[GRAPHIC OMITTED]
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December 31, 1999
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International Solutions I --
Conservative Growth
International Solutions II --
Balanced Growth
International Solutions III --
Moderate Growth
International Solutions IV --
Long-term Growth
International Solutions V --
Aggressive Growth
Market Commentary
As the new year began across the globe, it marked the close of a century full of
events. Nineteen ninety-nine marked the 10-year anniversary of the fall of the
Berlin Wall. Over the past 10 years, the Soviet bloc countries were able to
progress toward a more market-driven economy, similar to that of other European
countries. China followed suit by signing an agreement with the US, and which
opened a path for its participation in the World Trade Organization. Following
this milestone, the Chinese government announced that it would reduce its role
in its domestic economy over the next five years. According to our research,
increased interaction and trade-improved relations among European countries and
the Americas has had a dramatic impact on the world economies. From the
inception of International Solutions on July 1, 1999 through December 31, 1999,
Hong Kong's Hang Seng Index was up 25.3%; the Morgan Stanley Capital
International (MSCI) Emerging Markets Free Index was up 18.9%; the MSCI Emerging
Markets Free Latin America Index was up 21.2%; the MSCI Asia Pacific
(Excluding-Japan) Index was up 11.6%; and the MSCI World Index was up 15.1%.
This was a good time to be investing internationally.
Over the last year, Japan experienced low inventory levels, which in our
view resulted in increased industrial production. As a result, we believe
investors began investing in Japan with a renewed confidence in the economy
coupled with the recovery of many Japanese companies. According to our research,
contributing to the optimism for Japan in 1999 was the government's aggressive
fiscal policy. Not to be excluded from the recovery swing, our research
indicates that the Asia Pacific region experienced a stronger-than-expected
rebound with increased exports and more domestic demand for goods and services.
Our research confirms that economic activity accelerated steadily in Europe
over the course of 1999. Europe, following the introduction of the euro in
January 1999, went through a period of consolidation, which we believe forced
management to look for greater efficiencies. Restructuring played a major role
in many European businesses and assisted their efforts to eliminate the excess
from cost structures.
In Brazil, where its currency, the real, was devalued in January 1999,
according to our research GDP and inflation were only mildly affected.
With the shift to more market-friendly policies, companies now have
<PAGE>
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.821.4347
Board of Trustees
- -----------------
James W. Broadfoot
Keith J. Carlson
Ian Carmichael
P. Rodney Cunningham
Gary R. Ellis
Officers
- --------
Keith J. Carlson, Chairman
James W. Broadfoot, President
Ted A. Parkhill, Vice President
C. William Ferris, Secretary/Treasurer
Legal Counsel
- -------------
Dechert Price & Rhoads
Boston, Massachusetts
Custodian
- ---------
Brown Brothers Harriman & Co.
Boston, Massachusetts
Transfer Agent
- --------------
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, Florida 33431-0922
800.821.4350
Auditors
- --------
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
Distributor
- -----------
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.821.4347
[GRAPHIC OMITTED]
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INTERNATIONAL SOLUTIONS
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access to more channels of distribution than ever before. We believe that
foreign economies strengthened throughout 1999 as the effects of increased
trade, domestic demand, and relaxed government policies stimulated the global
markets.
The Five International Solutions Funds
The core concept of the International Solutions asset allocation program is to
construct well-diversified investment portfolios of international mutual funds
that are less volatile than portfolios that emphasize a particular investment
style or region, while providing exposure to capital markets that we believe are
expected to offer attractive long-term returns based on their respective levels
of risk. The approach is specifically strategic in that it is based on
assessments of the long-term risk and return characteristics and capabilities of
these markets, not on short-term relative investment outcomes among them.
The five International Solutions portfolios can be represented by
successive points along a risk/return continuum, ranging from lower risk and
lower expected return to higher risk and higher expected return. Each Fund
typically invests in eight to 15 international funds that combine to provide an
overall investment strategy that is consistent with the risk and return
objectives of each International Solutions fund. The selection of the underlying
funds that comprise each Fund's portfolio is based on Modern Portfolio Theory,
which provides an analytical framework for transforming fund characteristics
into a coherent portfolio structure. The ongoing monitoring and rebalancing
carried out in an effort to maintain a more stable underlying fund composition
provides a managed, disciplined approach to international investing.
The following will detail the objectives, composition, and international
market conditions that have affected the five International Solutions funds
since their inception on July 1, 1999 through December 31, 1999.
INTERNATIONAL SOLUTIONS I --
CONSERVATIVE GROWTH
The primary investment objective of this Fund is capital preservation with
moderate current income, and secondarily capital appreciation. Three of the
underlying funds that make up the Conservative Growth Fund invest in fixed
income securities, which accounted for 46% of the market value of the Fund.
While our research shows these investments limited the volatility of the Fund
between its launch on July 1, 1999 and the end of the year, the Fund's return
has been adversely affected by this foreign bond content. This reflects the fact
that the global bonds performed less favorably than global equities, excluding
the US. Specifically, the Salomon World Government Bond Index returned 3.1% for
the period, compared to 22.6% for the MSCI World (Excluding-US) Index.
The Fund has a moderate degree of exposure to international equity markets
through investment in eight equity funds. From July 1, 1999 through December 31,
1999, the Fund had exposure to the strong Japanese equity market, which was up
33.9% for the period as measured by the MSCI Japan Index. This helped to improve
the Fund's return and offset the underperformance of the balance of the Pacific
region during this period relative to Japan, and as measured by the MSCI Pacific
Free (Excluding-Japan) Index, which was up 12.7%; and relative to overall global
returns, excluding the US, as measured by the MSCI World (Excluding-US) Index,
which was up 22.6%. The Fund benefited during the period from its international
mandate, as many foreign equity markets (as measured by the MSCI Europe,
Australasia, Far East (EAFE) Index, which was up 22.1%) had higher returns than
the US equity market, as measured by the S&P 500 Index, which was up 7.7% for
the same period. The exposure to emerging markets was small. Although the level
of return derived from this asset class was positive, in our view, it had a
modestly negative impact on the Fund's overall
2
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<PAGE>
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return since it underperformed the other components of the Fund.
INTERNATIONAL SOLUTIONS II --
BALANCED GROWTH
The primary investment objective of the Balanced Growth Fund is a balance of
capital appreciation and capital preservation, with moderate current income. The
Fund's portfolio of underlying funds preserves some degree of stability normally
associated with fixed income securities through a weighting of 25% of market
value in foreign bonds. The majority of the Fund's investments--with a weighting
of 75% of market value--were allocated to 10 international equity funds. The
performance of the Fund has been somewhat adversely affected between its launch
on July 1, 1999 and the end of the year by its foreign bond content. According
to our research, global bonds performed less favorably than global equities,
excluding the US. Specifically, the Salomon World Government Bond Index returned
3.1% for the period, compared to 22.6% for the MSCI World (Excluding-US) Index.
