<PAGE> 1
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IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
GROWTH
FUND Although corporate profits and cash resume their long-term upward trend when
flows continue to be positive for US companies investors realize that equities benefit from
in general, recently the overall investment a moderately growing economy with stable
climate turned less benign than at the inflation.
beginning of 1996. Interest rates rose early About half of the Ivy Growth Fund is
- ------------------- in the year and stayed up as the economy invested in larger capitalization US stocks.
SEMI-ANNUAL produced better than expected results for the According to our research, most of these stocks
REPORT later stages of an economic recovery. Investors are valued quite reasonably--below market
- ------------------- searched for clues in corporate earnings reports price/earnings ratios and with positive growth
This report and the and worried that profit growth had peaked, prospects. Sectors that are emphasized include
financial statements particularly in the highly visible technology the financial services group, and companies
contained herein are industry. These factors have combined to produce that provide health care and leisure services
submitted for the general a volatile summer. However, second quarter to an aging US population.
information of the share- earnings were typically better than expected, In the technology sector investors are
holders. This report is save for some highly publicized exceptions and concerned about inventory reduction on the part
not authorized for distri- many companies were forecasting continued growth, of manufacturers of personal computers and a
bution to prospective albeit at a somewhat slower pace. resultant demand for integrated circuits. Our
investors unless preced- There is no clear consensus about the research indicates, however, this sector
ed or accompanied by economy, much less about the pace of inflation, should continue to enjoy strong secular
an effective prospectus. which is key to valuations of stock prices. This growth, although undoubtably it will experience
high level of uncertainty has led to higher cyclical declines within the secular trend.
Ivy Management, Inc. volatility in stock prices. However, we expect We continue to believe that
Via Mizner Financial to see a moderating of economic growth from the opportunities outside the US can provide the
Plaza heady pace recorded in the first half of the year. Fund with diversification and return benefits.
700 South Federal Hwy. As a result of this strong pace, interest rates The Fund's international holdings are focused
Boca Raton, FL 33432 have gone up this year. These higher interest on large capitalization European companies
1-800-456-5111 rates are likely to act as a natural brake on and high-growth nations in Asia and Latin
the economy over time. We don't expect to see America. According to our research, the
a resurgence in inflation, although the low combination of a stronger US dollar, falling
point for this cycle may be behind us. We European interest rates and a continuation of
would expect to see the Federal Reserve tighten solid economic growth among the developing
monetary policy when and if they sense a countries should result in strong corporate
challenge to a stable inflation environment. earnings growth for foreign companies in the
So far this year, the broader stock averages coming years.
have experienced a decline of about 5% from their We encourage investors with a long-
highs, while the smaller capitalization group is term horizon to take advantage of the window
down about 20%. These adjustments are healthy and of opportunity that has resulted from the
normal (and long overdue), but rarely enjoyable. recent pullback in the equity markets.
Our research indicates US companies are stronger Opportunities are typically short lived and
financially than they have been in a decade and don't come around very often.
that economic growth is likely to moderate. We
believe stock prices are much more volatile than IVY MANAGEMENT, INC.
the underlying businesses and ultimately should
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
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<PAGE> 2
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 93.4% SHARES VALUE
<S> <C> <C>
- -----------------------------------------
BASIC INDUSTRIES -- 8.7%
AKZO Nobel............................... 12,000 $ 1,438,984
Anglo-American Corporation of South
Africa Limited*(a)..................... 3,000 190,053
Asarco, Inc.............................. 58,000 1,616,750
AssiDoman AB(a).......................... 13,200 307,953
BASF AG*(a).............................. 3,800 1,087,035
Bayer AG*(a)............................. 23,000 812,975
Bethlehem Steel Corporation.............. 58,000 688,750
Cementos de Mexico S.A. 'B'(a)........... 118,750 461,066
Cypress-Amax Minerals Inc................ 31,000 720,750
Du Pont(E.I.) De Numours & Company....... 27,000 2,136,375
Engelhard Corporation.................... 86,200 1,982,600
Enso OY -- R(a).......................... 40,000 311,700
Ferro Corporation........................ 46,000 1,219,000
Fletcher Challenge Ltd.*(a).............. 736,286 1,430,650
Harsco Corporation....................... 38,000 2,541,250
Holderbank Financiere Glaris AG(a)....... 1,520 1,216,000
Inco Ltd. ADR(a)......................... 23,000 741,750
Inland Steel Industries, Inc. ........... 8,000 157,000
Lyondell Petrochemical Company........... 17,800 429,425
Nampak Limited(a)........................ 34,400 142,109
Pioneer Hi-Bred International, Inc. ..... 46,000 2,432,250
Semen Gresik(a).......................... 110,000 320,193
Stora Kopparbergs Bergslags
Aktiebolag(a).......................... 23,200 306,534
Trelleborg AB B Free Shares(a)........... 116,300 1,457,607
UPM-Kymmene OY(a)........................ 14,840 309,123
Union Carbide Corp. Holding Co. ......... 19,000 755,250
Weirton Steel Corporation*............... 46,000 149,500
Weyerhaeuser Co. ........................ 31,000 1,329,125
------------
26,691,757
------------
BUSINESS SERVICES -- 1.3%
Copart, Inc.*............................ 15,000 247,500
Daisytek International Corporation *..... 9,600 403,200
Dendrite International, Inc.*............ 20,600 710,700
Employee Solutions, Inc.*................ 12,000 373,500
Gartner Group, Inc.*..................... 16,700 613,725
Medaphis Corp.*.......................... 21,000 834,750
Profit Recovery Group International,
Inc.*.................................. 12,000 243,000
Quick Response Services, Inc.*........... 19,000 546,250
------------
3,972,625
------------
CAPITAL GOODS -- 5.1%
AGCO Corporation......................... 62,000 1,728,250
American Standard Companies, Inc.*....... 38,000 1,254,000
Caterpillar Inc.......................... 27,000 1,829,250
Cincinnati Milacron, Inc................. 77,000 1,828,750
Fluor Corp............................... 15,000 978,750
Foster Wheeler Corporation............... 54,000 2,409,750
Ingersoll-Rand Company................... 8,000 350,000
Johnson Controls, Inc.................... 38,000 2,641,000
Jurong Shipyard Limited(a)............... 70,000 354,713
Schneider, S.A.(a)....................... 24,000 1,259,659
Tecumseh Products Company................ 19,000 1,021,250
------------
15,655,372
------------
CONGLOMERATES -- 2.0%
Benpres Holdings Corporation *(a)........ 57,000 456,000
Cheung Kong(a)........................... 167,000 1,202,757
Guangdong Investments(a)................. 1,600,000 1,012,822
Hanson PLC ADR(a)........................ 32,000 456,000
Jardine Matheson Holdings Ltd.(a)........ 75,200 552,720
Jardine Strategic Holdings Ltd.(a)....... 171,562 548,997
Jardine Strategic Holdings Ltd.
Warrants 98 *(a)....................... 19,062 5,909
Pacific Dunlop Ltd.(a)................... 215,000 483,279
Swire Pacific Ltd. Class A(a)............ 184,000 1,574,783
------------
6,293,267
------------
<CAPTION>
EQUITY SECURITIES SHARES VALUE
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CONSUMER DURABLES -- 3.1%
Brunswick Corp........................... 77,000 $ 1,540,000
CIADEA S.A ADR*(a)....................... 36,500 253,769
Electrolux AB(a)......................... 12,500 629,489
Goodyear Tire & Rubber Company........... 31,000 1,488,000
PT Astra International(a)................ 142,000 205,908
Peugeot Citroen(a)....................... 6,200 830,403
Singer Company NV(The)................... 46,000 920,000
Standard-Pacific Corp.................... 247,500 1,794,375
Volkswagen AG(a)......................... 5,300 1,970,966
------------
9,632,910
------------
CONSUMER NON-DURABLES -- 6.1%
Astra AB B Free Shares(a)................ 33,000 1,440,106
Buenos Aires Embotelladora
S.A.(BAESA)(a)......................... 26,400 349,800
Cadbury Schweppes PLC(a)................. 54,000 426,994
Canadaigua Wine Company, Inc. Class A*... 15,000 450,000
Casino Data Systems*..................... 22,000 332,750
Grand Metropolitan PLC ADR(a)............ 26,776 716,257
Hasbro, Inc.............................. 23,000 822,250
Mattel, Inc.............................. 48,100 1,376,863
Nabisco Holdings Corporation Class A..... 69,000 2,432,250
Nestle S.A. -- Registered(a)............. 2,013 2,301,262
PepsiCo, Inc............................. 62,000 2,193,250
Premark International, Inc............... 75,000 1,387,500
Rembrandt Group Limited(a)............... 21,000 197,254
South African Breweries Ltd.(a).......... 5,200 152,412
Tsingtao Brewery Series H(a)............. 1,176,000 425,385
Tupperware Corporation................... 38,500 1,626,625
Unilever N.V. -- ADR(a).................. 4,700 681,500
Vina Concha y Toro S.A.(a)............... 13,400 247,900
Warnaco Group, Inc. Class A.............. 54,000 1,390,500
------------
18,950,858
------------
CONSUMER SERVICES -- 11.5%
American Stores Co. ..................... 62,000 2,402,500
America Online, Inc.*.................... 9,200 402,500
Baby Superstore, Inc.*................... 8,000 132,000
Barnes & Noble, Inc.*.................... 13,000 464,750
Boston Chicken, Inc.*.................... 44,000 1,430,000
Callaway Golf Company.................... 58,000 1,928,500
Carnival Corp. Class A................... 45,000 1,299,375
Comcast UK Cable Partners Ltd.*.......... 30,000 382,500
CompUSA, Inc.*........................... 11,500 392,437
Corporate Express, Inc.*................. 16,400 656,000
Cuc International Inc. .................. 32,500 1,165,937
Eckerd Corporation*...................... 76,000 1,738,500
Extended Stay America, Inc.*............. 23,000 724,500
Federated Department Stores, Inc.*....... 23,000 782,000
Filmes Lusomundo, SGPS S.A.(a)........... 26,200 211,882
Galeries Lafayette*(a)................... 860 293,563
General Nutrition Companies, Inc.*....... 43,200 756,000
Harte-Hanks Communications............... 69,000 1,914,750
Helicopter Line Ltd(The)(a).............. 421,000 810,010
Julius Meinl International AG(a)......... 3,900 123,536
Just for Feet, Inc.*..................... 9,000 478,125
Lowe's Companies, Inc. .................. 40,000 1,445,000
Micro Warehouse Inc.*.................... 19,200 381,600
News Corporation Ltd.(a)................. 308,000 1,500,845
OfficeMax, Inc.*......................... 23,550 562,256
Outback Steakhouse, Inc.*................ 11,800 406,916
Planet Hollywood International, Inc.*.... 11,500 309,063
Premier Parks, Inc.*..................... 15,000 326,250
Rio Hotel and Casino, Inc.*.............. 50,000 781,250
Robinson Department Store Public
Company Limited(a)....................... 147,100 365,027
Royal Caribbean Cruises Ltd. ............ 46,000 1,311,000
Santa Isabel S.A. ADR(a)................. 8,800 240,900
Scandinavian Broadcasting System S.A.*... 11,000 269,500
</TABLE>
(See Notes to Financial Statements)
<PAGE> 3
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
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- -----------------------------------------
Sports Authority, Inc.*.................. 25,000 $ 818,750
Station Casinos, Inc.*................... 25,000 359,375
Stewart Enterprises Inc. Class A......... 21,000 656,250
Sunglass Hut International, Inc.*........ 10,000 243,125
TRM Copy Centers Corporation*............ 69,000 767,625
Tandy Corp. ............................. 50,000 2,368,750
Toys "R" Us, Inc.*....................... 50,000 1,425,000
Viacom Inc. Class A*..................... 42,000 1,627,500
Viking Office Products, Inc.*............ 10,000 313,750
West Marine Inc.*........................ 5,000 357,500
------------
35,326,597
------------
ENERGY -- 6.3%
Ashland Inc. ............................ 35,000 1,395,625
Dresser Industries, Inc. ................ 58,000 1,711,000
Enron Corporation........................ 38,000 1,558,000
Helmerich & Payne, Inc. ................. 41,500 1,514,750
Kaneb Services, Inc.*.................... 96,000 312,000
Norsk Hydro A.S. ADR(a).................. 37,500 1,832,813
Parker & Parsley Petroleum Co............ 50,000 1,381,250
Schlumberger Ltd......................... 27,000 2,274,750
Societe Nationale Elf Aquitaine(a)....... 20,000 1,471,935
Tenneco, Inc. ........................... 62,800 3,210,650
Total Compagnie Francaise des
Petroles(a)............................ 41,155 1,527,879
Union Pacific Resources Group............ 23,000 615,250
YPF Sociedad Anonima(a).................. 22,000 492,250
------------
19,298,152
------------
FINANCIAL SERVICES -- 12.0%
ABN Amro Bank(a)......................... 17,400 934,601
AMBAC, Inc. ............................. 27,000 1,410,750
Advanta Corporation Class B.............. 19,000 859,750
A.F.P. Provida S.A. ADR(a)............... 10,300 254,925
Amerin Corporation*...................... 21,400 572,450
Arab Malaysian Corporation Berhad(a)..... 89,000 349,649
Bank of Ireland(a)....................... 109,175 747,524
Banque Nationale De Paris(a)............. 17,000 597,152
CS Holding AG(a)......................... 12,500 1,190,000
Capital One Financial Corp............... 5,900 168,150
Chase Manhattan Corp..................... 8,000 565,000
Compagnie Financiere de Paribas(a)....... 12,455 736,030
Credit Acceptance Corporation*........... 7,200 151,200
DCB Holdings Berhad(a)................... 103,000 353,037
Donaldson, Lufkin & Jenrette, Inc.*...... 38,000 1,192,250
Equitable Companies, Inc. ............... 77,000 1,915,375
Exel Limited............................. 33,000 2,326,500
Federal Home Loan Mortgage Corp.......... 27,000 2,308,500
Federal National Mortgage Association.... 77,000 2,579,500
First Union Corporation.................. 27,500 1,674,063
Green Tree Financial Corp................ 20,000 627,500
HSBC Holdings PLC(a)..................... 115,997 1,753,273
ING Groep NV(a).......................... 27,827 830,550
Krung Thai Bank Public Company
Limited*(a)............................ 75,000 351,544
Litchfield Financial Corp................ 30,000 420,000
MBIA Inc. ............................... 19,200 1,495,200
NationsBank Corporation.................. 32,300 2,668,787
Norwest Corporation...................... 27,000 941,625
PennCorp Financial, Inc. ................ 39,000 1,228,500
Peregrine Investment Holdings*(a)........ 828,000 1,192,675
Peregrine Investment Holdings
Warrants*(a)........................... 82,800 10,269
Providian Corp........................... 35,000 1,500,625
Risk Capital Holdings, Inc.*............. 27,000 529,875
SPS Transaction Services, Inc.*.......... 22,400 403,200
Terra Nova(Bermuda) Holdings Ltd......... 70,000 1,093,750
Travelers, Inc. ......................... 23,100 1,053,937
------------
36,987,716
------------
HEALTHCARE -- 10.2%
American Medical Response, Inc.*......... 25,100 884,775
Arbor Health Care Company*............... 24,200 659,450
Autoimmune, Inc.*........................ 15,000 140,625
Baxter International Inc. ............... 31,000 1,468,625
Biochem Pharma, Inc.*.................... 24,500 918,750
Biopsys Medical, Inc.*................... 15,000 300,000
Boston Scientific Corporation*........... 22,000 965,250
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
CIMA Labs, Inc.*......................... 21,600 $ 162,000
Cardiovascular Dynamics*................. 25,000 306,250
Cephalon, Inc.*.......................... 15,000 296,250
Chronimed, Inc.*......................... 18,000 330,750
Coherent, Inc.*.......................... 7,600 395,200
Columbia/HCA Healthcare Corp. ........... 46,200 2,465,925
Depotech Corporation*.................... 12,000 303,000
Dura Pharmaceuticals, Inc.*.............. 29,800 1,668,800
Elan Corp., PLC ADR*(a).................. 21,000 1,199,625
Express Scripts, Inc. -- Class A*........ 10,000 460,000
Geltex Pharmaceuticals, Inc.*............ 5,000 95,000
Genzyme Corp. -- General Division*....... 18,000 904,500
Genzyme Corp. -- Tissue Repair*.......... 3,104 35,308
Glaxo Holdings PLC ADR(a)................ 13,000 349,375
Health Management Associates, Inc.*...... 15,000 303,750
Healthsource, Inc.*...................... 46,000 805,000
Horizon Mental Health Management, Inc.*.. 15,000 427,500
Humana, Inc.*............................ 27,000 482,625
ICU Medical, Inc.*....................... 5,000 68,750
Integrated Health Services, Inc. ........ 85,000 2,029,375
Liposome Company, Inc.*.................. 94,000 1,762,500
Medpartners/Mullikin, Inc.*.............. 15,000 313,125
NABI, Inc.*.............................. 50,000 475,000
Neurex Corporation*...................... 19,000 415,625
Norland Medical Systems, Inc.*........... 15,000 296,250
Omnicare, Inc. .......................... 35,200 932,800
Orthodontic Centers of America, Inc.*.... 51,000 1,351,500
OrthoLogic Corp.*........................ 20,000 255,000
Penederm, Inc.*.......................... 5,500 93,500
Pharmacia & Upjohn, Inc. ................ 30,000 1,331,250
PhyCor, Inc.*............................ 17,288 656,944
Renal Treatment Centers Inc.*............ 24,000 690,000
Sepracor, Inc.*.......................... 25,000 375,000
Serologicals Corporation*................ 10,000 265,000
Sonus Pharmaceuticals, Inc.*............. 22,500 438,750
Spine-Tech, Inc.*........................ 2,000 58,000
Trinity Biotech PLC ADR Warrants A*(a)... 60,000 217,500
Trinity Biotech PLC ADR Warrants B*(a)... 30,000 60,000
United Dental Care, Inc.*................ 10,000 422,500
Uromed Corporation*...................... 52,500 708,750
Vencor, Inc.*............................ 13,000 390,000
VidaMed, Inc.*........................... 25,000 318,750
Vivra, Inc.*............................. 19,500 650,813
Vivus, Inc.*............................. 14,500 474,875
------------
31,379,890
------------
INDUSTRIAL -- 2.7%
Clipsal Industries Ltd.(a)............... 252,000 708,120
General Electric Company................. 38,500 3,330,250
Hunter Douglas NV(a)..................... 6,400 437,207
Lyonnaise Des Eaux -- Dumez(a)........... 9,200 879,180
SMH AG*(a)............................... 1,000 696,000
United Waste Systems Inc.*............... 40,000 1,290,000
Waste Management International PLC*(a)... 96,400 1,072,450
------------
8,413,207
------------
MISCELLANEOUS -- 0.6%
Fidelity Advisor Korea Fund*............. 80,000 890,000
ROC Taiwan Fund*......................... 48,000 546,000
Taiwan Fund, Inc......................... 22,000 528,000
------------
1,964,000
------------
REAL ESTATE -- 1.5%
Beacon Properties Corporation............ 89,000 2,280,625
DBS Land Limited(a)...................... 157,000 538,540
Land & General Bhd(a).................... 150,000 369,814
Metro Pacific Corporation(a)............. 1,500,000 446,565
New World Development Company Ltd.(a).... 247,000 1,145,535
------------
4,781,079
------------
TECHNOLOGY -- 16.4%
3Com Corporation*........................ 17,950 821,213
Altera Corporation*...................... 9,600 364,800
Analog Devices, Inc.*.................... 18,000 459,000
Applix, Inc.*............................ 12,000 345,000
Arch Communications Group, Inc.*......... 18,000 333,000
Ascend Communications, Inc.*............. 12,500 703,125
Bell & Howell Holdings Company*.......... 38,000 1,254,000
</TABLE>
(See Notes to Financial Statements)
<PAGE> 4
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Boca Research, Inc.*..................... 20,000 $ 365,000
Business Objects S.A. ADR*(a)............ 7,000 281,750
CBT Group PLC ADR*(a).................... 10,000 462,500
Cabletron Systems, Inc.*................. 62,000 4,247,000
California Amplifier, Inc.*.............. 18,000 414,000
Cascade Communications, Corp.*........... 21,600 1,471,500
Checkfree Corporation*................... 16,000 318,000
Cisco Systems, Inc.*..................... 30,000 1,698,750
Compaq Computer Corporation*............. 12,000 589,500
Cornerstone Imaging Inc.*................ 16,500 115,500
DSC Communications Corporation*.......... 52,500 1,581,563
DSP Communications, Inc.*................ 10,000 513,750
FileNet Corporation*..................... 17,000 620,500
GT Interactive Software Corp.*........... 20,000 335,000
Gemstar International Group Limited*..... 10,000 300,000
Glenayre Technologies, Inc.*............. 13,500 675,000
Heartland Wireless Communications,
Inc.*.................................. 20,000 475,000
Hewlett-Packard Company.................. 19,000 1,892,875
