement.]] 1. CLASS A: INITIAL SALES CHARGE SHARES. Class A shareholders may exchange their Class A shares ("outstanding Class A shares") for Class A shares of another Ivy or Mackenzie Fund (or for shares of another Ivy or Mackenzie Fund that currently offers only a single class of shares) ("new Class A Shares") on the basis of the relative net asset value per Class A share, plus an amount equal to the difference, if any, between the sales charge previously paid on the outstanding Class A shares and the sales charge payable at the time of the exchange on the new Class A shares. Incremental sales charges are waived for outstanding Class A shares that have been invested for 12 months or longer. CONTINGENT DEFERRED SALES CHARGE SHARES. Class A shareholders may exchange their Class A shares subject to a contingent deferred sales charge ("CDSC"), as described in the Prospectus ("outstanding Class A shares"), for Class A shares of another Ivy or Mackenzie Fund (or for shares of another Ivy or Mackenzie Fund that currently offers only a single class of shares) ("new Class A shares") on the basis of the relative net asset value per Class A share, without the payment of a CDSC that would otherwise be due upon the redemption of the outstanding Class A shares. Class A shareholders of a Fund exercising the exchange privilege will continue to be subject to the Fund's CDSC schedule (or period) following an exchange, unless the CDSC schedule that applies to the new Class A shares is higher (or such period is longer) than the CDSC schedule (or period), if any, applicable to the outstanding Class A shares, in which case the schedule (or period) of the Fund into which the exchange is made shall apply. 2. CLASS B AND CLASS C: Shareholders may exchange their Class B or Class C shares ("outstanding Class B shares" or "outstanding Class C shares," respectively) for Class B (or Class C) shares of another Ivy or Mackenzie Fund ("new Class B shares" or "new Class C shares," respectively) on the basis of the net asset value per Class B (or Class C) share, without the payment of any CDSC that would otherwise be due upon the redemption of the outstanding Class B (or Class C) shares. Class B and Class C shareholders of a Fund exercising the exchange privilege will continue to be subject to the Fund's CDSC schedule (or period) following an exchange, unless, in the case of Class B shareholders, the CDSC schedule that applies to the new Class B shares is higher (or such period is longer) than the CDSC schedule (or period) applicable to the outstanding Class B shares, in which case the schedule (or period) of the Fund into which the exchange is made shall apply. 3. CLASS I: Class I shareholders may exchange their outstanding Class I shares for Class I shares of another Fund or Mackenzie Fund on the basis of the net asset value per Class I share. 4. GENERAL: Shares resulting from the reinvestment of dividends and other distributions will not be charged an initial sales charge or CDSC when exchanged into another Ivy or Mackenzie Fund. With respect to Fund shares subject to a CDSC, if less than all of an investment is exchanged out of the Fund, the shares exchanged will reflect, pro rata, the cost, capital appreciation and/or reinvestment of distributions of the original investment as well as the original purchase date, for purposes of calculating any CDSC for future redemptions of the exchanged shares. E. CONVERSION FEATURE Class B shares of a Fund convert automatically to Class A shares of the Fund as of the close of business on the first business day after the last day of the calendar quarter in which the eighth anniversary of the purchase date of the Class B shares occurs. The conversion will be based on the relative net asset values per share of the two classes, without the imposition of any sales load, fee or other charge. For purposes of calculating the eight year holding period, the "purchase date" shall mean the date on which the Class B shares were initially purchased, regardless of whether the Class B shares that are subject to the conversion were obtained through an exchange (or series of exchanges) from a different Ivy or Mackenzie Fund. For purposes of conversion of Class B shares, Class B shares acquired through the reinvestment of dividends and capital gain distributions paid in respect of Class B shares will be held in a separate