Nonetheless, our research confirms that the bond content of this Fund moderately
reduced its volatility.
In terms of the allocation to the international equity markets, from July
1, 1999 through December 31, 1999, the Fund had exposure to the strong Japanese
equity market, which was up 33.9% for the period as measured by the MSCI Japan
Index. This helped to improve the Fund's return and offset the underperformance
of the balance of the Pacific region during this period relative to Japan, and
as measured by the MSCI Pacific Free (Excluding-Japan) Index, which was up
12.7%; and relative to overall global returns, excluding the US, as measured by
the MSCI (Excluding-US) World Index, which was up 22.6%. The Fund benefited
during the period from its international mandate, as many foreign equity markets
(as measured by the MSCI EAFE Index, which was up 22.1%) had higher returns than
the US equity market, as measured by the S&P 500 Index, which was up 7.7% for
the same period. The Fund's exposure to emerging markets was modest. Although
performance from this asset class was positive, it had a modestly negative
impact on the Fund's return since it underperformed the other components of the
Fund. This Fund's geographic exposure included a 47% weighting in the European
markets, which outperformed the US equity market (as measured by the MSCI Europe
Index, which was up 18.9%, and the S&P 500 Index, which was up 7.7%) during the
period.
INTERNATIONAL SOLUTIONS III --
MODERATE GROWTH
The primary investment objective of this Fund is capital appreciation, with
preservation of capital as a secondary objective. Nine of the underlying funds
invest in equity securities; the exposure to fixed income securities, at 14% of
the Fund, helps to mitigate short-term losses that may occur in volatile equity
markets. The return of the Fund was somewhat adversely affected between its
launch on July 1, 1999 and the end of 1999 by its foreign bond content. Global
bonds performed less favorably than global equities, excluding the US.
Specifically, the Salomon World Government Bond Index returned 3.1% for the
period, compared to 22.6% for the MSCI World (Excluding-US) Index. Nonetheless,
our research confirms that the bond content modestly reduced the volatility of
the Fund.
In terms of the allocation to the international equity markets, from July
1, 1999 through December 31, 1999, the Fund had exposure to the strong Japanese
equity market, which was up 33.9% for the period as measured by the MSCI Japan
Index. This helped to improve the Fund's return and offset the underperformance
of the balance of the Pacific region during this period relative to Japan, and
as measured by the MSCI Pacific Free (Excluding-Japan) Index, which was up
12.7%; and relative to overall global returns, excluding the US, as measured by
the MSCI World (Excluding-US) Index, which was up 22.6%. The Fund benefited
during the period from its international mandate, as many foreign
3
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<PAGE>
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INTERNATIONAL SOLUTIONS
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equity markets (as measured by the MSCI EAFE Index, which was up 22.1%) had
higher returns than the US equity market, as measured by the S&P 500 Index,
which was up 7.7% for the same period. The Fund's exposure to emerging markets
was modest. Although performance from this asset class was positive, it had a
modestly negative impact on the Fund's return since it underperformed the other
components of the Fund. This Fund's geographic exposure included a 47% weighting
in the European markets, which outperformed the US equity market (as measured by
the MSCI Europe Index, which was up 18.9% and the S&P 500 Index, which was up
7.7%) during the period.
INTERNATIONAL SOLUTIONS IV --
LONG-TERM GROWTH
The investment objective of this Fund is capital appreciation without regard to
current income. The 14 underlying funds invest only in equity securities, which
is likely to cause greater fluctuations in the Fund's net asset value than would
be the case with the Conservative Growth, Balanced Growth and Moderate Growth
Funds, which have degrees of exposure to the historically less volatile fixed
income markets.
From July 1, 1999 through December 31, 1999, the Fund had exposure to the
strong Japanese equity market, which was up 33.9% for the period as measured by
the MSCI Japan Index. This helped to improve the Fund's return and offset the
underperformance of the balance of the Pacific region during this period
relative to Japan, and as measured by the MSCI Pacific Free (Excluding-Japan)
Index, which was up 12.7%; and relative to overall global returns, excluding the
US, as measured by the MSCI World (Excluding-US) Index, which was up 22.6%. The
performance of the Fund reflects the favorable impact of the performance of
developed and emerging markets relative to the US market during the period. The
exposure to emerging markets was substantial, at a weighting of 33%. Although
performance from this asset class was positive, it had a modestly negative
impact on the Fund's return since it underperformed the other components of the
Fund. This Fund's geographic exposure included a 49% weighting in the European
markets, which outperformed the US equity market (as measured by the MSCI Europe
Index, which was up 18.9% and the S&P 500 Index, which was up 7.7%) during the
period.
INTERNATIONAL SOLUTIONS V --
AGGRESSIVE GROWTH
The investment objective of this Fund is aggressive capital appreciation without
regard to current income. The 14 underlying funds invest predominantly in equity
securities; approximately 44% of the holdings were in emerging market
securities, which historically have higher projected growth rates than developed
markets. The exposure to emerging markets was substantial. Although the
contribution to performance by this asset class was positive, it had a modestly
negative impact on the Fund's return since it underperformed other components of
the Fund.
From July 1, 1999 through December 31, 1999, the Fund had exposure to the
strong Japanese equity market, which was up 33.9% for the period as measured by
the MSCI Japan Index. This helped to improve the Fund's return and offset the
underperformance of the balance of the Pacific region during this period
relative to Japan, and as measured by the MSCI Pacific Free (Excluding-Japan)
Index, which was up 12.7%; and relative to overall global returns, excluding
the US, as measured by the MSCI World (Excluding-US) Index, which was up 22.6%.
The performance of the Fund reflects the favorable impact of the
outperformance of many developed and emerging markets relative to the US market
(as measured by the S&P 500 Index) during the period. This Fund's geographic
exposure included a 43% weighting in the European markets, which outperformed
the US equity market (as measured by the MSCI Europe Index, which was up 18.9%
and the S&P 500 Index, which was up 7.7%) during the period.
4
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<PAGE>
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INTERNATIONAL SOLUTIONS I --
CONSERVATIVE GROWTH
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY FUNDS -- 65.75% SHARES VALUE
- --------------------------------------------------------------------
Ivy International Fund II - Advisor Class ...... 1,694 $ 20,317
Ivy International Small Companies Fund -
Advisor Class ............................... 634 7,912
Ivy Pan-Europe Fund - Advisor Class ............ 813 10,232
Lazard Emerging Market Fund - Institutional
Shares ...................................... 936 10,019
Lazard International Small Cap Fund -
Institutional Shares ........................ 541 7,639
Scudder International Fund - Class A ........... 579 40,987
The Japan Fund, Inc. ........................... 609 9,995
Warburg Pincus International Equity Fund -
Common Shares ............................... 1,733 48,091
---------
Total Equity Funds (cost -- $130,375)........... 155,192
---------
FIXED INCOME FUNDS -- 46.40% ...................