IKOS Systems, Inc.*...................... 23,000 485,875
Informix Corporation*.................... 28,200 634,500
Integrated Process Equipment
Corporation*........................... 10,000 207,500
Intel Corp............................... 38,500 2,824,937
International Business Machines Corp..... 23,100 2,286,900
Intersolv*............................... 14,000 129,500
Komag, Inc.*............................. 15,000 395,625
Lam Research Corporation*................ 5,000 130,000
Linear Technology Corporation............ 8,000 238,000
MEMC Electronic Materials, Inc.*......... 27,000 1,053,000
Macromedia Inc.*......................... 16,700 365,313
Madge, NV*............................... 29,000 420,500
McAfee Associates, Inc.*................. 12,000 588,000
Microsoft Corporation*................... 31,000 3,723,875
Motorola, Inc. .......................... 23,000 1,443,250
Open Environment Corporation*............ 15,000 76,875
Oracle Systems Corp.*.................... 28,800 1,135,800
P-COM, Inc. ............................. 24,000 756,000
Paging Network Inc.*..................... 40,000 960,000
Pairgain Technologies, Inc.*............. 32,600 2,021,200
Peoplesoft, Inc.*........................ 6,500 463,125
Project Software & Development, Inc.*.... 19,000 890,625
ProNet, Inc.*............................ 29,500 357,687
QUALCOMM, Inc.*.......................... 28,400 1,508,750
Red Brick Systems, Inc.*................. 5,800 213,150
Spectrian Corporation*................... 10,000 142,500
Stratacom, Inc.*......................... 26,000 1,462,500
Synopsys, Inc.*.......................... 21,000 834,750
Systemsoft Corporation*.................. 5,000 234,375
Transaction Network Services, Inc.*...... 63,750 1,370,625
U.S. Robotics, Inc.*..................... 18,000 1,539,000
Ultratech Stepper, Inc.*................. 10,000 187,500
Veritas Software Corporation*............ 12,000 516,000
VideoServer, Inc.*....................... 8,000 312,000
Xylan Corporation*....................... 4,000 186,250
------------
50,732,813
------------
TELEPHONE & ELECTRIC -- 5.0%
American Portable Telecom, Inc.*......... 40,000 430,000
Ameritech Corporation.................... 35,000 2,078,125
BellSouth Corporation.................... 45,000 1,906,875
Cia. de Telecomunicaciones de Chile
S.A.(a)................................ 2,500 245,313
Empresa Nacional de Electricidad --
ADR(a)................................. 21,900 1,371,487
Empresa Nacional de Electridad S.A.(a)... 11,800 255,175
Portugal Telecom S.A..................... 10,800 283,500
Telecomunicacoes Brasileiras S.A.
Telebras............................... 28,700 1,998,237
Telefonica de Argentina -- ADS(a)........ 36,400 1,078,350
Telefonica de Espana S.A. -- ADR(a)...... 39,200 2,160,900
Vodafone Group PLC -- ADR(a)............. 69,000 2,535,750
Western Wireless Corp.*.................. 15,000 320,625
WinStar Communications, Inc.*............ 26,500 660,844
------------
15,325,181
------------
EQUITY SECURITIES SHARES VALUE
TRANSPORTATION -- 0.9%
Brambles Industries Limited(a)........... 73,000 $ 1,014,375
Offshore Logistics, Inc.*................ 48,577 680,079
Offshore Logistics, Inc. B Warrants
96*.................................... 507,086 65,921
RailTex, Inc.*........................... 15,000 378,750
Shanghai Haixing Shipping Company(a)..... 948,000 62,459
Wisconsin Central Transportation
Corporation*........................... 15,000 487,500
------------
2,689,084
------------
TOTAL EQUITY SECURITIES
(Cost -- $233,999,117)................. 288,094,508
NUMBER OF
PURCHASED PUT OPTIONS -- 0.1% CONTRACTS
- ----------------------------------------- ----------
Standard & Poors 500 Index Put,
09/15/96 @ $575 (Cost -- $233,875)..... 250 143,750
------------
TOTAL INVESTMENTS -- 93.5%
(Cost -- $234,232,992)(b).............. 288,238,258
OTHER ASSETS, LESS LIABILITIES -- 6.5%... 20,079,462
------------
NET ASSETS -- 100%....................... $308,317,720
============
ADR - American Depository Receipt
ADS - American Depository Share
NV - Non-voting
* Non-income producing security.
(a) Foreign security.
(b) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 66,899,338
Gross unrealized depreciation.................... (12,894,072)
------------
Net unrealized appreciation.................. $ 54,005,266
============
Purchases and sales of securities other than short-term obligations
aggregated $102,853,570 and $124,461,966, respectively, for the
period ended June 30, 1996.
Forward foreign currency exchange contracts at June 30, 1996 were:
</TABLE>
<TABLE>
<CAPTION>
FORWARD CONTRACTS PRINCIPAL VALUE OF UNREALIZED
(CURRENCY/EXPIRATION/COMMITMENT) AMOUNT OBLIGATION DEPRECIATION
<S> <C> <C> <C>
- ------------------------------------------------------------------
Deutsch Marks/September 96/Sell.... 3,186,390 US $ (3,772,666) $ (20,641)
French Francs/September 96/Sell.... 6,905,294 US (7,543,626) (64,029)
Netherland Guilders/
September 96/Sell................. 5,544,125 US (4,363,810) (18,536)
Swiss Francs/September 96/Sell..... 5,155,384 US (5,169,803) (45,428)
------------ ------------
Total forward foreign currency
exchange contracts sold........... $(20,849,905) $ (148,634)
============== ==============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $234,232,992)............................................................ $288,238,258
Cash............................................................................................................... 20,294,247
Receivables:
Investments sold................................................................................................. 372,385
Fund shares sold................................................................................................. 42,853
Dividends and interest........................................................................................... 468,717
Deferred organization expenses..................................................................................... 88,993
Other assets....................................................................................................... 70,252
------------
Total assets..................................................................................................... 309,575,705
------------
LIABILITIES
Payables:
Open forward foreign currency exchange contracts................................................................. 148,634
Investments purchased............................................................................................ 720,094
Management fee................................................................................................... 215,846
12b-1 service and distribution fees.............................................................................. 15,143
Administrative services fee...................................................................................... 25,394
Fund accounting.................................................................................................. 10,825
Transfer agent................................................................................................... 73,431
Other accrued expenses and liabilities............................................................................. 48,618
------------
Total liabilities................................................................................................ 1,257,985
------------
NET ASSETS......................................................................................................... $308,317,720
============
CLASS A:
Net asset value and redemption price per share ($305,016,885/16,608,042 shares outstanding)........................ $ 18.37
============
Maximum offering price per share ($18.37 X 100/94.25)*............................................................. $ 19.49
============
CLASS B:
Net asset value and offering price per share ($3,295,937/180,519 shares outstanding)**............................. $ 18.26
============
CLASS C:
Net asset value and offering price per share ($4,898/268 shares outstanding)**..................................... $ 18.30
============
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................. $229,020,917
Accumulated net realized gain on investments and foreign currency transactions................................... 24,770,124
Accumulated undistributed net investment income.................................................................. 670,047
Net unrealized gain (loss) on:
Investments.................................................................................................... 54,095,391
Put options.................................................................................................... (90,125)
Forward foreign currency contracts............................................................................. (148,634)
------------
NET ASSETS......................................................................................................... $308,317,720
============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends (net of $94,234 foreign taxes withheld).................................................... $ 2,502,740
Interest............................................................................................. 399,298
-----------
2,902,038
-----------
Expenses
Management fee....................................................................................... $1,292,458
Transfer agent fee................................................................................... 457,313
Administrative services fee.......................................................................... 152,054
Custodian fees....................................................................................... 62,529
Blue Sky fees........................................................................................ 16,066
Auditing and accounting fees......................................................................... 37,207
Shareholder reports.................................................................................. 6,078
Amortization of organization expenses................................................................ 22,793
Fund accounting...................................................................................... 75,705
Trustees' fees....................................................................................... 482
12b-1 service and distribution fees
Class A............................................................................................ 75,676
Class B............................................................................................ 14,913
Class C............................................................................................ 5
Legal fees........................................................................................... 17,043
Other................................................................................................ 39,494
-----------
2,269,816
Expenses reimbursed by manager....................................................................... (12,486)
-----------
Net expenses....................................................................................... 2,257,330
-----------
NET INVESTMENT INCOME.................................................................................. 644,708
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) on
Investments and foreign currency transactions...................................................... 24,430,830
Put options........................................................................................ (925,144)
Forward foreign currency contracts................................................................. 1,378,451
Net unrealized appreciation (depreciation) during the period on
Investments........................................................................................ 2,398,951
Put options........................................................................................ (90,125)
Forward foreign currency contracts................................................................. 89,488
-----------
Net gain on investment transactions................................................................ 27,282,451
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................... $27,927,159
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1996* 1995
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income............................................................................. $ 644,708 $ 835,987
Net realized gain (loss) on
Investments and foreign currency transactions................................................... 25,809,281 15,071,628
Put options..................................................................................... (925,144) (345,250)
Net unrealized appreciation (depreciation) during the period on
Investments..................................................................................... 2,398,951 49,271,083
Put options..................................................................................... (90,125) --
Forward foreign currency contracts.............................................................. 89,488 (149,842)
----------- -----------
Net increase resulting from operations.......................................................... 27,927,159 64,683,606
----------- -----------
Class A distributions
From net investment income........................................................................ -- (393,729)
From net realized gain............................................................................ -- (14,615,580)
In excess of net realized gain.................................................................... -- (521,353)
------------ -----------
Total distributions to Class A shareholders..................................................... -- (15,530,662)
------------ -----------
Class B distributions
From net realized gain............................................................................ -- (110,798)
In excess of net realized gain.................................................................... -- (9,479)
------------ -----------
Total distributions to Class B shareholders..................................................... --
(120,277)
------------ -----------
Fund share transactions (Note 5):
Class A........................................................................................... (12,622,903) 9,822,759
Class B........................................................................................... 385,011 922,346
Class C........................................................................................... 5,037 --
------------ ------------
Net increase (decrease) resulting from Fund share transactions.................................. (12,232,855) 10,745,105
------------ ------------
TOTAL INCREASE IN NET ASSETS........................................................................ 15,694,304 59,777,772
NET ASSETS
Beginning of period............................................................................... 292,623,416 232,845,644
------------ ------------
END OF PERIOD..................................................................................... $308,317,720 $292,623,416
============ ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME..................................................... $ 670,047 $ 25,339
============ ============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 8
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
CLASS A JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------- ------------------------------------------------------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993 1992 1991
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 16.75 $ 13.91 $ 15.14 $ 14.98 $ 16.91 $ 14.41
------------- -------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income.......................... .04(a) .05(a) .05(a) .10(a) .17(a) .27
Net gain (loss) on investment transactions
(both realized and unrealized)............... 1.58 3.73 (.49) 1.74 .70 4.12
------------- -------- -------- -------- -------- --------
Total from investment operations............. 1.62 3.78 (.44) 1.84 .87 4.39
------------- -------- -------- -------- -------- --------
Less distributions
From net investment income..................... -- .02 .05 .10 .15 .27
From net realized gain......................... -- .89 .74 1.58 2.65 1.62
In excess of net realized gain................. -- .03 -- -- -- --
------------- -------- -------- -------- -------- --------
Total distributions.......................... -- .94 .79 1.68 2.80 1.89
------------- -------- -------- -------- -------- --------
Net asset value, end of period................... $ 18.37 $ 16.75 $ 13.91 $ 15.14 $ 14.98 $ 16.91
=============== ======== ======== ======== ======== ========
Total return(%).................................. 9.67(b) 27.33(c) (2.97)(c) 12.29(c) 5.21(c) 30.76(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......... $ 305,017 $289,954 $231,446 $268,533 $226,068 $231,706
Ratio of expenses to average net assets
With expense reimbursement(%).................. 1.48(d) 1.59 1.38 1.33 1.32 --
Without expense reimbursement(%)............... 1.48(d) 1.60 1.49 1.43 1.40 1.29
Ratio of net investment income to average net
assets(%)...................................... .43(a)(d) .32(a) .32(a) .64(a) .98(a) 1.60
Portfolio turnover rate(%)....................... 71(d) 41 39 77(e) 138 79
Average commission rate(f)....................... $ .0442 N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
CLASS B JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------------- ----------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993
------------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............................. $16.75 $13.91 $15.14 $ 16.42
------ ------ ------ ----------------
Income (loss) from investment operations
Net investment loss(a).......................................... (.04) (.08) (.04) --
Net gain (loss) on investment transactions
(both realized and unrealized)................................ 1.55 3.71 (.54) .37
------ ------ ------ ----------------
Total from investment operations.............................. 1.51 3.63 (.58) .37
------ ------ ------ ----------------
Less distributions
From net investment income...................................... -- -- -- .07
From net realized gain.......................................... -- .73 .52 1.58
In excess of net realized gain.................................. -- .06 .13 --
------ ------ ------ ----------------
Total distributions........................................... -- .79 .65 1.65
------ ------ ------ ----------------
Net asset value, end of period.................................... $18.26 $16.75 $13.91 $ 15.14
=============== ====== ====== =================
Total return(%)................................................... 9.01(b) 26.13(c) (3.90)(c) 2.34(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......................... $3,296 $2,669 $1,399 $ 65
Ratio of expenses to average net assets
With expense reimbursement(%)................................... 2.43(d) 2.55 2.34 2.31(d)
Without expense reimbursement(%)................................ 2.43(d) 2.56 2.45 2.44(d)
Ratio of net investment loss to average net assets(%)(a).......... (.52)(d) (.64) (.64) (.33)(d)
Portfolio turnover rate(%)........................................ 71(d) 41 39 77(e)
Average commission rate(f)........................................ $.0442 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 9
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period............................................................................. $18.46
------
Loss from investment operations
Net investment loss(a)......................................................................................... (.01)
Net loss on investment transactions (both realized and unrealized)............................................. (.15)
------
Total from investment operations............................................................................. (.16)
------
Net asset value, end of period................................................................................... $18.30
==============
Total return(%).................................................................................................. (.87)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......................................................................... $ 5
Ratio of expenses to average net assets
With expense reimbursement(%).................................................................................. 2.43(d)
Without expense reimbursement(%)............................................................................... 2.43(d)
Ratio of net investment loss to average net assets(%)(a)......................................................... (.52)(d)
Portfolio turnover rate(%)....................................................................................... 71(d)
Average commission rate(f)....................................................................................... $.0442
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return and does not reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Annualized.