sub- account. Each time any Class B shares in the shareholder's regular account (other than those shares in the sub-account) convert to Class A shares, a pro rata portion of the Class B shares in the sub-account will also convert to Class A shares. The portion will be determined by the ratio that the shareholder's Class B shares converting to Class A shares bears to the shareholder's total Class B shares not acquired through the reinvestment of dividends and capital gain distributions. IV. BOARD REVIEW A. INITIAL APPROVAL The Board of Trustees of Ivy Fund, including a majority of the Trustees who are not interested persons of Ivy Fund, as defined under the 1940 Act (the "Independent Trustees"), at a meeting held on December 1-2, 1995, initially approved this Plan based on a determination that the Plan, including the expense allocation, is in the best interests of each class of shares of each Fund individually and Ivy Fund as a whole.[[FN9: The Plan, as initially approved, pertained only to the Class A and Class B shares of the Funds, and the Class I shares of Ivy Bond Fund, Ivy Short-Term Bond Fund and Ivy International Fund. By written consent dated as of February 29, 1996, the Trustees of Ivy Fund approved the establishment and designation of Class C shares of the Funds (other than Ivy Short-Term Bond Fund), the effective date of which will coincide with the date that the Registration Statement for Class C shares filed with the SEC on or about February 29, 1996 pursuant to Rule 485(a) under the Securities Act of 1933 first becomes effective (i.e., 60 days after filing).]] B. APPROVAL OF AMENDMENTS Before any material amendments to this Plan, Ivy Fund's Board of Trustees, including a majority of the Independent Trustees, must find that the Plan, as proposed to be amended (including any proposed amendments to the method of allocating class and/or fund expenses), is in the best interests of each class of shares of each Fund individually and Ivy Fund as a whole. In considering whether to approve any proposed amendment(s) to the Plan, the Trustees of Ivy Fund shall request and evaluate such information as they consider reasonably necessary to evaluate the proposed amendment(s) to the Plan. Such information shall address the issue of whether any waivers or reimbursements of advisory or administrative fees could be considered a cross-subsidization of one class by another, and other potential conflicts of interest between classes. C. PERIODIC REVIEW The Board of Trustees of Ivy Fund shall review the Plan as frequently as it deems necessary, consistent with applicable legal requirements. V. EFFECTIVE DATE The Plan first became effective as of January 1, 1996. EX-27.041 7
6 041 IVY MONEY MARKET FUND YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 24,677,123 24,677,123 29,164 145,292 0 24,851,579 0 0 242,817 242,817 0 24,608,762 24,608,762 26,827,405 0 0 0 0 0 24,608,762 0 1,594,570 0 235,334 1,359,236 0 0 1,359,236 0 1,359,236 0 0 67,708,114 71,172,047 1,245,290 (2,218,643) 0 0 0 0 110,748 0 384,102 27,686,353 1.00 .05 0 .05 0 0 1.00 .85 0 0
EX-27.121 8 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. ISTBF-1-496
6 121 IVY SHORT-TERM BOND FUND - CLASS A YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 5,468,898 5,580,789 92,304 391,662 0 6,064,755 0 0 10,836 10,836 0 6,723,281 619,271 903,236 25,217 0 (806,470) 0 111,891 6,053,919 0 452,627 0 65,587 387,040 (321,600) 313,952 379,392 0 385,327 0 0 29,579 342,312 28,768 (2,517,739) 27,935 (645,132) 0 0 42,049 0 229,642 6,968,301 9.44 .80 (.02) .54 0 0 9.73 .93 0 0
EX-27.122 9
6 122 IVY SHORT-TERM BOND FUND - CLASS B OTHER DEC-31-1995 JAN-01-1995 DEC-01-1995 5,468,898 5,580,789 92,304 391,662 0 6,064,755 0 0 10,836 10,836 0 6,723,281 2,751 0 25,217 0 (806,470) 0 111,891 6,053,919 0 452,627 0 65,587 387,040 (321,600) 313,952 379,392 0 2,285 0 0 20,705 18,123 169 (2,517,739) 27,935 (645,132) 0 0 42,049 0 229,642 39,775 9.44 .75 .03 .49 0 0 9.73 1.43 0 0
EX-27.123 10
6 123 IVY SHORT-TERM BOND FUND - CLASS I YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 5,468,898 5,580,789 92,304 391,662 0 6,064,755 0 0 10,836 10,836 0 6,723,281 0 0 25,217 0 (806,470) 0 111,891 6,053,919 0 452,627 0 65,587 387,040 (321,600) 313,952 379,392 0 0 0 0 0 0 0 (2,517,739) 27,935 (645,132) 0 0 42,049 0 229,642 0 0 0 0 0 0 0 0 0 0 0
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