Ivy International Strategic Bond Fund -
Advisor Class ............................... 9,265 91,723
Lazard International Fixed-Income Fund -
Institutional Shares ........................ 755 7,690
Scudder International Bond Fund ................ 1,031 10,101
---------
Total Fixed Income Funds
(cost -- $107,062)........................... 109,514
---------
TOTAL INVESTMENTS -- 112.15% ...................
(cost -- $237,437) (a)......................... 264,706
LIABILITIES, IN EXCESS OF OTHER
ASSETS -- (12.15%) .......................... (28,669)
---------
NET ASSETS -- 100% ............................. $ 236,037
=========
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation ................. $ 27,563
Gross unrealized depreciation ................. (294)
---------
Net unrealized appreciation .................. $ 27,269
=========
Purchases and sales of securities other than short-term obligations
aggregated $237,437 and $0, respectively, for the period ended
December 31, 1999.
</TABLE>
<PAGE>
INTERNATIONAL SOLUTIONS II --
BALANCED GROWTH
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY FUNDS -- 85.08% SHARES VALUE
- --------------------------------------------------------------------
BT Investment International Equity Fund (b)..... 1,375 $ 43,958
Ivy Asia Pacific Fund - Advisor Class .......... 1,603 12,773
Ivy Developing Nations Fund -
Advisor Class ............................... 849 7,469
Ivy International Fund II - Advisor Class ...... 2,893 34,690
Ivy International Small Companies Fund -
Advisor Class ............................... 583 7,275
Lazard International Equity Fund -
Institutional Shares ........................ 2,317 40,058
Montgomery International Growth -
Class R ..................................... 311 7,286
Scudder Greater Europe Growth Fund ............. 687 24,386
The Japan Fund, Inc. ........................... 292 4,797
Warburg Pincus Japan Growth Fund -
Common Shares ............................... 86 2,959
---------
Total Equity Funds (cost -- $158,638)........... 185,651
FIXED INCOME FUNDS -- 29.80%
Ivy International Strategic Bond Fund -
Advisor Class (cost -- $65,144).............. 6,568 65,024
---------
TOTAL INVESTMENTS -- 114.88%
(cost -- $223,782) (a)......................... 250,675
LIABILITIES, IN EXCESS OF OTHER
ASSETS -- (14.88%) .......................... (32,473)
---------
NET ASSETS -- 100% ............................. $ 218,202
=========
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation ................. $ 27,013
Gross unrealized depreciation ................. (120)
---------
Net unrealized appreciation .................. $ 26,893
=========
Purchases and sales of securities other than short-term obligations
aggregated $223,782 and $0, respectively, for the period ended
December 31, 1999.
</TABLE>
The accompanying notes are an integral part
of the financial statements.
5
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<PAGE>
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INTERNATIONAL SOLUTIONS
- --------------------------------------------------------------------------------
INTERNATIONAL SOLUTIONS III --
MODERATE GROWTH
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY FUNDS -- 88.53% SHARES VALUE
- --------------------------------------------------------------------
Ivy China Region Fund - Advisor Class ......... 8,009 $ 72,322
Ivy International Fund II - Advisor Class ..... 17,975 215,517
Ivy International Small Companies Fund -
Advisor Class .............................. 9,170 114,445
Ivy Pan-Europe Fund - Advisor Class ........... 10,471 131,824
Lazard International Equity Fund -
Institutional Shares ....................... 11,608 200,704
Montgomery Emerging Markets Fund -
Class R (b) ................................ 7,765 101,094
Scudder International Fund - Class A .......... 2,635 186,433
Scudder Latin America Fund .................... 1,107 28,825
Warburg Pincus International Equity Fund -
Common Shares .............................. 7,257 201,379
----------
Total Equity Funds (cost -- $1,095,069)........ 1,252,543
FIXED INCOME FUNDS -- 14.14%
Ivy International Strategic Bond Fund -
Advisor Class (cost -- $199,689)............ 20,210 200,082
----------
TOTAL INVESTMENTS -- 102.67%
(cost -- $1,294,758) (a)...................... 1,452,625
LIABILITIES, IN EXCESS OF
OTHER ASSETS -- (2.67%) .................... (37,786)
----------
NET ASSETS -- 100% ............................ $1,414,839
==========
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation ................ $ 157,867
Gross unrealized depreciation ................ --
----------
Net unrealized appreciation ................. $ 157,867
==========
Purchases and sales of securities other than short-term obligations
aggregated $1,375,291 and $79,007, respectively, for the period
ended December 31, 1999.
</TABLE>
<PAGE>
INTERNATIONAL SOLUTIONS IV --
LONG-TERM GROWTH
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY FUNDS -- 101.86% SHARES VALUE
- ---------------------------------------------------------------------
BT Investment International
Equity Fund (b) ............................ 11,731 $ 375,030
Ivy Asia Pacific Fund - Advisor Class ......... 11,030 87,906
Ivy China Region Fund - Advisor Class ......... 19,553 176,560
Ivy Developing Nations Fund -
Advisor Class .............................. 17,449 153,554
Ivy International Fund II - Advisor Class ..... 20,125 241,301
Ivy International Small Companies Fund -
Advisor Class .............................. 10,546 131,615
Ivy Pan-Europe Fund - Advisor Class ........... 14,167 178,366
Ivy South America Fund - Advisor Class ........ 17,570 137,045
Lazard International Equity Fund -
Institutional Shares ....................... 7,644 132,162
Scudder Emerging Markets Growth Fund (b) 3,008 44,522
Scudder International Fund - Class A .......... 3,863 273,252
The Japan Fund, Inc. .......................... 3,054 50,120
Warburg Pincus International Equity Fund -
Common Shares .............................. 8,058 223,619
Warburg Pincus Japan Small Company Fund
- Common Shares ............................ 885 24,427
----------
TOTAL INVESTMENTS -- 101.86%
(cost -- $1,923,258) (a)...................... 2,229,479
LIABILITIES, IN EXCESS OF
OTHER ASSETS -- (1.86%) .................... (40,760)
----------
NET ASSETS -- 100% ............................ $2,188,719
==========
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation ................ $ 306,221
Gross unrealized depreciation ................ --
----------
Net unrealized appreciation ................. $ 306,221
==========
Purchases and sales of securities other than short-term obligations
aggregated $1,928,613 and $5,316, respectively, for the period
ended December 31, 1999.
</TABLE>
The accompanying notes are an integral part
of the financial statements.