(e) The portfolio turnover rate excludes sales of portfolio securities made following the February 1, 1993
reorganization between the Fund and American Investors Growth Fund, Inc. to realign the Fund's portfolio
and reflects an adjustment to the monthly average value of the portfolio securities owned by the Fund
during the year ended December 31, 1993.
(f) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average
commission rate per share for security trades on which commissions are charged. This amount may vary from
period to period and fund to fund depending on the mix of trades executed in various markets where trading
practices and commission rate structures may differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Growth Fund (the Fund) is a series of shares of Ivy Fund. The shares of
beneficial interest are assigned no par value and an unlimited number of shares
of Class A, Class B and Class C are authorized. Ivy Fund was organized as a
Massachusetts business trust under a Declaration of Trust dated December 21,
1983 and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect. All
other securities are valued at their fair value as determined in good faith by
the Valuation Committee of the Board; as of June 30, 1996, there were no such
securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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.
OPTIONS -- The Fund may write (sell) exchange-listed and over-the-counter
call options on securities held in its portfolio. When the Fund writes a call,
it gives the purchaser of the call option the right to buy the underlying
security at the price specified in the option (the "exercise price") at any time
during the option period, generally ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the form
of a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder or in
the case of options on indices, will require cash settlement by the Fund if the
option is exercised.
By writing a call option, the Fund forgoes, in exchange for the premium less
the commission ("net premium"), the opportunity to profit during the option
period from an increase in the market value of the underlying security or
currency above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call option is valued at the last sale price or, in the absence of a
sale, the mean between the closing bid and asked quotations or at the most
recent asked quotation if no bid and asked quotations are available. Over the
counter written options are valued at the most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, put options
on securities and stock indices. Exchange traded purchased options are valued at
the last sales price or, in the absence of a sale, the mean between the closing
bid and asked quotations or at the most recent bid quotation if no bid and asked
quotations are available. Over-the-counter purchased options are valued at the
most recent bid quotation.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has 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. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Forward foreign currency
exchange contracts may be entered into for purposes of hedging specific
securities denominated in foreign currencies. Forward contracts are marked to
market daily, and the change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The Fund
could be exposed to risk if the counter parties are unable to meet the terms of
the contracts.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with issuing Class B shares have been deferred and are being
amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, investments in forward foreign currency contracts,
passive foreign investment companies, and certain securities sold at a loss. As
a result, Net investment income (loss) and Net realized gain (loss) on
investments and foreign currency transactions for a reporting period may differ
significantly in amount and character from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .85% of
the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. In addition, IMI may
voluntarily reimburse the Fund's expenses. Expenses reimbursed by manager
reflected in the Statement of Operations consists of a voluntary reimbursement.
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly-owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $11,557.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of shares issued after December 31, 1991. Class B and Class C
shares are also subject to an ongoing distribution fee at an annual rate of .75%
of the average net asset value of Class B and Class C shares. IMDI may use such
distribution fee for purposes of advertising and marketing shares of the Fund.
Such fees are reflected as 12b-1 service and distribution fees in the Statement
of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. ACQUISITION OF MACKENZIE AMERICAN FUND
On April 1, 1995, the Fund acquired the net assets (valued at $22,845,039)
of Mackenzie American Fund (MAF), approved by MAF's shareholders on March 31,
1995. The acquisition was accomplished by a tax-free exchange, based on values
computed as of the close of business on March 31, 1995 of 1,558,771 (NAV $14.66)
shares (1,556,917 Class A and 1,854 Class B) of the Fund for 2,170,282 (NAV
$10.53) shares (2,167,700 Class A and 2,582 Class B) of MAF outstanding. MAF's
net assets at that date, including $604,631 unrealized appreciation on
investments, were combined with the Fund for total net assets after acquisition
of $264,077,723.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 590,039 $ 10,438,664 1,293,661 $ 20,326,652
Issued in connection with
the acquisition of
Mackenzie American
Fund.................... -- -- 1,556,917 22,817,867
Issued on reinvestment of
distributions........... -- -- 854,211 14,217,886
Repurchased.............. (1,292,758) (23,061,567) (3,036,434) (47,539,646)
---------- ------------ ---------- ------------
Net increase (decrease).. (702,719) $(12,622,903) 668,355 $ 9,822,759
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 65,462 $ 1,165,154 274,170 $ 4,147,548
Issued in connection with
the acquisition of
Mackenzie American
Fund.................... -- -- 1,854 27,172
Issued on reinvestment of
distributions........... -- -- 7,166 119,052
Repurchased.............. (44,299) (780,143) (224,460) (3,371,426)
---------- ------------ ---------- ------------
Net increase............. 21,163 $ 385,011 58,730 $ 922,346
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------------------------- ---------- ------------
<S> <C> <C>
Sold..................... 268 $ 5,037
---------- ------------
Net increase............. 268 $ 5,037
============ ==============
</TABLE>
IGF-3-896
<PAGE> 12
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY GROWTH MARKET COMMENTARY:
WITH INCOME
FUND Although corporate profits and cash resume their long-term upward trend when
flows continue to be positive for US companies investors realize that equities benefit from
in general, recently the overall investment a moderately growing economy with stable
climate turned less benign than at the inflation.
beginning of 1996. Interest rates rose early Most of the Ivy Growth with Income Fund is
- ------------------- in the year and stayed up as the economy invested in larger capitalization US stocks.
SEMI-ANNUAL produced better than expected results for the According to our research, these stocks are
REPORT later stages of an economic recovery. Investors valued quite reasonably--below market price/
- ------------------- searched for clues in corporate earnings reports earnings ratios and with positive growth
This report and the and worried that profit growth had peaked, prospects and strong financial characteristics.
financial statements particularly in the highly visible technology Areas that are emphasized include the financial
contained herein are industry. These factors have combined to produce services group, which has very positive long-
submitted for the general a volatile summer. However, second quarter term characteristics and low valuations, and
information of the share- earnings were typically better than expected, the technology sector. We believe technology
holders. This report is save for some highly publicized exceptions and should continue to enjoy strong secular growth,
not authorized for distri- many companies were forecasting continued growth, but undoubtably will experience cylical
bution to prospective albeit at a somewhat slower pace. declines within the secular trend.
investors unless preced- There is no clear consensus about the Additionally, companies that provide health
ed or accompanied by economy, much less about the pace of inflation, care and leisure services to an aging US
an effective prospectus. which is key to valuations of stock prices. This population should benefit from increased
high level of uncertainty has led to higher demand for those services.
Ivy Management, Inc. volatility in stock prices. However, we expect The Fund also continues to maintain
Via Mizner Financial to see a moderating of economic growth from the exposure to Real Estate Investment Trusts
Plaza heady pace recorded the first half of the year. (REITs) which are vehicles designed to
700 South Federal Hwy. Higher interest rates are likely to act as a facilitate investment in commercial and multi-
Boca Raton, FL 33432 natural brake on the economy over time. We don't family residential real estate. These stocks
1-800-456-5111 expect to see a resurgence in inflation, although typically pay relatively high dividends because
the low point for this cycle may be behind us. at least 95% of a corporation's net income
We would expect to see the Federal Reserve tighten must be distributed to shareholders.
monetary policy when and if they sense a challenge Meanwhile, the fundamentals for many sectors
to a stable environment. of the real estate market continue to improve
So far this year, the broader stock averages as occupancy rates increase and the supply
have experienced a decline of about 5% from their of new buildings is low. The extra income
highs, while the smaller capitalization group is from these stocks may help provide the Fund
down about 20%. These adjustments are healthy and with a downside cushion during weak markets.
normal (and long overdue), but rarely enjoyable. The Ivy Growth with Income Fund
Our research indicates US companies are stronger maintains its strategy of seeking long-term
financially than they have been in a decade and growth with an emphasis on risk control.
that economic growth is likely to moderate. We
believe stock prices are much more volatile than IVY MANAGEMENT, INC.
the underlying businesses and ultimately should
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 13
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 72.2% SHARES VALUE
<S> <C> <C>
BASIC INDUSTRIES -- 6.9%
Asarco, Inc............................... 17,000 $ 473,875
Bethlehem Steel Corporation*.............. 17,000 201,875
Cypress-Amax Minerals Inc................. 9,000 209,250
Du Pont (I.E.) De Numours & Company....... 8,000 633,000
Englehard Corp............................ 28,050 645,150
Ferro Corporation......................... 14,000 371,000
Harsco Corporation........................ 12,000 802,500
Inco, Ltd.(a)............................. 7,000 225,750
Inland Steel Industries, Inc.............. 2,000 39,250
Lyondell Petrochemical Company............ 5,000 120,625
Pioneer Hi-Bred International............. 14,000 740,250
Union Carbide Corporation Holding
Company................................. 6,000 238,500
Weirton Steel Corporation*................ 14,000 45,500
Weyerhaeuser Company...................... 9,000 385,875
-----------
5,132,400
-----------
CAPITAL GOODS -- 7.2%
AGCO Corporation.......................... 18,000 501,750
American Standard Companies, Inc.*........ 12,000 396,000
Caterpillar, Inc.......................... 8,000 542,000
Cincinnati Milacron, Inc.................. 23,000 546,250
Fluor Corporation......................... 5,000 326,250
Foster Wheeler Corporation................ 16,000 714,000
General Electric Company.................. 12,800 1,107,200
Ingersoll-Rand Company.................... 2,000 87,500
Johnson Controls, Inc..................... 12,000 834,000
Tecumseh Products Company................. 6,000 322,500
-----------
5,377,450
-----------
CONSUMER DURABLES -- 1.7%
Goodyear Tire & Rubber Company
(The)................................... 9,000 432,000
Singer Company NV (The)................... 14,000 280,000
Standard-Pacific Corporation.............. 74,000 536,500
-----------
1,248,500
-----------
CONSUMER NON-DURABLES -- 4.7%
Hasbro, Inc............................... 7,000 250,250
Mattel, Inc............................... 15,401 440,854
Nabisco Holdings Corporation Class A...... 21,000 740,250
PepsiCo, Inc.............................. 18,000 636,750
Premark International, Inc................ 25,000 462,500
Tupperware Corporation.................... 12,400 523,900
Warnaco Group, Inc........................ 16,000 412,000
-----------
3,466,504
-----------
CONSUMER SERVICES -- 10.9%
American Stores Company................... 18,000 697,500
Brunswick Corporation..................... 23,000 460,000
Callaway Golf Company..................... 17,000 565,250
Carnival Corporation...................... 12,000 346,500
Eckerd Corporation*....................... 24,000 549,000
Federated Department Stores, Inc.*........ 7,000 238,000
Harte-Haks Communications................. 21,000 582,750
Lowes Companies, Inc...................... 15,000 541,875
Royal Caribbean Cruises Ltd............... 14,000 399,000
Service Corp. International............... 18,000 1,037,250
Tandy Corporation......................... 15,000 710,625
Toys "R" Us, Inc.*........................ 15,000 427,500
Viacom Inc. Class B*...................... 13,000 503,750
Vivra, Inc.*.............................. 30,500 1,017,937
-----------
8,076,937
-----------
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
ENERGY -- 5.9%
Ashland Inc............................... 10,000 $ 398,750
Dresser Industries, Inc................... 17,000 501,500
Enron Corporation......................... 12,000 492,000
Helmerich & Payne, Inc.................... 12,000 438,000
Kaneb Services, Inc.*..................... 29,000 94,250
Offshore Logistics, Inc................... 14,000 196,000
Parker & Parsley Petroleum Company........ 15,000 414,375
Schlumberger, Ltd......................... 8,000 674,000
Tenneco, Inc.............................. 19,000 971,375
Union Pacific Resources Group Inc......... 7,000 187,250
-----------
4,367,500
-----------
FINANCIAL SERVICES -- 14.0%
AMBAC, Inc................................ 9,200 480,700
Charles Schwab, Corporation............... 20,000 487,500
Chase Manhattan Corporation............... 2,000 141,250
Donaldson, Lufkin & Jenrette, Inc......... 12,000 376,500
Equitable Companies, Inc.................. 23,000 572,125
Exel Limited.............................. 10,000 705,000
Federal Home Loan Mortgage Corp........... 9,200 786,600
Federal National Mortgage Association..... 25,800 864,300
First Union Corporation................... 11,000 669,625
MBIA Inc.................................. 6,100 475,037
NationsBank Corporation................... 9,000 743,625
Norwest Corporation....................... 8,000 279,000
Olympic Financial Ltd.*................... 10,000 230,000
Penncorp Financial Group, Inc............. 12,000 378,000
Peoples Heritage Financial Group, Inc..... 36,000 733,500
Price (T. Rowe) Associates, Inc........... 31,200 963,300
Providian Corporation..................... 11,000 471,625
Risk Capital Holdings, Inc.*.............. 8,000 157,000
Terra Nova (Bermuda) Holdings Ltd......... 32,000 500,000
The Travelers Inc......................... 7,350 335,344
-----------
10,350,031
-----------
HEALTHCARE -- 5.2%
Baxter International, Inc................. 9,000 426,375
Boston Scientific Corporation*............ 6,000 263,250
Cardinal Health, Inc...................... 12,019 869,875
Columbia/HCA Healthcare Corp.............. 15,200 811,300
Humana, Inc.*............................. 8,000 143,000
Integrated Health Services, Inc........... 30,000 716,250
Pharmacia & Upjohn, Inc................... 14,000 621,250
-----------
3,851,300
-----------
TECHNOLOGY -- 11.0%
Adaptec, Inc.*............................ 14,000 661,500
Bell & Howell Company*.................... 12,000 396,000
Cabletron Systems Inc.*................... 18,000 1,233,000
Cisco Systems, Inc.*...................... 21,000 1,189,125
Compaq Computer Corp.*.................... 3,000 147,375
DSC Communications Corp.*................. 16,000 482,000
Hewlett-Packard Company................... 6,000 597,750
Intel Corp................................ 12,100 887,837
International Business Machines
Corporation............................. 7,200 712,800
Microsoft Corporation*.................... 9,000 1,081,125
Motorola, Inc............................. 7,000 439,250
Oracle Corporation*....................... 9,000 354,937
-----------
8,182,699
-----------
TRANSPORTATION -- 2.1%
Illinois Central.......................... 37,500 1,064,062
Union Pacific Corporation................. 7,300 510,087
-----------
1,574,149
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
UTILITIES -- 2.6%
Ameritech Corporation..................... 10,000 $ 593,750
BellSouth Corporation..................... 14,000 593,250
Vodafone Group plc - ADR(a)............... 21,000 771,750
-----------
1,958,750
-----------
TOTAL COMMON STOCKS
(Cost -- $48,134,353)................... 53,586,220
-----------
PREFERRED STOCKS -- 2.2%
- ------------------------------------------
Liposome Co. Inc.......................... 21,000 782,250
News Corporation Ltd.(a).................. 92,000 448,304
Suncoast Savings & Loan Association
(Series A).............................. 26,800 375,200
-----------
TOTAL PREFERRED STOCKS
(Cost -- $1,542,125).................... 1,605,754
-----------
REAL ESTATE INVESTMENT TRUSTS
(REITS) -- 12.5%
- ------------------------------------------
Beacon Properties Corporation............. 26,000 666,250
Developers Diversified Realty
Corporation............................. 21,000 666,750
Duke Realty Investments, Inc.............. 12,000 361,500
Equity Residential Properties Trust....... 25,000 825,000
Health Care Property Investors, Inc....... 13,100 442,125
Healthcare Realty Trust, Inc.............. 15,100 360,513
Merry Land & Investment Company Inc....... 23,000 485,875
National Golf Properties, Inc............. 33,000 808,500
Saul Centers, Inc......................... 38,500 534,188
Southwestern Properties Trust............. 37,000 499,500
Storage Trust Realty...................... 15,000 307,500
Storage USA, Inc.......................... 16,000 520,000
Sun Communities, Inc...................... 51,000 1,377,000
Thornburg Mortgage Corporation............ 37,000 592,000
Weingarten Realty Investors............... 21,000 813,750
-----------
TOTAL REITS
(Cost -- $8,443,677).................... 9,260,451
-----------
BONDS -- 10.5% PRINCIPAL
- ------------------------------------------ ----------
DOMESTIC CORPORATE BONDS -- 0.3%
General Electric Capital, FRN, 10/29/96... $ 500,000 238,400(b)
-----------
CONVERTIBLE BONDS -- 10.2%
Altera Corp - 144A Reg., 5.75%,
06/15/02................................ 375,000 374,063
Baby Superstore, 4.875%, 10/01/00......... 510,000 406,725
Boston Chicken, 4.50%, 02/01/04........... 713,000 844,905
Elan International Financial,
0.00%, 10/16/12......................... 400,000 248,000
<CAPTION>
BONDS PRINCIPAL VALUE
<S> <C> <C>
First Financial Management Corp, 5.00%,
12/1/99................................. $ 350,000 $ 641,375
General Instrument Conv., 6.00%,
11/01/99................................ 355,000 435,319
Integrated Health Services Inc.,
6.00%, 01/01/03......................... 600,000 574,500
NABI Inc., 6.50%, 02/01/03................ 750,000 675,938
Office Depot, 0.00%, 11/01/08............. 1,170,000 700,538
Omnicare, Inc., 5.75%, 10/01/03........... 125,000 468,906
Quantum Health Resources, Inc.,
4.75%, 10/01/00......................... 400,000 357,000
Schuler Homes Inc., 6.50%, 01/15/03....... 800,000 632,000
Sepracor Inc., 7.00%, 12/02/02............ 950,000 971,375
United Gaming, Inc., 7.50%, 09/15/03...... 400,000 256,000
-----------
7,586,644
-----------
TOTAL BONDS
(Cost -- $7,857,094).................... 7,825,044
-----------
TOTAL INVESTMENTS -- 97.4%
(Cost -- $65,977,249)(c)................ 72,277,469
OTHER ASSETS, LESS LIABILITIES -- 2.6%.... 1,942,633
-----------
NET ASSETS -- 100%........................ $74,220,102
===========
ADR -- American Depository Receipt
FRN -- Floating Rate Note; reflects rate as of June 30, 1996
NV -- Non-voting
* Non-income producing security.
(a) Foreign security.
(b) Security valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
this security at June 30, 1996 aggregated
$385,706. See Note 1 of the Notes to the Financial
Statements.
(c) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 8,977,795
Gross unrealized depreciation..................... (2,677,575)
-----------
Net unrealized appreciation................... $ 6,300,220
===========
Purchases and sales of securities (other than short-term
obligations) aggregated $49,472,887 and $48,892,530, respectively,
for the period ended June 30, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $65,977,249).............................................................. $72,277,469
Cash................................................................................................................ 1,835,051
Receivables:
Fund shares sold.................................................................................................. 9,458
Dividends and interest............................................................................................ 263,887
Deferred organization expenses...................................................................................... 54,972
Other assets........................................................................................................ 71,795
-----------
Total assets.................................................................................................... 74,512,632
-----------
LIABILITIES
Payables:
Dividends to shareholders......................................................................................... 139,355
Fund shares repurchased........................................................................................... 32,946
Management fee.................................................................................................... 51,995
12b-1 service and distribution fees............................................................................... 20,478
Administrative services fee....................................................................................... 6,117
Fund accounting................................................................................................... 8,514
Transfer agent.................................................................................................... 19,195
Other accrued expenses and liabilities.............................................................................. 13,930
-----------
Total liabilities................................................................................................. 292,530
-----------
NET ASSETS.......................................................................................................... $74,220,102
===========
CLASS A:
Net asset value and redemption price per share ($61,664,057/5,245,009 shares outstanding)........................... $ 11.76
===========
Maximum offering price per share
($11.76 X 100/94.25)*............................................................................................... $ 12.48
===========
CLASS B:
Net asset value and offering price per share ($11,805,338/1,008,449 shares outstanding)**........................... $ 11.71
===========
CLASS C:
Net asset value and offering price per share ($11.74/1 share outstanding)**......................................... $ 11.74
===========
CLASS D:
Net asset value and redemption price per share ($750,695/64,119 shares outstanding)................................. $ 11.71
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $67,368,522
Accumulated net realized gain on investments and foreign currency transactions.................................... 538,709
Accumulated undistributed net investment income................................................................... 12,651
Net unrealized appreciation on investments........................................................................ 6,300,220
-----------
NET ASSETS.......................................................................................................... $74,220,102
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 16
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends, net of foreign taxes withheld................................................................ $ 687,008
Interest................................................................................................ 311,641
----------
998,649
----------
Expenses
Management fee.......................................................................................... $311,344
Transfer agent.......................................................................................... 110,302
Administrative services fee............................................................................. 36,629
Custodian fees.......................................................................................... 4,272
Blue Sky fees........................................................................................... 13,134
Auditing and accounting fees............................................................................ 13,219
Shareholder reports..................................................................................... 3,960
Amortization of organization expenses................................................................... 19,152
Fund accounting......................................................................................... 47,465
Trustees' fees.......................................................................................... 1,516
12b-1 service and distribution fees
Class A............................................................................................... 63,406
Class B............................................................................................... 52,979
Class D............................................................................................... 5,196
Legal................................................................................................... 14,390
Other................................................................................................... 15,826
----------
Total expenses........................................................................................ 712,790
----------
NET INVESTMENT INCOME..................................................................................... 285,859
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions...................................... 9,601,881
Net unrealized depreciation during the period on investments............................................ (4,735,262)
----------
Net gain on investment transactions................................................................... 4,866,619
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $5,152,478
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- ------------
1996* 1995
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income............................................................................ $ 285,859 $ 570,249
Net realized gain on investments and foreign currency transactions............................... 9,601,881 3,005,363
Net unrealized appreciation (depreciation) during the period on
Investments.................................................................................... (4,735,262) 10,477,958
Forward foreign currency contracts............................................................. -- 8,082
----------- ------------
Net increase resulting from operations......................................................... 5,152,478 14,061,652
----------- ------------
Class A distributions
From net investment income....................................................................... (229,964) (448,998)
From net realized gain........................................................................... -- (1,323,702)
----------- ------------
Total distributions to Class A shareholders.................................................... (229,964) (1,772,700)
----------- ------------
Class B distributions
From net investment income....................................................................... (39,358) (6,337)
From net realized gain........................................................................... -- (198,573)
----------- ------------
Total distributions to Class B shareholders.................................................... (39,358) (204,910)
----------- ------------
Class D distributions
From net investment income....................................................................... (3,886) (1,556)
From net realized gain........................................................................... -- (35,765)
----------- ------------
Total distributions to Class D shareholders.................................................... (3,886) (37,321)
----------- ------------
Fund share transactions (Note 5):
Class A.......................................................................................... (1,573,201) 22,755,447
Class B.......................................................................................... 2,316,305 1,580,170
Class C.......................................................................................... 12 --
Class D.......................................................................................... (566,791) (2,088,473)
----------- ------------
Net increase resulting from Fund share transactions............................................ 176,325 22,247,144
----------- ------------
TOTAL INCREASE IN NET ASSETS....................................................................... 5,055,595 34,293,865
NET ASSETS
Beginning of period.............................................................................. 69,164,507 34,870,642
----------- ------------
END OF PERIOD.................................................................................... $74,220,102 $ 69,164,507
=========== ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME.................................................... $ 12,651 $ --
=========== ============
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
CLASS A JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
----------------- ---------------------------------------------------------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993 1992 1991
----------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 10.98 $ 9.08 $ 9.70 $ 9.21 $ 9.74 $ 7.79
-------- ------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income..................... .05 .11 .17 .08 .07 .09(a)
Net gain (loss) on investment transactions
(both realized and unrealized).......... .77 2.13 (.36) 1.30 .18 2.72
-------- ------- ------- ------- ------- -------
Total from investment operations........ .82 2.24 (.19) 1.38 .25 2.81
-------- ------- ------- ------- ------- -------
Less distributions
From net investment income................ .04 .08 .17 .06 .07 .09
In excess of net investment income........ -- -- .01 -- -- --
From net realized gain.................... -- .26 .25 .83 .71 .77
-------- ------- ------- ------- ------- -------
Total distributions..................... .04 .34 .43 .89 .78 .86
-------- ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 11.76 $ 10.98 $ 9.08 $ 9.70 $ 9.21 $ 9.74
=================== ======= ======= ======= ======= =======
Total return(%)............................. 7.49(d) 24.93(b) (2.03)(b) 15.07(b) 2.61(b) 36.33(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $61,664 $59,054 $26,017 $22,669 $19,045 $17,063
Ratio of expenses to average net
assets(%)................................. 1.82(e) 1.96 1.84 2.14 1.94 1.50(c)
Ratio of net investment income to average
net assets(%)............................. .91(e) 1.06 1.83 .88 .73 1.10(a)
Portfolio turnover rate(%).................. 142(e) 81 36 85 163 113
Average commission rate(g).................. $ .0580 N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR OCTOBER 23, 1993
MONTHS ENDED ENDED DECEMBER (COMMENCEMENT)
CLASS B JUNE 30, 31, TO DECEMBER 31,
----------------- ----------------- ----------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993
----------------- ------ ------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................... $ 10.98 $ 9.08 $ 9.70 $10.43
-------- ------ ------ ------
Income (loss) from investment operations
Net investment income............................................ .01 .03 .09 --
Net gain (loss) on investment transactions (both realized and
unrealized).................................................... .76 2.13 (.36) .05
-------- ------ ------ ------
Total from investment operations............................... .77 2.16 (.27) .05
-------- ------ ------ ------
Less distributions
From net investment income....................................... .04 .01 .09 .01
In excess of net investment income............................... -- -- .01 --
From net realized gain........................................... -- .25 .25 .77
-------- ------ ------ ------
Total distributions............................................ .04 .26 .35 .78
-------- ------ ------ ------
Net asset value, end of period..................................... $ 11.71 $10.98 $ 9.08 $ 9.70
=================== ====== ====== ==================
Total return(%).................................................... 7.04(d) 23.94(b) (2.88)(b) .61(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................... $11,805 $8,868 $5,849 $ 888
Ratio of expenses to average net assets(%)......................... 2.62(e) 2.75 2.70 3.09(e)
Ratio of net investment income (loss) to average net assets(%)..... .11(e) .27 .97 (.07)(e)
Portfolio turnover rate(%)......................................... 142(e) 81 36 85
Average commission rate(g)......................................... $ .0580 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 19
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
---------------
SELECTED PER SHARE DATA 1996*
---------------
<S> <C>
Net asset value, beginning of period.......................................................................... $ 11.73
---------------
Income from investment operations
Net investment income....................................................................................... .01
Net gain on investment transactions (both realized and unrealized).......................................... .01
---------------
Total from investment operations.......................................................................... .02
---------------
Less distributions
From net investment income.................................................................................. .01
---------------
Net asset value, end of period................................................................................ $ 11.74
==================
Total return(%)............................................................................................... .21(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...................................................................... $ --
Ratio of expenses to average net assets(%).................................................................... 2.62(e)
Ratio of net investment income to average net assets(%)....................................................... .11(e)
Portfolio turnover rate(%).................................................................................... 142(e)
Average commission rate(g).................................................................................... $ .0580
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE AUGUST 16, 1993
MONTHS ENDED YEAR ENDED (COMMENCEMENT)
CLASS D(F) JUNE 30, DECEMBER 31, TO DECEMBER 31,
----------------- --------------------- ---------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993
----------------- ------ ------ ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 10.98 $ 9.08 $ 9.70 $ 9.83
------ ------ ------ ------
Income (loss) from investment operations
Net investment income......................................... .01 .03 .09 --
Net gain (loss) on investment transactions (both realized and
unrealized)................................................. .76 2.13 (.36) .73
------ ------ ------ ------
Total from investment operations............................ .77 2.16 (.27) .73
------ ------ ------ ------
Less distributions
From net investment income.................................... .04 .01 .09 .06
In excess of net investment income............................ -- -- .01 --
From net realized gain........................................ -- .25 .25 .80
------ ------ ------ ------
Total distributions......................................... .04 .26 .35 .86
------ ------ ------ ------
Net asset value, end of period.................................. $ 11.71 $10.98 $ 9.08 $ 9.70
=================== ====== ====== ================
Total return(%)................................................. 7.04(d) 23.94(b) (2.88)(b) 7.59(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................ $ 751 $1,242 $3,004 $ 5,185
Ratio of expenses to average net assets(%)...................... 2.62(e) 2.75 2.70 3.09(e)
Ratio of net investment income (loss) to average net
assets(%)..................................................... .11(e) .27 .97 (.07)(e)
Portfolio turnover rate(%)...................................... 142(e) 81 36 85
Average commission rate(g)...................................... $ .0580 N/A N/A N/A
(a) Net investment income is net of expenses reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) Ratio of expenses to average net assets is net of expenses
reimbursed by manager. Without the expense reimbursement the ratio
of expenses to average net assets would have been 1.61%.