6
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<PAGE>
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INTERNATIONAL SOLUTIONS V --
AGGRESSIVE GROWTH
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY FUNDS -- 106.27% SHARES VALUE
- ------------------------------------------------------------------
Ivy Asia Pacific Fund - Advisor Class ......... 4,265 $ 33,990
Ivy China Region Fund - Advisor Class ......... 2,766 24,976
Ivy Developing Nations Fund -
Advisor Class .............................. 4,828 42,485
Ivy International Fund II - Advisor Class ..... 4,769 57,178
Ivy International Small Companies Fund -
Advisor Class .............................. 2,352 29,356
Ivy Pan-Europe Fund - Advisor Class ........... 2,753 34,659
Ivy South America Fund - Advisor Class ........ 3,077 24,000
Lazard Emerging Markets Fund -
Institutional Shares ....................... 2,295 24,556
Lazard International Equity Fund -
Institutional Shares ....................... 3,647 63,055
Lazard International Small Cap Fund -
Institutional Shares ....................... 2,419 34,163
Montgomery Emerging Markets Fund -
Class R (b) ................................ 2,929 38,140
Scudder International Fund .................... 888 62,787
Scudder Pacific Opportunities Fund (b) ........ 928 14,434
The Japan Fund, Inc. .......................... 660 10,827
---------
TOTAL INVESTMENTS - 106.27%
(cost -- $444,863) (a)........................ 494,606
LIABILITIES, IN EXCESS OF OTHER
ASSETS -- (6.27%) .......................... (29,174)
---------
NET ASSETS -- 100% ............................ $ 465,432
=========
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation ................ $ 49,744
Gross unrealized depreciation ................ --
---------
Net unrealized appreciation ................. $ 49,744
=========
Purchases and sales of securities other than short-term obligations
aggregated $450,163 and $5,251, respectively, for the period ended
December 31, 1999.
</TABLE>
FOOTNOTES TO PORTFOLIOS OF INVESTMENTS
(a) Cost is approximately the same for Federal income tax purposes.
(b) Non-income producing security.
The accompanying notes are an integral part
of the financial statements.
7
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<PAGE>
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INTERNATIONAL SOLUTIONS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
SOLUTIONS I -- SOLUTIONS II --
CONSERVATIVE BALANCED
GROWTH GROWTH
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (a) ..................... $264,706 $250,675
Cash .......................................... -- --
Receivables
Fund shares sold ............................. -- --
Manager for expense reimbursement ............ 30,308 30,793
Deferred offering costs ....................... 41,273 41,273
Other assets .................................. 2,599 2,587
-------- --------
Total assets ................................ 338,886 325,328
-------- --------
LIABILITIES
Payables
Investments purchased ........................ -- --
Fund shares repurchased ...................... -- --
Management fee ............................... 43 44
12b-1 service and distribution fees .......... 51 78
Other payables to related parties ............ 84,266 84,266
Due to custodian .............................. -- --
Accrued expenses .............................. 18,489 22,738
-------- --------
Total liabilities ........................... 102,849 107,126
-------- --------
NET ASSETS .................................... $236,037 $218,202
======== ========
Net assets consist of:
Capital paid-in .............................. $181,393 $163,051
Undistributed net realized gain on investments 1,874 1,994
Undistributed net investment income .......... 25,501 26,264
Net unrealized appreciation on investments ... 27,269 26,893
-------- --------
NET ASSETS .................................... $236,037 $218,202
======== ========
CLASS A:
Net assets, at value ......................... $ 40,298 $ 5,495
-------- --------
Shares outstanding ........................... 3,522 490
-------- --------
Net asset value and redemption price per share $ 11.44 $ 11.21
-------- --------
Maximum offering price per share
(net asset value x 100/94.25) (b) ........... $ 12.14 $ 11.89
-------- --------
CLASS B:
Net assets, at value ......................... $ 74,763 $ 88,987
-------- --------
Shares outstanding ........................... 6,572 7,953
-------- --------
Net asset value, offering price and redemption
price per share (c) ......................... $ 11.38 $ 11.19
-------- --------
CLASS C:
Net assets, at value ......................... $ -- $ 5,810
-------- --------
Shares outstanding ........................... -- 520(e)
-------- --------
Net asset value, offering price and redemption
price per share (d) ......................... $ -- $ 11.18
-------- --------
ADVISOR CLASS
Net assets, at value ......................... $120,976 $117,910
-------- --------
Shares outstanding ........................... 10,605 10,516
-------- --------
Net asset value, offering price and redemption
price per share ............................. $ 11.41 $ 11.21
-------- --------
(a) Cost of investments: ...................... $237,437 $223,782
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL INTERNATIONAL
SOLUTIONS III -- SOLUTIONS IV -- SOLUTIONS V --
MODERATE LONG-TERM AGGRESSIVE
GROWTH GROWTH GROWTH
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at value (a) ..................... $1,452,625 $2,229,479 $ 494,606
Cash .......................................... -- -- 142
Receivables
Fund shares sold ............................. 42,301 26,305 1,320
Manager for expense reimbursement ............ 34,947 33,197 39,721
Deferred offering costs ....................... 41,273 41,273 41,273
Other assets .................................. 2,821 2,966 2,603
---------- ---------- ----------
Total assets ................................ 1,573,967 2,333,220 579,665
---------- ---------- ----------
LIABILITIES
Payables
Investments purchased ........................ 33,301 9,110 --
Fund shares repurchased ...................... 1,534 12,758 --
Management fee ............................... 253 416 86
12b-1 service and distribution fees .......... 489 1,203 196
Other payables to related parties ............ 84,296 84,310 84,270
Due to custodian .............................. 6,422 -- --
Accrued expenses .............................. 32,833 36,704 29,681
---------- ---------- ----------
Total liabilities ........................... 159,128 144,501 114,233
---------- ---------- ----------
NET ASSETS .................................... $1,414,839 $2,188,719 $ 465,432
========== ========== ==========
Net assets consist of:
Capital paid-in .............................. $1,238,806 $1,854,737 $ 392,007
Undistributed net realized gain on investments 14,452 19,864 5,251
Undistributed net investment income .......... 3,714 7,897 18,430
Net unrealized appreciation on investments ... 157,867 306,221 49,744
---------- ---------- ----------
NET ASSETS .................................... $1,414,839 $2,188,719 $ 465,432
========== ========== ==========
CLASS A:
Net assets, at value ......................... $ 341,727 $ 472,594 $ 65,945
---------- ---------- ----------
Shares outstanding ........................... 29,433 39,238 5,832
---------- ---------- ----------
Net asset value and redemption price per share $ 11.61 $ 12.04 $ 11.31
---------- ---------- ----------
Maximum offering price per share
(net asset value x 100/94.25) (b) ........... $ 12.32 $ 12.77 $ 12.00
---------- ---------- ----------
CLASS B:
Net assets, at value ......................... $ 574,907 $1,137,109 $ 173,756
---------- ---------- ----------
Shares outstanding ........................... 49,629 94,686 15,401
---------- ---------- ----------
Net asset value, offering price and redemption
price per share (c) ......................... $ 11.58 $ 12.01 $ 11.28
---------- ---------- ----------
CLASS C:
Net assets, at value ......................... $ 98,060 $ 333,097 $ 88,687
---------- ---------- ----------
Shares outstanding ........................... 8,463 27,802 7,851
---------- ---------- ----------
Net asset value, offering price and redemption
price per share (d) ......................... $ 11.59 $ 11.98 $ 11.30
---------- ---------- ----------
ADVISOR CLASS
Net assets, at value ......................... $ 400,145 $ 245,919 $ 137,044
---------- ---------- ----------
Shares outstanding ........................... 34,483 20,406 12,084
---------- ---------- ----------
Net asset value, offering price and redemption
price per share ............................. $ 11.60 $ 12.05 $ 11.34
---------- ---------- ----------
(a) Cost of investments: ...................... $1,294,758 $1,923,258 $ 444,863
---------- ---------- ----------
</TABLE>
(b) On sales of more than $50,000 the offering price is reduced.