(d) Total return represents aggregate total return and does not reflect a
sales charge.
(e) Annualized.
(f) On April 30, 1996, Class C shares outstanding were redesignated Class
D shares. Class D shares are not available for sale.
(g) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary
from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission
rate structures may differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Growth with Income Fund (the Fund) is a series of shares of Ivy Fund.
The shares of beneficial interest are assigned no par value and an unlimited
number of shares of Class A, Class B and Class C are authorized; 638,129 Class D
shares were authorized in connection with the acquisition of Mackenzie Growth &
Income Fund on August 16, 1993. Ivy Fund was organized as a Massachusetts
business trust under a Declaration of Trust dated December 21, 1983 and is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect.
All other securities are valued at their fair value as determined in good
faith by the Valuation Committee of the Board. As of June 30, 1996, securities
valued in good faith by the Valuation Committee of the Board amounted to
$238,400 (.32% of net assets) and have been noted as such in the investment
portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax basis capital loss carryforward of approximately
$9,268,000 as of December 31, 1995, which may be applied against any realized
net taxable capital gains of each succeeding fiscal year until fully utilized or
until the expiration date, whichever occurs first. The Fund's capital loss
carryforward was realized by Mackenzie North American Fund (MNAF) prior to the
Fund's acquisition of all the net assets on April 1, 1995 (Note 4). The
carryforward expires $3,616,000 in 1997, $3,616,000 in 1999, and $2,036,000 in
2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily. Distributions are paid at the earlier of redemption or the
last business day of the quarter. An additional distribution in December will
include any remaining undistributed net investment income and any net capital
gain realized during the year. An additional distribution may be declared if
necessary to avoid the payment of a four percent Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B and Class D shares over Class
A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Forward foreign currency
exchange contracts may be entered into for purposes of hedging specific
securities denominated in foreign currencies. Forward contracts are marked to
market daily, and the change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The Fund
could be exposed to risk if the counter parties are unable to meet the terms of
the contracts.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with issuing Class B and Class D shares have been deferred and are
being amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, foreign forward currency contracts, passive foreign
investment companies, and certain securities sold at a loss. As a result, Net
investment income (loss) and Net realized gain (loss) on investments and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .85% of
the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. In addition, IMI may
voluntarily reimburse the Fund's expenses.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $9,671.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of shares issued after December 31, 1991. Class B, Class C and
Class D shares are also subject
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
to an ongoing distribution fee at an annual rate of .75% of the average net
asset value attributable to Class B, Class C and Class D shares. IMDI may use
such distribution fee for purposes of advertising and marketing shares of the
Fund. Such fees are reflected as 12b-1 service and distribution fees in the
Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. ACQUISITION OF MACKENZIE NORTH AMERICAN FUND
On April 1, 1995, the Fund acquired the net assets (valued at $27,815,572)
of MNAF, approved by MNAF's shareholders on March 31, 1995. The acquisition was
accomplished by a tax-free exchange, based on values computed as of the close of
business on March 31, 1995 of 2,962,768 (NAV $9.39) shares of the Fund for the
4,368,536 (NAV $6.37) shares of MNAF outstanding. MNAF's net assets at that
date, including $10,629,907 net realized capital loss and $778,631 unrealized
depreciation, were combined with the Fund for total net assets after acquisition
of $64,583,061.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class D were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 575,845 $ 6,575,668 995,850 $ 9,779,465
Issued in connection with
the acquisition of
Mackenzie North American
Fund...................... -- -- 2,962,768 27,815,572
Issued on reinvestment of
distributions............. 7,548 87,690 132,508 1,422,527
Repurchased................ (716,098) (8,236,559) (1,580,020) (16,262,117)
-------- ----------- ---------- ------------
Net increase (decrease).... (132,705) $(1,573,201) 2,511,106 $ 22,755,447
========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 414,090 $ 4,747,967 478,516 $ 4,852,229
Issued on reinvestment of
distributions............. 1,423 16,472 17,693 190,075
Repurchased................ (214,827) (2,448,134) (332,940) (3,462,134)
-------- ----------- ---------- ------------
Net increase............... 200,686 $ 2,316,305 163,269 $ 1,580,170
========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
----------------------
CLASS C SHARES AMOUNT
- --------------------------- -------- -----------
<S> <C> <C>
Sold....................... 1 $ 12
-------- -----------
Net increase............... 1 $ 12
========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- -------------------------
CLASS D* SHARES AMOUNT SHARES AMOUNT
- --------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Issued on reinvestment of
distributions............. 190 $ 2,189 3,107 $ 32,805
Repurchased................ (49,217) (568,980) (220,936) (2,121,278)
-------- ----------- ---------- ------------
Net decrease............... (49,027) $ (566,791) (217,829) $ (2,088,473)
========== ============= ============ ==============
</TABLE>
* Class D shares are not available for sale.
IGWIF-3-896
<PAGE> 22
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
INTERNATIONAL
FUND The major themes of Ivy International has a market value of only $1.5 billion
Fund have not changed over the last year--- yet its oil production and reserves are
lower interest rates in Europe, above average valued at more than $60 billion. Mosenergo
growth rates in the Far East and selected Electric, a utility that serves 17 million
opportunities in other parts of the world. people in Moscow, trades for less than two
- ------------------- In the past twelve months, short-term times last year's earnings---about one-fifth
SEMI-ANNUAL interest rates in France have come down of what US electric companies trade at.
REPORT approximately 50% and the Fund manager Ivy International Fund continues to
- ------------------- believes they should fall further as major allocate assets (6%) to South America, which
This report and the European countries will find it necessary to is benefitting from secular growth as well as
financial statements cut rates to combat unemployment and cyclical growth. A new-found emphasis on
contained herein are sluggish growth. The Fund manager also fiscal austerity and disinflationary monetary
submitted for the general expects to see the US dollar continue to policies have helped to stabilize South
information of the share- appreciate against major European currencies America's economic environment. Privatization
holders. This report is such as the French franc, Dutch guilder, German has provided access to capital and increased
not authorized for distri- mark and Swiss franc. This would bode well for market efficiency; trade liberalization and
bution to prospective European multinationals with significant dollar deregulation have helped to increase economic
investors unless preced- earnings. As of June 30, 1996, 53% of the efficiency. Argentina's recession appears to
ed or accompanied by Ivy International Fund is invested in the be over and the Fund manager believes strong
an effective prospectus. mature European economies. economic growth should resume. Brazil has made
In the Far East, the Ivy International tremendous progress in bringing inflation
Ivy Management, Inc. Fund continues to favor those countries the under control. The Fund is not invested in
Via Mizner Financial Fund manager believes will provide the best Mexico which reflects the manager's opinion
Plaza opportunities for growth. These countries that the primary affects of the North American
700 South Federal Hwy. include: Hong Kong, Malaysia and Singapore. Free Trade Agreement (NAFTA) is to enable US
Boca Raton, FL 33432 The World Bank estimates that over the next corporations to compete favorably in Mexico
1-800-456-5111 five years, growth rates in Asia should be and not the reserve.
more than double those more mature economies; Our research continues to support our
historically, high growth rates have lead to belief that investors with a long-term
higher stock market returns. The Fund has horizon should be looking to opportunities
allocated 10% to Japanese companies with a outside the US for greater returns and
strong exporting base. should take advantage of windows of
Earlier this year, Ivy International Fund opportunity as they occur.
increased its Russian exposure, which is focused
in two companies, Lukoil and Mosenergo. The IVY MANAGEMENT, INC.
Fund's manager believes these two stocks are
significantly undervalued. Lukoil, for example,
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 23
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 88.4% SHARES VALUE
<S> <C> <C>
AFRICA -- 4.3%
- ---------------------------------------
SOUTH AFRICA -- 4.3%
Anglo American Corporation of South
Africa Ltd. ......................... 26,900 $ 1,704,143
Anglo American Corporation of South
Africa Ltd. ADR...................... 150,000 9,487,500
Gencor Limited......................... 476,400 1,759,151
Gencor Limited ADR..................... 1,800,000 6,570,000
Malbak GDS -- NPV (Reg S) ADR.......... 486,240 2,370,420
Malbak Limited ORD ADR 144A............ 526,760 2,612,730
Pepkor Limited ADR 144A REGD........... 315,000 3,052,350
South African Breweries Limited........ 159,000 4,660,281
South African Breweries Limited ADR.... 224,767 6,686,818
------------
38,903,393
------------
ASIA -- 20.6%
- ---------------------------------------
AUSTRALIA -- 2.3%
CRA Limited............................ 322,500 4,957,834
News Corp. Ltd. ADR.................... 425,000 9,987,500
Pasminco Limited....................... 550,000 773,765
Western Mining Corporation Holdings.... 400,000 2,860,848
Western Mining Holdings ADR............ 82,812 2,391,197
------------
20,971,144
------------
HONG KONG -- 3.2%
China Light & Power.................... 2,000,000 9,068,889
Hong Kong Telecommunications Ltd....... 4,828,624 8,670,720
Swire Pacific Class A.................. 1,000,000 8,558,602
Television Broadcasting Ltd............ 321,000 1,204,670
Tsingtao Brewery Company Ltd., Series
H.................................... 3,850,000 1,392,630
------------
28,895,511
------------
JAPAN -- 9.2%
Bridgestone Corp....................... 650,000 12,413,762
Canon Inc.............................. 600,000 12,500,571
Fuji Photo Film -- Ordinary............ 370,000 11,698,268
Matsushita Electric Industrial Co...... 800,000 14,912,962
Nintendo Corp Ltd...................... 20,000 1,493,124
Sega Enterprises....................... 18,000 842,144
Sharp Corp............................. 1,000,000 17,544,661
Sony Corp.............................. 175,000 11,529,675
------------
82,935,167
------------
MALAYSIA -- 3.4%
Malayan Banking Berhad................. 800,000 7,696,933
Sime Darby Berhad...................... 5,000,000 13,830,427
Telekom Malaysia Berhad................ 1,000,000 8,899,579
------------
30,426,939
------------
SINGAPORE -- 2.2%
Jurong Shipyard Limited................ 258,000 1,307,371
Keppel Corporation Ltd................. 1,300,000 10,871,722
United Overseas Bank Foreign
Registered........................... 807,920 7,729,922
------------
19,909,015
------------
SOUTH KOREA -- 0.3%
Hyundai Motor Company GDR 144A REGD.... 200,000 2,575,000
------------
EUROPE -- 57.9%
- ---------------------------------------
DENMARK -- 2.3%
ISS International Service Systems B.... 500,000 11,178,829
Novo Nordisk AS -- Class B............. 70,000 9,915,877
------------
21,094,706
------------
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
FRANCE -- 9.2%
BIC.................................... 70,000 $ 9,947,028
Banque Nationale de Paris.............. 150,000 5,268,990
Compagnie Financiere de Paribas........ 167,257 9,884,070
Eurotunnel S.A.*....................... 5,000,000 7,386,888
Lyonnaise des Eaux-Dumez............... 71,071 6,791,758
Michelin Class B (Registered).......... 250,000 12,227,244
Rhone Poulenc S.A...................... 350,000 9,205,424
Roussel Uclaf.......................... 45,000 10,803,324
TOTAL Compagnie Francaise des
Petroles............................. 154,522 11,468,436
------------
82,983,162
------------
NETHERLANDS -- 5.0%
Heineken NV............................ 41,562 9,295,195
Hunter Douglas NV...................... 72,402 4,946,043
ING Groep NV........................... 380,285 11,350,326
Nedlloyd............................... 300,000 6,913,456
Royal Dutch Petroleum ADR.............. 85,000 13,058,125
------------
45,563,145
------------
NORWAY -- 4.4%
Bergesen............................... 650,000 13,518,301
Kvaerner Industrier Series A........... 230,000 9,743,961
Norsk Hydro Sponsored ADR.............. 240,000 11,730,000
Saga Petroleum Series A Free........... 300,000 4,413,668
------------
39,405,930
------------
RUSSIA -- 5.8%
Lukoil ADR 144A........................ 730,300 32,206,230
Mosenergo ADR 144A*.................... 655,000 20,632,500
------------
52,838,730
------------
SPAIN -- 3.1%
BCO Bilboa Vizcaya Registered.......... 100,000 4,055,147
Banco Intercontinental................. 98,927 11,076,441
Tabacalera S.A. Series A Registered.... 3,712 187,071
Telefonica de Espana S.A............... 700,000 12,907,711
------------
28,226,370
------------
SWEDEN -- 6.5%
AGA AB Series B Free................... 500,000 8,607,112
Ericsson L.M. Telephone Series B
Free................................. 600,000 12,955,969
Kinnevik AB B Free..................... 230,870 7,007,227
Swedish Match AB Fuerer*............... 3,955,000 12,302,584
Trelleborg AB B Free................... 300,000 3,759,949
Volvo AB B Free........................ 635,000 14,478,824
------------
59,111,665
------------
SWITZERLAND -- 10.1%
CS Holding Bearer...................... 127,035 12,093,732
Ciba-Geigy Registered.................. 11,244 13,717,680
Clariant AG Registerd.................. 30,000 10,968,000
Electowatt AG Bearer................... 25,000 9,260,000
Nestle AG Registered................... 9,000 10,288,800
SCHW Ruckversicher Registered.......... 6,655 6,841,340
SGS Holdings Bearer.................... 5,000 11,980,000
Sulzer AG Registered................... 10,775 6,930,480
Swiss Bank Corporation Registered...... 47,121 9,311,110
Swiss Bank Corporation Warrants
06/30/00*............................ 5,605 17,936
Von Roll AG Registered*................ 11,200 228,480
------------
91,637,558
------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
UNITED KINGDOM -- 11.5%
B.A.T. Industries plc.................. 1,400,000 $ 10,896,211
Barclay's Bank Ordinary................ 422,628 5,071,851
Barclay's Bank 144A REGD............... 42,295 507,572
British Gas plc........................ 3,000,000 8,388,871
British Petroleum ORD.................. 742,316 6,509,723
British Petroleum 144A REGD............ 28,655 251,289
British Telecommunications plc......... 2,000,000 10,719,113
Cadbury Schweppes plc ADR.............. 242,960 7,835,460
Guinness plc........................... 1,500,000 10,905,532
RTZ Corporation (Registered)........... 706,425 10,458,483
Rolls-Royce............................ 2,500,000 8,699,570
Royal Bank Scotland Group ORD.......... 754,605 5,779,315
Smithkline Beecham plc ADR............. 120,000 6,540,000
Waste Management International plc
ADR.................................. 1,000,000 11,125,000
------------
103,687,990
------------
SOUTH AMERICA -- 5.6%
- ---------------------------------------
ARGENTINA -- 2.5%
Telecom de Argentina S.A. Class B...... 1,125,000 5,289,457
Telefonica de Argentina S.A. Class B... 2,250,000 6,617,448
YPF ADR Class D........................ 475,000 10,628,125
------------
22,535,030
------------
BRAZIL -- 3.1%
Petrobras Registered NV................ 115,000,000 14,143,803
Telebras Registered NV................. 200,000,000 13,962,058
------------
28,105,861
------------
TOTAL EQUITY SECURITIES
(Cost -- $636,728,082)............... 799,806,316
------------
CONVERTIBLE BONDS -- 1.5% PRINCIPAL
- --------------------------------------- ------------
BCP Bank & Trust, 8.75%, 05/21/02(a)... 8,000,000 10,391,746
Liberty Life, 6.50%, 09/30/04.......... $ 2,500,000 3,425,000
------------
TOTAL CONVERTIBLE BONDS
(Cost -- $13,607,216)................ 13,816,746
------------
<CAPTION>
COMMERCIAL PAPER -- 11.2% PRINCIPAL VALUE
<S> <C> <C>
American Express, 5.29%, 07/02/96...... $ 13,281,000 $ 13,302,505
American Express, 5.32%, 07/05/96...... 9,289,000 9,298,625
American Express, 5.39%, 07/12/96...... 10,545,000 10,549,747
Exxon Asset Management, 5.30%,
07/03/96............................. 9,000,000 9,009,287
General Electric Capital, 5.37%,
07/09/96............................. 10,145,000 10,152,581
General Electric Capital, 5.37%,
07/11/96............................. 14,097,000 14,105,429
Prudential Funding, 5.25%, 07/01/96.... 8,943,000 8,958,678
Prudential Funding, 5.35%, 07/08/96.... 11,809,000 11,819,550
Prudential Funding, 5.35%, 07/10/96.... 14,000,000 14,008,338
------------
TOTAL COMMERCIAL PAPER
(Cost -- $101,204,740)............... 101,204,740
------------
TOTAL INVESTMENTS -- 101.1%
(Cost -- $751,540,038)(b)............ 914,827,802
OTHER ASSETS, LESS
LIABILITIES -- (1.1%)................ (10,033,340)
------------
NET ASSETS -- 100%..................... $904,794,462
============
ADR - American Depository Receipt
GDR - Global Depository Receipt
NV - Non-voting
ORD - Ordinary
REGD - Registered
* Non-income producing security.
(a) Par Value is denominated in European Currency Units.
(b) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $191,927,018
Gross unrealized depreciation.................... (28,639,254)
------------
Net unrealized appreciation.................. $163,287,764
============
Purchases and sales of securities other than short-term obligations
aggregated $266,848,890 and $52,156,226, respectively, for the
period ended June 30, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 25
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $751,540,038)............................................................ $914,827,802
Cash............................................................................................................... 1,830,953
Receivables:
Investments sold................................................................................................. 1,478,277
Fund shares sold................................................................................................. 3,606,683
Dividends and interest........................................................................................... 4,027,528
Deferred organization expenses..................................................................................... 53,598
Other assets....................................................................................................... 27,468
------------
Total assets..................................................................................................... 925,852,309
------------
LIABILITIES
Payables:
Investments purchased............................................................................................ 19,636,896
Fund shares repurchased.......................................................................................... 47,042
Management fee................................................................................................... 712,891
12b-1 service and distribution fees.............................................................................. 285,291
Administrative services fee...................................................................................... 67,140
Fund accounting.................................................................................................. 13,501
Transfer agent................................................................................................... 97,068
Other accrued expenses and liabilities............................................................................. 198,018
------------
Total liabilities................................................................................................ 21,057,847
------------
NET ASSETS......................................................................................................... $904,794,462
============
CLASS A:
Net asset value and redemption price per share ($699,700,203/20,332,247 shares outstanding)........................ $ 34.41
============
Maximum offering price per share ($34.41 X 100/94.25)*............................................................. $ 36.51
============
CLASS B:
Net asset value and offering price per share ($168,490,282/4,916,411 shares outstanding)**......................... $ 34.27
============
CLASS C:
Net asset value and offering price per share ($3,620,160/105,661 shares outstanding)**............................. $ 34.26
============
CLASS I:
Net asset value, offering price, and redemption price per share ($32,983,817/957,815 shares outstanding)........... $ 34.44
============
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................. $724,235,187
Accumulated net realized gain on investments and foreign currency transactions................................... 10,529,793
Accumulated undistributed net investment income.................................................................. 6,741,718
Net unrealized appreciation on investments....................................................................... 163,287,764
------------
NET ASSETS......................................................................................................... $904,794,462
============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 26
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends (net of $1,101,349 foreign taxes withheld)................................................. $10,520,259
Interest............................................................................................. 2,552,504
-----------
13,072,763
-----------
Expenses
Management fee....................................................................................... $3,637,838
Transfer agent....................................................................................... 499,105
Administrative services fee.......................................................................... 354,977
Custodian fees....................................................................................... 343,443
Blue Sky fees........................................................................................ 27,371
Auditing and accounting fees......................................................................... 33,108
Shareholder reports.................................................................................. 24,216
Amortization of organization expenses................................................................ 11,550
Fund accounting...................................................................................... 91,959
Trustees' fees....................................................................................... 1,006
12b-1 service and distribution fees
Class A............................................................................................ 553,467
Class B............................................................................................ 591,686
Class C............................................................................................ 2,364
Legal................................................................................................ 16,295
Other................................................................................................ 148,483
-----------
Total expenses..................................................................................... 6,336,868
-----------
NET INVESTMENT INCOME.................................................................................. 6,735,895
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions................................... 10,571,615
Net unrealized appreciation during the period on investments......................................... 69,823,330
-----------
Net gain on investment transactions................................................................ 80,394,945
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................... $87,130,840
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 27
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1996* 1995
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income............................................................................. $ 6,735,895 $ 3,429,650
Net realized gain on investments and foreign currency transactions................................ 10,571,615 1,769,828
Net unrealized appreciation during the period on investments...................................... 69,823,330 44,011,142
----------- ------------
Net increase resulting from operations.......................................................... 87,130,840 49,210,620
----------- ------------
Class A distributions
From net investment income........................................................................ -- (3,301,120)
From net realized gain............................................................................ -- (1,495,008)
In excess of net realized gain.................................................................... -- (423,723)
----------- ------------
Total distributions to Class A shareholders..................................................... -- (5,219,851)
----------- ------------
Class B distributions
From net investment income........................................................................ -- (26,475)
From net realized gain............................................................................ -- (233,428)
In excess of net realized gain.................................................................... -- (69,587)
----------- ------------
Total distributions to Class B shareholders..................................................... -- (329,490)
----------- ------------
Class I distributions
From net investment income........................................................................ -- (102,055)
From net realized gain............................................................................ -- (41,392)
In excess of net realized gain.................................................................... -- (12,102)
----------- ------------
Total distributions to Class I shareholders..................................................... -- (155,549)
----------- ------------
Fund share transactions (Note 4):
Class A......................................................................................... 153,417,005 208,491,878
Class B......................................................................................... 79,570,617 39,727,936
Class C......................................................................................... 3,509,546 --
Class I......................................................................................... 17,506,834 7,284,014
----------- ------------
Net increase resulting from Fund share transactions............................................. 254,004,002 255,503,828
----------- ------------
TOTAL INCREASE IN NET ASSETS........................................................................ 341,134,842 299,009,558
NET ASSETS
Beginning of period............................................................................... 563,659,620 264,650,062
----------- ------------
END OF PERIOD..................................................................................... $904,794,46 $563,659,620
=========== ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME..................................................... $ 6,741,718 $ 5,823
=========== ============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 28
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
CLASS A JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------- ---------------------------------------------------------------------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993 1992 1991
------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 30.67 $ 27.60 $ 27.71 $ 18.88 $ 19.37 $ 16.98
------------- -------- -------- -------- -------- -------
Income from investment
operations
Net investment income....... .29 .25 .07 .12 .27(b) .26
Net gain (loss) on
investment transactions
(both realized and
unrealized)............... 3.45 3.22 1.01 9.01 (.26) 2.61
------------- -------- -------- -------- -------- -------
Total from investment
operations.............. 3.74 3.47 1.08 9.13 .01 2.87
------------- -------- -------- -------- -------- -------
Less distributions
From net investment
income.................... -- .25 .07 .08 .27 .26
From net realized gain...... -- .12 1.11 .22 .23 .22
In excess of net realized
gain...................... -- .03 -- -- -- --
From capital paid-in........ -- -- .01 -- -- --
------------- -------- -------- -------- -------- -------
Total distributions....... -- .40 1.19 .30 .50 .48
------------- -------- -------- -------- -------- -------
Net asset value, end of
period...................... $ 34.41 $ 30.67 $ 27.60 $ 27.71 $ 18.88 $ 19.37
=============== ======== ======== ======== ======== =======
Total return(%)............... 12.19(d) 12.65(c) 3.92(c) 48.37(c) .07(c) 16.93(c )
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).................. $ 699,700 $475,989 $229,586 $172,539 $109,637 $97,486
Ratio of expenses to average
net assets(%)............... 1.61(f) 1.52 1.58 1.61 1.71(e) 1.64
Ratio of net investment income
to average net assets(%).... 1.98(f) .97 .30 .56 1.36(b) 1.50
Portfolio turnover rate(%).... 16(f) 6 7 19 20 27
Average commission rate(g).... $ .0056 N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23,
1993
FOR THE SIX (COMMENCEMENT)
MONTHS ENDED FOR THE YEAR ENDED TO DECEMBER
CLASS B JUNE 30, DECEMBER 31, 31,
------------- ----------------------- --------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993
------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................... $ 30.67 $ 27.60 $ 27.71 $ 25.86
------------- -------- -------- --------------
Income from investment operations
Net investment income (loss)................................. .14 .01 (.10) (.01)
Net gain on investment transactions (both realized and
unrealized)................................................ 3.46 3.20 .91 2.12
------------- -------- -------- --------------
Total from investment operations........................... 3.60 3.21 .81 2.11
------------- -------- -------- --------------
Less distributions
From net investment income................................... -- .01 -- .04
From net realized gain....................................... -- .10 .90 .22
In excess of net realized gain............................... -- .03 -- --
From capital paid-in......................................... -- -- .02 --
------------- -------- -------- --------------
Total distributions........................................ -- .14 .92 .26
------------- -------- -------- --------------
Net asset value, end of period................................. $ 34.27 $ 30.67 $ 27.60 $ 27.71
=============== ======== ======== ==============
Total return(%)................................................ 11.74(d) 11.62(c) 2.96(c) 7.65(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....................... $ 168,490 $ 74,650 $ 30,143 $ 2,846
Ratio of expenses to average net assets(%)..................... 2.43(f) 2.44 2.50 2.59(f)
Ratio of net investment income to average net assets(%)........ 1.16(f) .05 (.62) (.42)(f)
Portfolio turnover rate(%)..................................... 16(f) 6 7 19
Average commission rate(g)..................................... $ .0056 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 29
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period............................................................................. $32.68
------
Income from investment operations
Net investment income.......................................................................................... .03
Net gain on investment transactions (both realized and unrealized)............................................. 1.55
------
Total from investment operations............................................................................. 1.58
------
Net asset value, end of period................................................................................... $34.26
=============
Total return(%).................................................................................................. 4.83(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......................................................................... $3,620
Ratio of expenses to average net assets(%)....................................................................... 2.43(f)
Ratio of net investment income to average net assets(%).......................................................... 1.16(f)
Portfolio turnover rate(%)....................................................................................... 16(f)
Average commission rate(g)....................................................................................... $.0056
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 6,
FOR THE 1994
FOR THE SIX YEAR ENDED (COMMENCEMENT)
MONTHS ENDED DECEMBER TO DECEMBER
CLASS I JUNE 30, 31, 31,
------------- ---------- --------------
SELECTED PER SHARE DATA 1996* 1995 1994
------------- ---------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period...................................... $ 30.67 $ 27.60 $29.06
------------- ---------- ------
Income (loss) from investment operations
Net investment income................................................... .32 .30 .03
Net gain (loss) on investment transactions (both realized and
unrealized)........................................................... 3.45 3.22 (.49)
------------- ---------- ------
Total from investment operations...................................... 3.77 3.52 (.46)
------------- ---------- ------
Less distributions
From net investment income.............................................. -- .30 .03
From net realized gain.................................................. -- .12 .92
In excess of net realized gain.......................................... -- .03 --
From capital paid-in.................................................... -- -- .05
------------- ---------- ------
Total distributions................................................... -- .45 1.00
------------- ---------- ------
Net asset value, end of period............................................ $ 34.44 $ 30.67 $27.60
=============== ============ ================
Total return(%)........................................................... 12.29(d) 12.85(c) (1.64)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................................. $32,984 $ 13,020 $4,921
Ratio of expenses to average net assets(%)................................ 1.34(f) 1.35 1.41(f)
Ratio of net investment income to average net assets(%)................... 2.25(f) 1.14 .47(f)
Portfolio turnover rate(%)................................................ 16(f) 6 7
Average commission rate (g)............................................... $ .0056 N/A N/A
(a) Effective April 1, 1993, the subadviser is Northern Cross Investments Limited. The previous subadviser was Boston Overseas
Investors Inc. from July 1, 1990 through March 31, 1993.
(b) Net investment income is net of expenses reimbursed by manager.
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not reflect a sales charge.
(e) The ratio of expenses to average net assets is net of expenses reimbursed by manager. Without the
expense reimbursement the ratio of expenses to average net assets would have been 1.80%.
(f) Annualized.
(g) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its
average commission rate per share for security trades on which commissions are charged. This amount may
vary from period to period and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Fund (the Fund) is a series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B, Class C and Class I are authorized. Ivy Fund was
organized as a Massachusetts business trust under a Declaration of Trust dated
December 21, 1983 and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect. All
other securities are valued at their fair value as determined in good faith by
the Valuation Committee of the Board; as of June 30, 1996, there were no such
securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has 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. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A and Class I
shares at the rate per share of the excess expenses of Class B shares over Class
A and Class I shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with issuing Class B and Class I shares have been deferred and are
being amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets. Northern Cross Investments Limited is the
subadviser of the Fund. IMI, not the Fund, is obligated to compensate the
subadviser.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. In addition, IMI may
voluntarily reimburse the Fund's expenses.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $179,760.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of shares issued after December 31, 1991. Class B and Class C
shares are also subject to an ongoing distribution fee at an annual rate of .75%
of the average net asset value attributable to Class B and Class C shares. IMDI
may use such distribution fee for purposes of advertising and marketing shares
of the Fund. Such fees are reflected as 12b-1 service and distribution fees in
the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class I were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 7,179,250 $229,875,405 9,867,336 $284,977,224
Issued on reinvestment of
distributions........... -- -- 158,854 4,677,883
Repurchased.............. (2,366,436) (76,458,400) (2,826,332) (81,163,229)
---------- ------------ ---------- ------------
Net increase............. 4,812,814 $153,417,005 7,199,858 $208,491,878
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 2,680,998 $ 85,849,765 1,620,201 $ 47,706,315
Issued on reinvestment of
distributions........... -- -- 9,355 286,570
Repurchased.............. (198,359) (6,279,148) (288,093) (8,264,949)
---------- ------------ ---------- ------------
Net increase............. 2,482,639 $ 79,570,617 1,341,463 $ 39,727,936
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------------------------- ---------- ------------
<S> <C> <C>
Sold..................... 107,245 $ 3,562,694
Repurchased.............. (1,584) (53,148)
---------- ------------
Net increase............. 105,661 $ 3,509,546
============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 571,605 $ 18,700,235 254,153 $ 7,521,113
Issued on reinvestment of
distributions........... -- -- 3,993 119,081
Repurchased.............. (38,295) (1,193,401) (11,973) (356,180)
---------- ------------ ---------- ------------
Net increase............. 533,310 $ 17,506,834 246,173 $ 7,284,014
============ ============== ============ ==============
</TABLE>
IIF-3-896
<PAGE> 32
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
EMERGING
GROWTH Despite recent pullbacks in the emerging there is no way to know how the current
FUND growth sector of the US market, we continue correction will compare in terms of
to believe that investors with a longer term either duration or severity. A number of
time horizon should consider investing in this individual stocks have pulled back as much as
sector of the equity market. Unpleasant 35-40% from their highs creating some
- ------------------- though they may be, these occasional air attractive buying opportunities.