(c) Subject to a maximum deferred sales charge of 5%.
(d) Subject to a maximum deferred sales charge of 1%.
(e) Actual shares at December 31, 1999 were 519.6.
The accompanying notes are an integral part of the financial statements.
8
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JULY 1, 1999 (COMMENCEMENT) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
SOLUTIONS I -- SOLUTIONS II --
CONSERVATIVE BALANCED
GROWTH GROWTH
- ------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income dividends from Underlying Funds $ 2,888 $ 3,321
Interest .............................. 159 143
-------- --------
3,047 3,464
-------- --------
EXPENSES
Management fee ........................ 188 207
Transfer agent ........................ 42 48
Custodian fees ........................ 3,994 9,899
Auditing and accounting fees .......... 9,500 9,500
Shareholder reports ................... 1,500 1,500
Amortization of deferred offering costs 41,273 41,273
Fund accounting ....................... 8,558 8,559
Trustees' fees ........................ 300 300
12b-1 service and distribution fees ... 154 294
Legal ................................. 8,679 8,217
Other ................................. 1,989 2,652
-------- --------
76,177 82,449
Expenses reimbursed by Manager and
Service fees (Note 2) ................ (75,729) (81,883)
-------- --------
Net expenses ......................... 448 566
-------- --------
NET INVESTMENT INCOME .................. 2,599 2,898
-------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gain distributions from
Underlying Funds ..................... 2,782 2,527
Net realized loss on investments ...... -- --
Net change in unrealized appreciation
on investments ....................... 27,269 26,893
-------- --------
Net gain on investments .............. 30,051 29,420
-------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................... $ 32,650 $ 32,318
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL INTERNATIONAL
SOLUTIONS III -- SOLUTIONS IV -- SOLUTIONS V --
MODERATE LONG-TERM AGGRESSIVE
GROWTH GROWTH GROWTH
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income dividends from Underlying Funds $ 14,326 $ 20,773 $ 5,331
Interest .............................. 151 117 159
--------- --------- ---------
14,477 20,890 5,490
--------- --------- ---------
EXPENSES
Management fee ........................ 789 1,161 272
Transfer agent ........................ 166 237 65
Custodian fees ........................ 28,350 35,343 16,572
Auditing and accounting fees .......... 9,500 9,500 9,500
Shareholder reports ................... 1,500 1,500 1,500
Amortization of deferred offering costs 41,273 41,273 41,273
Fund accounting ....................... 8,572 8,577 8,559
Trustees' fees ........................ 300 300 300
12b-1 service and distribution fees ... 1,325 3,192 426
Legal ................................. 9,920 9,144 8,679
Other ................................. 2,009 2,000 2,021
--------- --------- ---------
103,704 112,227 89,167
Expenses reimbursed by Manager and
Service fees (Note 2) ................ (101,652) (108,664) (88,632)
--------- --------- ---------
Net expenses ......................... 2,052 3,563 535
--------- --------- ---------
NET INVESTMENT INCOME .................. 12,425 17,327 4,955
--------- --------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gain distributions from
Underlying Funds ..................... 20,828 28,017 7,088
Net realized loss on investments ...... (1,526) (38) (49)
Net change in unrealized appreciation
on investments ....................... 157,867 306,221 49,744
--------- --------- ---------
Net gain on investments .............. 177,169 334,200 56,783
--------- --------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................... $ 189,594 $ 351,527 $ 61,738
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL SOLUTIONS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM JULY 1, 1999 (COMMENCEMENT) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
SOLUTIONS I -- SOLUTIONS II --
CONSERVATIVE BALANCED
GROWTH GROWTH
- ------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income ...................... $ 2,599 $ 2,898
Net realized gain on investments ........... 2,782 2,527
Net change in unrealized appreciation
on investments ............................ 27,269 26,893
--------- ---------
Net increase resulting from operations .... 32,650 32,318
--------- ---------
Class A distributions
Dividends
From net investment income ................. (299) (50)
In excess of net investment income ......... (1,626) (213)
--------- ---------
Total distributions to Class A shareholders (1,925) (263)
--------- ---------
Class B distributions
Dividends
From net investment income ................. (353) (780)
In excess of net investment income ......... (3,287) (3,485)
--------- ---------
Total distributions to Class B shareholders (3,640) (4,265)
--------- ---------
Class C distributions
Dividends
From net investment income ................. -- (51)
In excess of net investment income ......... -- (227)
--------- ---------
Total distributions to Class C shareholders -- (278)
--------- ---------
Advisor Class distributions
Dividends
From net investment income ................. (1,947) (2,017)
In excess of net investment income ......... (3,783) (3,633)
--------- ---------
Total distributions to Advisor
Class shareholders ....................... (5,730) (5,650)
--------- ---------
Fund share transactions (Note 4)
Class A .................................... 36,899 4,964
Class B .................................... 71,033 80,433
Class C .................................... (10) 5,263
Class I .................................... (10) (10)
Advisor Class .............................. 6,730 5,650
--------- ---------
Net increase resulting from Fund
share transactions ....................... 114,642 96,300
--------- ---------
TOTAL INCREASE IN NET ASSETS ................ 135,997 118,162
NET ASSETS
Beginning of period ........................ 100,040 100,040
--------- ---------
END OF PERIOD .............................. $ 236,037 $ 218,202
========= =========
Undistributed net investment income ......... $ 25,501 $ 26,264
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL INTERNATIONAL
SOLUTIONS III -- SOLUTIONS IV -- SOLUTIONS V --
MODERATE LONG-TERM AGGRESSIVE
GROWTH GROWTH GROWTH
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income ...................... $ 12,425 $ 17,327 $ 4,955
Net realized gain on investments ........... 19,302 27,979 7,039
Net change in unrealized appreciation
on investments ............................ 157,867 306,221 49,744
----------- ----------- -----------
Net increase resulting from operations .... 189,594 351,527 61,738
----------- ----------- -----------
Class A distributions
Dividends
From net investment income ................. (4,015) (4,128) (689)
In excess of net investment income ......... (7,795) (7,464) (2,465)
----------- ----------- -----------
Total distributions to Class A shareholders (11,810) (11,592) (3,154)
----------- ----------- -----------
Class B distributions
Dividends
From net investment income ................. (3,128) (8,405) (754)
In excess of net investment income ......... (14,544) (17,651) (6,982)
----------- ----------- -----------
Total distributions to Class B shareholders (17,672) (26,056) (7,736)
----------- ----------- -----------
Class C distributions
Dividends
From net investment income ................. (502) (1,659) (780)
In excess of net investment income ......... (2,754) (5,590) (3,422)
----------- ----------- -----------
Total distributions to Class C shareholders (3,256) (7,249) (4,202)
----------- ----------- -----------
Advisor Class distributions
Dividends
From net investment income ................. (4,780) (3,135) (2,732)
In excess of net investment income ......... (9,332) (2,802) (3,779)
----------- ----------- -----------
Total distributions to Advisor
Class shareholders ....................... (14,112) (5,937) (6,511)
----------- ----------- -----------
Fund share transactions (Note 4)
Class A .................................... 300,848 408,433 59,900