SEMI-ANNUAL pockets can't be avoided. We believe they're During the first half of this year
REPORT simply an inherent part of emerging growth Morningstar, the independent mutual fund
- ------------------- investing. But for the risk-tolerant investor rating organization, awarded Ivy Emerging
Ivy Management, Inc. this volatility often represents opportunity. Growth Fund five stars, its highest rating*.
Via Mizner Financial This pullback, which began in June, And on July 22 Barron's named James
Plaza continued into July and was particularly Broadfoot the Fund's portfolio manager, to
700 South Federal Hwy. severe in the technology sector. Technology its list of the top ten of all mutual fund
Roca Baton, FL 33432 stocks represent the largest component of the managers**. We are pleased to have received
1-800-456-5111 Ivy Emerging Growth Fund. The sell-off this recognition.
started as investors became concerned about We encourage investors with a long-term
an inventory reduction on the part of manu- horizon to take advantage of the window of
facturers of personal computers and a result- opportunity that results from market pull-
ant drop in demand for integrated circuits. backs in the emerging growth sector.
Additionally, Motorola experienced weakness
in its cellular phone business, and Hewlett- IVY MANAGEMENT, INC.
Packard noted a slowing in its order rate. *As of June 30, 1996, the Ivy Emerging
(The Ivy Emerging Growth Fund is not Growth Fund earned a five-star rating for its
invested in either of these companies.) three-year and overall performance. For one
Besides these concerns, investors feared that year, the Fund is rated four stars.
the threat of inflationary pressures would Morningstar proprietary ratings reflect risk-
prompt the Federal Reserve Board to tighten adjusted performance through June 30, 1996.
monetary policy before year end. And finally, The ratings are subject to change every month
the flow of new money into mutual funds and past performance is no guarantee of
began to slow. This combination of factors future results. Morningstar ratings are
created downward pressure on stock prices. calculated from the funds three-year return,
We believe, however, fundamentals of our with fee adjustments, in excess of 90-day
portfolio companies remain strong. Treasury bill returns. The one-year rating is
Prior to this year, the Fund's last signifi- calculated using the same methodology but is
cant correction was during the Spring of 1994, not a component of the overall rating. The
when the Federal Reserve embarked on a series one-year rating is out of 2,882 equity funds
of short-term rate hikes. From late March and the three-year rating is out of 1,583
through June of that year we had a peak-to- funds. Of the funds in a category, 10% receive
trough pullback of about 20%. Of course, five stars.
**The Barron's ranking is based upon
various criteria as determined by Barron's.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 33
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 86.1% SHARES VALUE
<S> <C> <C>
BIOTECHNOLOGY -- 4.4%
Affymetrix, Inc.*......................... 4,300 $ 65,575
Aksys, Ltd.*.............................. 12,500 190,625
Arterial Vascular Engineering, Inc.*...... 2,400 87,000
Autoimmune Inc.*.......................... 18,300 171,563
Biofield Corporation...................... 13,200 179,850
Biopsys Medical, Inc.*.................... 13,000 260,000
CardioGenesis Corporation*................ 500 6,750
Cardiovascular Dynamics................... 24,300 297,675
Connective Therapeutics, Inc.*............ 12,000 120,000
Cytec Corporation*........................ 9,600 248,400
Digene Corporation*....................... 23,400 187,200
Liposome Company Inc.*.................... 94,200 1,766,250
Neurex Corporation*....................... 20,000 437,500
-----------
4,018,388
-----------
BUSINESS & FINANCIAL SERVICES -- 10.7%
Amerin Corporation*....................... 26,500 708,875
Applied Graphics Technologies, Inc.*...... 25,000 396,875
BISYS Group, Inc.*........................ 10,888 411,022
CFI Proservices Inc.*..................... 12,000 300,000
Capital One Financial Corporation......... 10,500 299,250
Capmac Holdings*.......................... 8,900 253,650
Cohr, Inc.*............................... 12,000 285,000
Copart, Inc.*............................. 4,700 77,550
Corrections Corp. of America*............. 1,600 112,000
Cotelligent Group, Inc.*.................. 19,600 338,100
Credit Acceptance Corp.*.................. 10,800 226,800
Daisytek International Corporation*....... 13,100 550,200
Desktop Data, Inc.*....................... 6,600 219,450
Employee Solutions, Inc.*................. 10,000 311,250
Fair Issac and Company Inc................ 10,900 472,787
Gartner Group, Inc. -- Class A*........... 8,100 297,675
Green Tree Financial Corp................. 21,200 665,150
ICT Group, Inc.*.......................... 1,100 21,175
Individual, Inc.*......................... 10,400 171,600
Investment Technology Group, Inc.*........ 28,000 378,000
Litchfield Financial Corp................. 36,883 516,362
MS Financial, Inc.*....................... 20,100 125,625
Medaphis Corp.*........................... 10,000 397,500
Meta Group, Inc.*......................... 10,600 259,700
Ovid Technologies, Inc.................... 20,800 227,500
Oxford Resources Corp. Class A*........... 7,200 167,400
PMT Services, Inc.*....................... 6,150 176,043
Profit Recovery Group International, Inc.
(The)*.................................. 9,800 198,450
Quickresponse Services Inc.*.............. 20,500 589,375
RAC Financial Group, Inc.*................ 12,000 343,500
SPS Transaction Services Corp.*........... 7,900 142,200
-----------
9,640,064
-----------
COMPUTER SOFTWARE -- 15.0%
America Online, Inc.*..................... 8,400 367,500
Applix, Inc.*............................. 13,500 388,125
Business Objects S.A. ADR*(a)............. 5,200 209,300
CBT Group PLC ADR*........................ 10,400 481,000
Carnegie Group, Inc.*..................... 31,000 271,250
Casino Data Systems*...................... 32,600 493,075
Checkfee Corporation*..................... 20,300 403,463
Davidson and Associates, Inc.*............ 3,600 108,000
Dendrite International, Inc.*............. 25,000 862,500
Eagle Point Software Corporation*......... 16,000 112,000
Expert Software, Inc.*.................... 19,900 156,713
Forte Software, Inc.*..................... 3,300 172,425
GT Interactive Software Corp.*............ 21,600 361,800
Indus Group, Inc.*........................ 19,600 396,900
Inference Corporation*.................... 19,500 468,000
Informix Corp.*........................... 4,500 101,250
JDA Software Group, Inc.*................. 17,300 356,813
Macromedia Inc.*.......................... 11,200 $ 245,000
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
McAfee Associates, Inc.*.................. 10,750 526,750
MySoftware Company*....................... 24,900 157,181
Novadigm, Inc.*........................... 22,500 337,500
Peoplesoft, Inc.*......................... 5,500 391,875
Planning Sciences International PLC*...... 9,200 207,000
PowerCerv Corporation*.................... 26,900 329,525
Premenos Technology Corporation*.......... 16,200 295,650
Project Software & Development, Inc.*..... 10,050 471,094
Rational Software Corporation*............ 4,700 252,625
Red Brick Systems, Inc.*.................. 5,300 194,775
Remedy Corporation*....................... 3,200 233,600
Renaissance Solutions, Inc.*.............. 10,200 289,425
SPSS, Inc.*............................... 10,800 270,000
SQA, Inc.*................................ 5,300 148,400
Saville Systems Ireland ADR*.............. 12,300 339,788
Security Dynamics Technologies, Inc.*..... 2,600 213,850
Segue Software*........................... 10,100 300,475
Sierra On-Line, Inc.*..................... 6,100 267,637
Softkey International, Inc.*.............. 9,300 177,863
Softquad International, Inc.*............. 27,600 153,094
Systemsoft Corporation*................... 14,900 698,437
ULTRADATA Corporation*.................... 6,400 49,600
Veritas Software Corp.*................... 16,800 722,400
Viasoft, Inc.*............................ 8,900 572,937
-----------
13,556,595
-----------
CONSUMER PRODUCTS & SERVICES -- 5.1%
Blyth Industries, Inc.*................... 6,000 272,250
CHS Electronics, Inc.*.................... 12,200 164,700
Central European Media Enterprises
Ltd.*(a)................................ 14,700 367,500
Childtime Learning Centers*............... 6,200 66,650
Comcast UK Cable Partners Ltd.*........... 29,000 369,750
Cuc International, Inc.*.................. 11,900 426,913
Extended Stay America, Inc.*.............. 13,200 415,800
Heartland Wireless Communications, Inc.*.. 23,100 548,625
Northland Cranberries, Inc. -- Class A.... 14,400 432,000
Planet Hollywood International, Inc.*..... 2,600 69,875
Premier Parks, Inc.*...................... 17,900 389,325
Scandinavian Broadcasting System*......... 6,600 161,700
Suburban Lodges of America, Inc.*......... 3,900 90,187
Sunrise Assisted Living, Inc.*............ 5,200 124,800
TRM Copy Centers Corp.*................... 24,900 277,013
U.S. Satellite Broadcasting Company,
Inc.*................................... 11,000 415,250
-----------
4,592,338
-----------
HEALTHCARE -- 16.7%
American Medical Response*................ 9,300 327,825
American Oncology Resources, Inc.*........ 12,400 269,700
Cardiometrics, Inc.*...................... 17,200 111,800
CardioThoracic Systems, Inc.*............. 7,200 95,400
Coherent, Inc.*........................... 6,700 348,400
Compdent Corporation*..................... 6,300 292,163
EP Medsystems Inc.*....................... 40,500 222,750
Endosonics Corporation*................... 7,200 128,700
Endovascular Technologies, Inc.*.......... 16,800 184,800
Express Scripts, Inc. -- Class A*......... 10,800 496,800
FemRx, Inc.*.............................. 18,200 196,787
First Commonwealth*....................... 9,200 256,450
General Surgical Innovations, Inc.*....... 3,900 59,475
Gliatech, Inc.*........................... 22,200 233,100
Health Management Associates, Inc.*....... 12,000 243,000
Health Systems Design Corp.*.............. 17,600 259,600
Healthsource, Inc.*....................... 18,100 316,750
Heartstream, Inc.*........................ 14,400 198,000
HemaSure, Inc.*........................... 27,200 380,800
Home Health Corporation of America*....... 19,300 261,756
Horizon Mental Health Management, Inc.*... 27,300 778,050
</TABLE>
(See Notes to Financial Statements)
<PAGE> 34
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
ICU Medical, Inc.*........................ 24,600 $ 338,250
Intelligent Medical Imaging, Inc.*........ 19,700 290,575
Mecon, Inc.*.............................. 11,700 264,713
Medpartners/Mullikin, Inc.*............... 9,700 202,487
Molecular Devices Corporation*............ 42,300 375,413
NCS Healthcare Inc. -- Class A*........... 8,600 260,150
Norland Medical Systems, Inc.*............ 18,900 373,275
Omnicare, Inc............................. 6,400 169,600
Orthodontic Centers of America, Inc.*..... 26,500 702,250
OrthoLogic Corp.*......................... 18,000 229,500
PhyCor, Inc.*............................. 6,150 233,700
Physician Reliance Network, Inc.*......... 8,600 191,350
Physician Support Systems, Inc.*.......... 17,300 393,575
Physicians Resource Group, Inc.*.......... 6,000 200,250
Renal Treatment Centers Inc.*............. 28,500 819,375
Rural Metro Corp.*........................ 7,300 250,025
Serologicals Corporation*................. 27,400 726,100
Spine-Tech, Inc.*......................... 6,100 176,900
Sunquest Information Systems, Inc.*....... 13,000 195,000
Total Renal Care Holdings, Inc.*.......... 13,600 574,600
United Dental Care, Inc.*................. 7,500 316,875
UroCor, Inc.*............................. 5,100 62,475
Uromed Corporation*....................... 54,000 729,000
Vencor, Inc.*............................. 11,200 336,000
VidaMed, Inc.*............................ 28,600 364,650
Vivus, Inc.*.............................. 18,700 612,425
-----------
15,050,619
-----------
MISCELLANEOUS -- 1.5%
Railtex Inc.*............................. 19,800 499,950
United Waste Systems, Inc.*............... 20,800 670,800
Wisconsin Central Transportation Corp.*... 5,400 175,500
-----------
1,346,250
-----------
NETWORK & TELECOMMUNICATION
EQUIPMENT -- 8.5%
3Com Corporation*......................... 7,300 333,975
ACT Networks, Inc.*....................... 9,000 290,250
Ascend Communications, Inc.*.............. 8,500 478,125
Boca Research, Inc.*...................... 21,400 390,550
Cabletron Systems Inc.*................... 4,600 315,100
California Amplifier, Inc.*............... 16,400 377,200
Cascade Communications Corp.*............. 5,400 367,875
DSP Communications, Inc.*................. 10,700 549,713
Digital Microwave Corporation*............ 22,800 379,050
Farallon Communications*.................. 4,000 59,000
Fore Systems, Inc.*....................... 9,400 339,575
Harmonic Lightwaves, Inc.*................ 17,800 400,500
Madge N.V.*............................... 9,800 142,100
Netstar, Inc.*............................ 9,600 188,400
P-COM, Inc................................ 12,500 393,750
Pairgain Technologies, Inc.*.............. 7,200 446,400
QUALCOMM, Inc.*........................... 11,100 589,687
Stratacom, Inc.*.......................... 10,100 568,125
U.S. Robotics, Inc........................ 3,600 307,800
VideoServer, Inc.*........................ 14,800 577,200
Xylan Corporation*........................ 4,800 223,500
-----------
7,717,875
-----------
PHARMACEUTICALS -- 6.0%
Anesta Corp............................... 23,600 289,100
Biochem Pharma, Inc.*..................... 13,700 513,750
Cephalon, Inc.*........................... 10,000 197,500
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
Chronimed, Inc.*.......................... 21,000 $ 385,875
Cima Labs Inc.*........................... 18,000 135,000
Depotech Corp.*........................... 7,000 176,750
Dura Pharmaceuticals, Inc.*............... 8,200 459,200
Elan Corp. PLC*........................... 4,800 274,200
Ergo Science Corporation*................. 7,500 139,688
Ethical Holdings Ltd -- ADR*(a)........... 18,500 180,375
Geltex Pharmaceuticals, Inc.*............. 14,800 281,200
Genzyme Corporation*...................... 3,700 185,925
NABI, Inc.*............................... 26,630 252,985
NeoRx Corporation*........................ 38,300 220,225
NeoRx Corporation Units*.................. 23,000 37,375
Neurocrine Biosciences, Inc.*............. 6,500 56,063
Noven Pharmaceuticals, Inc.*.............. 2,600 41,600
Penederm Inc.*............................ 28,800 489,600
Sepracor, Inc.*........................... 27,200 408,000
Sonus Pharmaceuticals, Inc.*.............. 24,500 477,750
Vertex Pharmaceuticals Inc.*.............. 6,700 206,025
-----------
5,408,186
-----------
RESTAURANTS -- 1.4%
Apple South, Inc.......................... 9,900 264,825
Boston Chicken, Inc.*..................... 5,800 188,500
Daka International Inc.*.................. 21,500 499,875
Outback Steakhouse, Inc.*................. 9,000 310,359
-----------
1,263,559
-----------
RETAIL -- 5.5%
Baby Superstore, Inc.*.................... 7,200 118,800
Barnes & Noble, Inc.*..................... 9,500 339,625
CompUSA, Inc.*............................ 10,600 361,725
Corporate Express, Inc.*.................. 16,060 642,400
Garden Botanika, Inc.*.................... 10,000 220,000
General Nutrition Companies, Inc.*........ 20,700 362,250
Just for Feet, Inc.*...................... 8,700 462,187
K & G Men's Center, Inc.*................. 13,900 291,900
Micro Warehouse Inc.*..................... 5,800 115,275
Moovies, Inc.*............................ 12,400 97,650
OfficeMax, Inc.*.......................... 19,300 460,787
PetsMart Inc.*............................ 7,850 374,837
Sports Authority, Inc. (The)*............. 10,700 350,425
Sunglass Hut International*............... 9,400 228,537
West Marine Inc.*......................... 8,100 579,150
-----------
5,005,548
-----------
SEMICONDUCTERS & EQUIPMENT -- 3.3%
Altera Corporation*....................... 3,800 144,400
ANADIGICS, Inc.*.......................... 3,900 113,587
Analog Devices*........................... 16,200 413,100
Atmel Corporation*........................ 10,200 307,275
Benchmarq Microelectronics, Inc.*......... 16,500 148,500
Elantec Semiconductor, Inc.*.............. 11,500 103,500
GaSonics International Corporation*....... 9,600 100,800
Integrated Process Equipment Corp.*....... 10,000 207,500
MEMC Electronic Materials, Inc.*.......... 16,500 643,500
Maxim Integrated Products, Inc.*.......... 7,200 196,650
Opal, Inc.*............................... 8,800 112,200
Pri Automation, Inc.*..................... 4,800 146,400
Semtech Corporation*...................... 9,300 83,700
Ultratech Stepper, Inc.*.................. 14,300 268,125
-----------
2,989,237
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 35
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
TECHNOLOGY -- 3.7%
Cerion Technologies, Inc.*......................... 9,100 $ 88,725
Conductus, Inc.*................................... 22,900 243,313
Gemstar International Group Ltd.*.................. 9,900 297,000
IKOS Systems, Inc.*................................ 31,200 659,100
Komag, Inc.*....................................... 8,200 216,275
Periphonics Corp.*................................. 5,100 173,400
RadiSys Corporation*............................... 20,200 686,800
Synopsys, Inc.*.................................... 14,000 556,500
Trident International, Inc.*....................... 10,800 234,900
Truevision, Inc.*.................................. 28,800 216,000
-----------
3,372,013
-----------
TELECOMMUNICATION SERVICES -- 4.3%
American Portable Telecom, Inc.*................... 32,000 344,000
Arch Communications Group, Inc.*................... 16,800 310,800
Cellularvision USA, Inc.*.......................... 20,900 329,175
Glenayre Technologies, Inc.*....................... 7,250 362,500
Omnipoint Corporation*............................. 7,200 187,650
Paging Network, Inc.*.............................. 24,300 583,200
ProNet, Inc.*...................................... 23,700 287,363
Transaction Network Services, Inc.*................ 27,000 580,500
U.S. Order, Inc.*.................................. 3,500 53,375
Western Wireless Corp.*............................ 17,200 367,650
WinStar Communications, Inc.*...................... 19,000 473,812
-----------
3,880,025
-----------
TOTAL COMMON STOCKS
(Cost -- $63,196,225)............................. 77,840,697
-----------
CONVERTIBLE BOND -- 0.5% PRINCIPAL