Class B .................................... 529,426 972,362 162,699
Class C .................................... 90,545 295,867 81,157
Class I .................................... (10) (10) (10)
Advisor Class .............................. 251,246 111,334 21,511
----------- ----------- -----------
Net increase resulting from Fund
share transactions ....................... 1,172,055 1,787,986 325,257
----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS ................ 1,314,799 2,088,679 365,392
NET ASSETS
Beginning of period ........................ 100,040 100,040 100,040
----------- ----------- -----------
END OF PERIOD .............................. $ 1,414,839 $ 2,188,719 $ 465,432
=========== =========== ===========
Undistributed net investment income ......... $ 3,714 $ 7,897 $ 18,430
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
- --------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SOLUTIONS I -- CONSERVATIVE GROWTH
-------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 4, 1999 AUGUST 23, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ................................. $ 10.45 $ 10.25 $ 10.05
----------- ----------- -----------
Income from investment operations
Net investment income (a) ........................................... .09 .06 .11
Net realized and unrealized gain on investment transactions ......... 1.48 1.64 1.82
----------- ----------- -----------
Total from investment operations ................................... 1.57 1.70 1.93
----------- ----------- -----------
Less distributions
Dividends
From net investment income ......................................... .09 .06 .11
In excess of net investment income ................................. .49 .51 .46
----------- ----------- -----------
Total distributions ............................................... .58 .57 .57
----------- ----------- -----------
Net asset value, end of period ....................................... $ 11.44 $ 11.38 $ 11.41
=========== =========== ===========
Total return (%)(b) .................................................. 15.13 16.76 19.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ............................. $ 40 $ 75 $ 121
Ratio of expenses to average net assets (%)(c)(d)
With expense reimbursement and service fee (%) ...................... .64 1.39 .39
Without expense reimbursement and service fee (%) ................... 101.44 102.19 101.19
Ratio of net investment income to average net assets (%)(a)(c) ....... 3.41 2.66 3.66
Portfolio turnover rate (%) .......................................... -- -- --
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SOLUTIONS II -- BALANCED GROWTH
----------------------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
SEPTEMBER 19, 1999 AUGUST 9, 1999 AUGUST 26, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1999 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C ADVISOR CLASS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 10.11 $ 9.84 $ 10.11 $ 10.05
----------- ---------- ----------- -----------
Income from investment operations
Net investment income (a) ................... .11 .10 .10 .20
Net realized and unrealized gain on
investment transactions .................... 1.55 1.81 1.53 1.53
----------- ---------- ----------- -----------
Total from investment operations ........... 1.66 1.91 1.63 1.73
----------- ---------- ----------- -----------
Less distributions
Dividends
From net investment income ................. .11 .10 .10 .20
In excess of net investment income ......... .45 .46 .46 .37
----------- ---------- ----------- -----------
Total distributions ....................... .56 .56 .56 .57
----------- ---------- ----------- -----------
Net asset value, end of period ............... $ 11.21 $ 11.19 $ 11.18 $ 11.21
=========== ========== =========== ===========
Total return (%)(b) .......................... 16.60 19.59 16.15 17.30
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ..... $ 5 $ 89 $ 6 $ 118
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%) ............................ .58 1.33 .33 .33
Without expense reimbursement and
service fee (%) ............................ 99.75 100.50 100.50 99.50
Ratio of net investment income to average
net assets (%)(a)(c) ........................ 3.61 2.86 2.86 3.86
Portfolio turnover rate (%) .................. -- -- -- --
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager and
Service fees.
(b) Total return represents aggregate total return and does not reflect
a sales charge.
(c) Annualized
(d) Excludes expense ratios of Underlying Funds.
The accompanying notes are an integral part of the financial statements.
11
- --------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SOLUTIONS III -- MODERATE GROWTH
----------------------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JULY 6, 1999 JULY 30, 1999 JULY 23, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 10.17 $ 10.07 $ 9.95 $ 10.07
----------- ----------- ---------- -----------
Income from investment operations
Net investment income (a) ...................... .14 .07 .02 .14
Net realized and unrealized gain on
investment transactions ....................... 1.72 1.84 2.03 1.81
----------- ----------- ---------- -----------
Total from investment operations .............. 1.86 1.91 2.05 1.95
----------- ----------- ---------- -----------
Less distributions
Dividends
From net investment income .................... .14 .07 .02 .14
In excess of net investment income ............ .28 .33 .39 .28
----------- ----------- ---------- -----------
Total distributions .......................... .42 .40 .41 .42
----------- ----------- ---------- -----------
Net asset value, end of period .................. $ 11.61 $ 11.58 $ 11.59 $ 11.60
=========== =========== ========== ===========
Total return (%)(b) ............................. 18.38 19.13 20.70 19.54
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ........ $ 342 $ 575 $ 98 $ 400
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%) ............................... .48 1.23 1.23 .23
Without expense reimbursement and
service fee (%) ............................... 32.69 33.44 33.44 32.44
Ratio of net investment income to average
net assets (%)(a)(c) ........................... 4.11 3.36 3.36 4.36
Portfolio turnover rate (%) ..................... 12 12 12 12
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SOLUTIONS IV -- LONG-TERM GROWTH
----------------------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JULY 2, 1999 JULY 19, 1999 AUGUST 12, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 10.10 $ 10.16 $ 9.78 $ 10.10
----------- ----------- ---------- -----------
Income from investment operations
Net investment income (a) ...................... .11 .09 .07 .16
Net realized and unrealized gain on
investment transactions ....................... 2.13 2.04 2.42 2.10
----------- ----------- ---------- -----------
Total from investment operations .............. 2.24 2.13 2.49 2.26
----------- ----------- ---------- -----------
Less distributions
Dividends
From net investment income .................... .11 .09 .07 .16
In excess of net investment income ............ .19 .19 .22 .15
----------- ----------- ---------- -----------
Total distributions .......................... .30 .28 .29 .31
----------- ----------- ---------- -----------
Net asset value, end of period .................. $ 12.04 $ 12.01 $ 11.98 $ 12.05
=========== =========== ========== ===========
Total return (%)(b) ............................. 22.31 21.09 25.57 22.48
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ........ $ 473 $ 1,137 $ 333 $ 246
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%) ............................... .33 1.08 1.08 .08
Without expense reimbursement and
service fee (%) ............................... 23.73 24.48 24.48 23.48
Ratio of net investment income to average
net assets (%)(a)(c) ........................... 4.17 3.42 3.42 4.42
Portfolio turnover rate (%) ..................... 1 1 1 1
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager and
Service fees.
(b) Total return represents aggregate total return and does not reflect
a sales charge.
(c) Annualized
(d) Excludes expense ratios of Underlying Funds.
The accompanying notes are an integral part of the financial statements.
12
- --------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SOLUTIONS V -- AGGRESSIVE GROWTH
------------------------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JULY 6, 1999 SEPTEMBER 13, 1999 JULY 16, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31, TO DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 10.22 $ 10.22 $ 10.10 $ 10.11
----------- ----------- ----------- -----------
Income from investment operations
Net investment income (a) .................... .12 .06 .10 .24
Net realized and unrealized gain on
investment transactions ..................... 1.54 1.56 1.66 1.56
----------- ----------- ----------- -----------
Total from investment operations ............ 1.66 1.62 1.76 1.80
----------- ----------- ----------- -----------
Less distributions
Dividends
From net investment income .................. .12 .06 .10 .24
In excess of net investment income .......... .45 .50 .46 .33
----------- ----------- ----------- -----------
Total distributions ........................ .57 .56 .56 .57
----------- ----------- ----------- -----------
Net asset value, end of period ................ $ 11.31 $ 11.28 $ 11.30 $ 11.34
=========== =========== =========== ===========
Total return (%)(b) ........................... 16.38 16.07 17.65 17.95
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ...... $ 66 $ 174 $ 89 $ 137
Ratio of expenses to average net
assets (%)(c)(d)
With expense reimbursement and
service fee (%) ............................. .35 1.10 1.10 .10
Without expense reimbursement and
service fee (%) ............................. 81.82 82.57 82.57 81.57
Ratio of net investment income to average
net assets (%)(a)(c) ......................... 4.70 3.95 3.95 4.95
Portfolio turnover rate (%) ................... 2 2 2 2
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager and
Service fees.
(b) Total return represents aggregate total return and does not reflect
a sales charge.
(c) Annualized
(d) Excludes expense ratios of Underlying Funds.
The accompanying notes are an integral part of the financial statements.
13
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL SOLUTIONS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Mackenzie Solutions (the "Company") is an open-end management investment company
registered under the Investment Company Act of 1940, as amended, and is
organized as a Massachusetts business trust under a Declaration of Trust dated
November 18, 1998. The Company operates as a series company and at December 31,
1999, consisted of five diversified investment portfolios: International
Solutions I - Conservative Growth ("Conservative Growth"), International
Solutions II - Balanced Growth ("Balanced Growth"), International Solutions III
- - Moderate Growth ("Moderate Growth"), International Solutions IV - Long-term
Growth ("Long-term Growth") and International Solutions V - Aggressive Growth
("Aggressive Growth") (each a "Fund" and, collectively the "Funds"). The Funds
were initially seeded on June 28, 1999, commenced operations on July 1, 1999 and
received initial subscriptions beginning July 2, 1999. The shares of beneficial
interest are assigned no par value and an unlimited number of shares of Class A,
Class B, Class C, Class I and Advisor Class are authorized. The Funds invest
primarily in existing mutual funds (the "Underlying Funds") that are either
affiliated with Ivy Management Inc. ("IMI") or unaffiliated.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of their financial statements. The policies are
in conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Investments in the shares of Underlying Funds are valued
at their net asset value as reported by such funds.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Income dividends and capital gain distributions
are recorded on the ex-dividend date, and interest income is accrued on a daily
basis. Realized gains and losses from security transactions are calculated on an
identified cost basis.
FEDERAL INCOME TAXES -- Each Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986, as amended (the "Code"), and distribute all of its taxable income to its
shareholders. Therefore, no provisions have been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
net realized capital gains, if any, are declared in December. Distributions to
shareholders are recorded on the ex-dividend date. The timing and
characterization of certain income and net capital gain distributions are
determined annually in accordance with Federal tax regulations which may differ
from generally accepted accounting principles. These differences primarily
relate to non-deductible offering costs. As a result, Net investment income and
Net realized loss on investments for a reporting period may differ significantly
in amount and character from distributions during such period. Accordingly, each
Fund may make reclassifications among certain of its capital accounts without
impacting the net asset value of the Funds.
DEFERRED OFFERING COSTS -- Offering costs are being amortized over a one year
period beginning July 1, 1999, the date each Fund commenced operations. Offering
costs have been paid by Mackenzie Investment Management Inc. ("MIMI") and will
be reimbursed by each Fund.
2. RELATED PARTIES
IMI is the Investment Adviser of each Fund. For its services, IMI receives a fee
monthly at the annual rate of .25% of each Fund's average daily net assets.
Currently, IMI limits each Fund's total operating expenses (excluding taxes,
12b-1 fees and certain other expenses) to annual rates of .39% for Conservative
Growth, .33% for Balanced Growth, .23% for Moderate Growth, .08% for Long-term
Growth and .10% for Aggressive Growth Fund, of each Fund's average daily net
assets. Garmaise Investment Technologies (US) Inc. ("GIT") provides asset
allocation consulting services to IMI in connection with the Funds pursuant to a
sub-advisory contract. IMI, not the Funds, is obligated to compensate GIT.
Each Fund invests in certain Underlying Funds, which are separately-managed by
affiliated and unaffiliated managers. Each manager of an unaffiliated Underlying
Fund has agreed to make a payment to IMI at an annual rate up to .25% of the
average daily value of the shares of the Underlying Fund held by each Fund
during any calendar quarter. Such payments will be used by IMI to reduce the
expenses of the Funds. By effectively lowering each Fund's expenses, the
payments will also reduce the amount of voluntary reimbursement by IMI necessary
to maintain each Fund's annual operating expense level. For the period ended
December 31, 1999 such payments of $69, $89, $323, $470 and $106 were made to
Conservative Growth, Balanced Growth,
14
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Moderate Growth, Long-term Growth and Aggressive Growth, respectively. These
payments are reflected as Service fees in the Statements of Operations and in
the Financial Highlights.
MIMI, of which IMI is a wholly owned subsidiary, provides certain accounting and
pricing services for each Fund. For those services, each Fund pays MIMI fees
plus certain out-of-pocket expenses. Such fees and expenses are reflected as
Fund accounting in the Statement of Operations. MIMI also provides certain
administrative services to each Fund at no charge. At December 31, 1999, MIMI
owned 51.2% of Conservative Growth, 54.0% of Balanced Growth, 8.5% of Moderate
Growth, 5.6% of Long-term Growth and 25.5% of Aggressive Growth.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of each Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the period ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $0, $39, $846, $2,252 and $264 for Conservative
Growth, Balanced Growth, Moderate Growth, Long-term Growth and Aggressive
Growth, respectively.
Under Service and Distribution Plans, each Fund reimburses IMDI for service fee
payments made to brokers at an annual rate of .25% of its average daily net
assets, excluding Advisor Class and Class I. Class B and Class C shares are also
subject to an ongoing distribution fee at an annual rate of .75% of the average
daily net assets attributable to Class B and Class C. IMDI may use such
distribution fee for purposes of advertising and marketing shares of each Fund.
Such fees, detailed below, are reflected as 12b-1 service and distribution fees
in each Funds' Statement of Operations.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
CLASS A CLASS B CLASS C
- ----------------------------------------------------------------
<S> <C> <C> <C>
Conservative Growth ......... $ 21 $ 133 $ 0
Balanced Growth ............. $ 3 $ 273 $ 18
Moderate Growth ............. $244 $ 932 $149
Long-term Growth ............ $248 $2,459 $485
Aggressive Growth ........... $ 37 $ 191 $198
</TABLE>
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for each Fund. For those services, each
Fund pays certain out-of-pocket expenses. Such fees and expenses are reflected
as Transfer agent in each Fund's Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from each
Fund, which is reflected as Trustees' fees in each Fund's Statement of
Operations.
15
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL SOLUTIONS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C, Class I and Advisor Class
were as follows:
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH BALANCED GROWTH MODERATE GROWTH
----------------------- ------------------- -----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
OCTOBER 4, 1999 SEPTEMBER 19, 1999 JULY 6, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sold ........................................ 3,349 $ 34,984 466 $4,711 36,105 $ 368,055
Issued on reinvestment of dividends ......... 173 1,925 24 263 1,050 11,810
Repurchased ................................. (1) (10) (1) (10) (7,723) (79,017)
------ -------- ---- ------ ------- ----------
Net increase ............................... 3,521 $ 36,899 489 $4,964 29,432 $ 300,848
====== ======== ==== ====== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH BALANCED GROWTH MODERATE GROWTH
----------------------- --------------------- --------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
AUGUST 23, 1999 AUGUST 9, 1999 JULY 30, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sold ........................................ 6,413 $ 69,283 7,825 $79,040 49,890 $ 532,440
Issued on reinvestment of dividends ......... 159 1,760 128 1,403 631 7,085
Repurchased ................................. (1) (10) (1) (10) (893) (10,099)
------ -------- ------- ------- ------- ----------
Net increase ............................... 6,571 $ 71,033 7,952 $80,433 49,628 $ 529,426
====== ======== ====== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH BALANCED GROWTH MODERATE GROWTH
----------------------- ------------------- -----------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JULY 2, 1999 AUGUST 26, 1999 JULY 23, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sold ........................................ -- $ -- 520 $5,273 8,495 $ 90,914
Issued on reinvestment of dividends ......... -- -- -- -- 55 618
Repurchased ................................. (1) (10) (1) (10) (88) (987)
-- ------- --- ------ ------ --------
Net (decrease) increase .................... (1) $ (10) 519 $5,263 8,462 $ 90,545
== ======= === ====== ====== ========
</TABLE>
16
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH BALANCED GROWTH MODERATE GROWTH
----------------------- ----------------- -------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JULY 2, 1999 JULY 2, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Repurchased ........... (1) $ (10) (1) $(10) (1) $ (10)
-- ------ -- ---- -- ------
Net decrease ......... (1) $ (10) (1) $(10) (1) $ (10)
== ====== == ==== == ======
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH BALANCED GROWTH MODERATE GROWTH
--------------------- ----------------- -------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JULY 2, 1999 JULY 2, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sold ........................................ 88 $ 1,000 -- $ -- 24,105 $ 246,999
Issued on reinvestment of dividends ......... 517 5,730 516 5,650 378 4,247
--- -------- --- ------ ------ ---------
Net increase ............................... 605 $ 6,730 516 $5,650 24,483 $ 251,246
=== ======== === ====== ====== =========
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM GROWTH AGGRESSIVE GROWTH
------------------------- ---------------------
FOR THE PERIOD FOR THE PERIOD
JULY 2, 1999 JULY 6, 1999
(COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold ........................................ 42,395 $ 441,240 6,124 $ 62,814
Issued on reinvestment of dividends ......... 861 10,010 234 2,563
Repurchased ................................. (4,019) (42,817) (527) (5,477)
------ ---------- ----- --------
Net increase ............................... 39,237 $ 408,433 5,831 $ 59,900
====== ========== ===== ========
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM GROWTH AGGRESSIVE GROWTH
------------------------- -------------------------
FOR THE PERIOD FOR THE PERIOD
JULY 19, 1999 SEPTEMBER 13, 1999
(COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold ........................................ 95,695 $ 982,804 15,170 $160,180
Issued on reinvestment of dividends ......... 768 8,907 231 2,529
Repurchased ................................. (1,778) (19,349) (1) (10)
------ ---------- ------ --------
Net increase ............................... 94,685 $ 972,362 15,400 $162,699
====== ========== ====== ========
</TABLE>
17
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL SOLUTIONS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
LONG-TERM GROWTH AGGRESSIVE GROWTH
------------------------- -----------------------
FOR TH PERIOD FOR THE PERIOD
AUGUST 12, 1999 JULY 16, 1999
(COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold ........................................ 27,492 $ 292,289 7,723 $79,761
Issued on reinvestment of dividends ......... 310 3,588 128 1,406
Repurchased ................................. (1) (10) (1) (10)
------ --------- ----- -------
Net increase ............................... 27,801 $ 295,867 7,850 $81,157
====== ========= ===== =======
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM GROWTH AGGRESSIVE GROWTH
----------------------- --------------------
FOR THE PERIOD FOR THE PERIOD
JULY 2, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- ------------------------------------------------------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Repurchased ........... (1) $ (10) (1) $(10)
-- ------ -- ----
Net decrease ......... (1) $ (10) (1) $(10)
== ====== == ====
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM GROWTH AGGRESSIVE GROWTH
------------------------ ---------------------
FOR THE PERIOD FOR THE PERIOD
JULY 2, 1999 JULY 2, 1999
(COMMENCEMENT) (COMMENCEMENT)
TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold ........................................ 10,265 $ 109,684 1,491 $15,000
Issued on reinvestment of dividends ......... 266 3,093 593 6,511
Repurchased ................................. (125) (1,443) -- --
------ --------- ----- -------
Net increase ............................... 10,406 $ 111,334 2,084 $21,511
====== ========= ===== =======
</TABLE>
18
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
Mackenzie Solutions
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the International
Solutions I -- Conservative Growth, International Solutions II -- Balanced
Growth, International Solutions III -- Moderate Growth, International Solutions
IV -- Long-term Growth and International Solutions V -- Aggressive Growth
(constituting Mackenzie Solutions, hereafter referred to as the "Company") at
December 31, 1999, and the results of each of their operations and the changes
in each of their net assets for the period July 1, 1999 (commencement of
operations) through December 31, 1999 and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities owned at December 31, 1999 by correspondence with the custodian and
with the transfer agents of the underlying funds, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
19
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