- --------------------------------------------------- ----------
Boston Chicken Inc., 0.00%, 06/01/15
(Cost -- $270,777)................................ $1,300,000 414,375
-----------
<CAPTION>
NUMBER OF
PURCHASED PUT OPTIONS -- 0.5% CONTRACTS VALUE
<S> <C> <C>
Russell 2000 Index Put, 07/29/96 @ 328.50.......... 1,099 $ 128,571
Russell 2000 Index Put, 08/01/96
@ 331.987......................................... 215 37,773
Russell 2000 Index Put, 08/16/96 @ 341.28.......... 278 128,881
Russell 2000 Index Put, 09/04/96 @ 344.61.......... 298 209,304
-----------
TOTAL PURCHASED PUT OPTIONS
(Cost -- $1,089,185).............................. 504,529
-----------
TOTAL INVESTMENTS -- 87.1%
(Cost -- $64,556,187)(b).......................... 78,759,601
OTHER ASSETS, LESS LIABILITIES -- 12.9%............ 11,652,754
-----------
NET ASSETS -- 100%................................. $90,412,355
=============
ADR -- American Depository Receipt
* Non-income producing security.
(a) Foreign security.
(b) Cost is the same Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for financial
statement and Federal income tax purposes is as follows:
Gross unrealized appreciation............................... $19,723,869
Gross unrealized depreciation............................... (5,520,455)
-----------
Net unrealized appreciation............................. $14,203,414
===========
Purchases and sales of securities other than short-term obligations
aggregated $49,802,871 and $31,389,878, respectively, for the period ended
June 30, 1996.
- -----------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<S> <C>
ASSETS
Investments, at value (identified cost -- $64,556,187)......... $78,759,601
Cash........................................................... 11,771,413
Receivables:
Investments sold.............................................. 405,701
Fund shares sold.............................................. 239,043
Dividends and interest........................................ 75
Deferred organization expenses................................. 21,927
Other assets................................................... 18,220
-----------
Total assets.................................................. 91,215,980
-----------
LIABILITIES
Payables:
Investments purchased......................................... 622,613
Fund shares repurchased....................................... 38,884
Management fee................................................ 63,207
12b-1 service and distribution fees........................... 34,074
Administrative services fee................................... 7,436
Fund accounting............................................... 7,777
Transfer agent................................................ 14,486
Other accrued expenses and liabilities......................... 15,148
-----------
Total liabilities............................................. 803,625
-----------
NET ASSETS..................................................... $90,412,355
===========
CLASS A:
Net asset value and redemption price per share
($64,392,193/2,230,994 shares outstanding)..................... $ 28.86
===========
Maximum offering price per share ($28.86 X 100/94.25)*......... $ 30.62
===========
CLASS B:
Net asset value and offering price per share
($25,457,506/884,809 shares outstanding)**..................... $ 28.77
===========
CLASS C:
Net asset value and offering price per share
($562,656/19,557 shares outstanding)**......................... $ 28.77
===========
NET ASSETS CONSIST OF:
Capital paid-in............................................... $69,106,338
Accumulated net realized gain on investments and
foreign currency transactions................................. 7,583,536
Accumulated undistributed net investment loss................. (480,933)
Net unrealized appreciation (depreciation) on:
Investments................................................. 14,788,070
Put options................................................. (584,656)
-----------
NET ASSETS..................................................... $90,412,355
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 36
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends, net of foreign taxes withheld............................................................... $ 5,577
Interest............................................................................................... 188,213
-----------
193,790
-----------
Expenses
Management fee......................................................................................... $288,910
Transfer agent......................................................................................... 84,249
Administrative services fee............................................................................ 33,989
Custodian fees......................................................................................... 9,256
Blue Sky fees.......................................................................................... 16,259
Auditing and accounting fees........................................................................... 7,259
Shareholder reports.................................................................................... 4,707
Amortization of organization expenses.................................................................. 6,552
Fund accounting........................................................................................ 42,211
Trustees' fees......................................................................................... 1,608
12b-1 service and distribution fees
Class A.............................................................................................. 62,229
Class B.............................................................................................. 90,599
Class C.............................................................................................. 419
Legal.................................................................................................. 14,121
Other.................................................................................................. 12,355
-----------
Total expenses....................................................................................... 674,723
-----------
NET INVESTMENT LOSS...................................................................................... (480,933)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain on investments....................................................................... 7,583,121
Net unrealized appreciation (depreciation) during the period on:
Investments.......................................................................................... 3,914,543
Put options.......................................................................................... (584,656)
-----------
Net gain on investments.............................................................................. 10,913,008
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $10,432,075
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- ------------
1996* 1995
---------------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment loss........................................................................... $ (480,933) $ (591,193 )
Net realized gain on investments.............................................................. 7,583,121 4,445,572
Net unrealized appreciation (depreciation) during the period on:
Investments................................................................................. 3,914,543 8,767,787
Put options................................................................................. (584,656) --
---------------- ------------
Net increase resulting from operations...................................................... 10,432,075 12,622,166
---------------- ------------
Class A distributions
From net realized gain........................................................................ -- (2,804,408 )
---------------- ------------
Total distributions to Class A shareholders................................................. -- (2,804,408 )
---------------- ------------
Class B distributions
From net realized gain........................................................................ -- (1,010,602 )
---------------- ------------
Total distributions to Class B shareholders................................................. -- (1,010,602 )
---------------- ------------
Fund share transactions (Note 4):
Class A....................................................................................... 17,079,558 11,258,356
Class B....................................................................................... 8,866,482 6,867,492
Class C....................................................................................... 593,195 --
---------------- ------------
Net increase resulting from Fund share transactions......................................... 26,539,235 18,125,848
---------------- ------------
TOTAL INCREASE IN NET ASSETS.................................................................... 36,971,310 26,933,004
NET ASSETS
Beginning of period........................................................................... 53,441,045 26,508,041
---------------- ------------
END OF PERIOD................................................................................. $ 90,412,355 $53,441,045
================== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT LOSS................................................... $ (480,933) $ --
================== ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 37
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MARCH 3, 1993
MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
CLASS A JUNE 30, DECEMBER 31, TO DECEMBER 31,
----------------- ----------------------- ---------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993
----------------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 24.12 $ 18.38 $ 17.93 $ 10.00
------- ------- ------- -------
Income from investment operations
Net investment loss.................................. (.14) (.24) (.24)(a) (.07)(a)
Net gain on investments (both realized and
unrealized)........................................ 4.88 7.90 .82 8.29
------- ------- ------- -------
Total from investment operations................... 4.74 7.66 .58 8.22
------- ------- ------- -------
Less distributions
From net realized gain............................... -- 1.92 -- .29
From capital paid-in................................. -- -- .13 --
------- ------- ------- -------
Total distributions................................ -- 1.92 .13 .29
------- ------- ------- -------
Net asset value, end of period........................ $ 28.86 $ 24.12 $ 18.38 $ 17.93
======================= ======== ======== ================
Total return(%)....................................... 19.55(e) 42.07(b) 3.29(b) 45.33(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $64,392 $39,456 $21,493 $14,212
Ratio of expenses to average net assets
With expense reimbursement(%)........................ -- -- 2.20 1.93(d)
Without expense reimbursement(%)..................... 1.78(d) 1.95 2.22 2.33(d)
Ratio of net investment loss to average net
assets(%)............................................ (1.21)(d) (1.39) (1.72)(a) (1.30)(a)(d)
Portfolio turnover rate(%)............................ 77(d) 86 67 41(d)
Average commission rate(f)............................ $ .0598 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT) TO
CLASS B JUNE 30, DECEMBER 31, DECEMBER 31,
----------------- --------------------- -----------------
SELECTED PER SHARE DATE 1996* 1995 1994 1993
----------------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 24.12 $ 18.38 $ 17.93 $ 18.21
------- ------- ------- -------
Income (loss) from investment operations
Net investment loss...................................... (.20) (.35) (.29)(a) (.04)(a)
Net gain on investments (both realized and unrealized)... 4.85 7.85 .74 .03
------- ------- ------- -------
Total from investment operations....................... 4.65 7.50 .45 (.01)
------- ------- ------- -------
Less distributions
From net realized gain................................... -- 1.76 -- .27
------- ------- ------- -------
Total distributions.................................... -- 1.76 -- .27
------- ------- ------- -------
Net asset value, end of period............................ $ 28.77 $ 24.12 $ 18.38 $ 17.93
======================= ======== ======== ==================
Total return(%)........................................... 19.18(e) 41.03(b) 2.51(b) (.05)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $25,458 $13,985 $ 5,015 $ 1,216
Ratio of expenses to average net assets
With expense reimbursement(%)............................ -- -- 2.95 2.68(d)
Without expense reimbursement(%)......................... 2.53(d) 2.70 2.97 3.08(d)
Ratio of net investment loss to average net assets(%)..... (1.96)(d) (2.14) (2.47)(a) (2.05)(a)(d)
Portfolio turnover rate(%)................................ 77(d) 86 67 41(d)
Average commission rate(f)................................ $ .0598 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period........................................................................... $29.69
------
Loss from investment operations
Net investment loss........................................................................................... (.04)
Net loss on investments (both realized and unrealized)........................................................ (.88)
------
Total from investment operations............................................................................ (.92)
------
Net asset value, end of period................................................................................. $28.77
==============
Total return(%)................................................................................................ (3.10)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....................................................................... $ 563
Ratio of expenses to average net assets
Without expense reimbursement(%).............................................................................. 2.53(d)
Ratio of net investment loss to average net assets(%).......................................................... (1.96)(d)
Portfolio turnover rate(%)..................................................................................... 77(d)
Average commission rate(f)..................................................................................... $.0598
(a) Net investment loss is net of expenses reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return since April 30, 1993
(when the Fund became available for sale to the public) and does not
reflect a sales charge.
(d) Annualized.
(e) Total return represents aggregate total return and does not reflect a sales charge.
(f) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per
share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets where trading practices and commission rate structures may
differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Emerging Growth Fund (the Fund) is a series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B and Class C are authorized. Ivy Fund was organized
as a Massachusetts business trust under a Declaration of Trust dated December
21, 1983 and is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect. All
other securities are valued at their fair value as determined in good faith by
the Valuation Committee of the Board; as of June 30, 1996 there were no such
securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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.
OPTIONS -- The Fund may write (sell) exchange-listed and over-the-counter
call options on securities held in its portfolio . When the Fund writes a call,
it gives the purchaser of the call option the right to buy the underlying
security at the price specified in the option (the "exercise price") at any time
during the option period, generally ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the form
of a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder or in
the case of options on indices, will require cash settlement by the Fund if the
option is exercised.
By writing a call option, the Fund forgoes, in exchange for the premium less
the commission ("net premium"), the opportunity to profit during the option
period from an increase in the market value of the underlying security or
currency above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call option is valued at the last sale price or, in the absence of a
sale, the mean between the closing bid and asked quotations or at the most
recent asked quotation if no bid and asked quotations are available. Over the
counter written options are valued at the most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, put options
on securities and stock indices. Exchange traded purchased options are valued at
the last sales price or, in the absence of a sale, the mean between the closing
bid and asked quotations or at the most recent bid quotation if no bid and asked
quotations are available. Over-the-counter purchased options are valued at the
most recent bid quotation.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has 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. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization and issuing Class B shares have been deferred
and are being amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 certain securities sold at a
loss. As a result, Net investment income (loss) and Net realized gain (loss) on
investments and foreign currency transactions for a reporting period may differ
significantly in amount and character from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .85% of
the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. Currently, IMI
voluntarily limits the Fund's total operating expenses (excluding taxes, 12b-1
fees, brokerage commissions, interest, litigation and indemnification expenses,
and other extraordinary expenses) to an annual rate of 1.95% of its average net
assets. The voluntary expense limitation may be terminated or revised at any
time. There were no required or voluntary expense reimbursements for the period
ended June 30, 1996.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares,
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
and as such, purchases shares from the Fund at net asset value to settle orders
from investment dealers. For the six months ended June 30, 1996, the net amount
of underwriting discount retained by IMDI was $37,529.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- ------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------- -------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sold......................... 958,419 $26,759,931 1,087,467 $ 25,161,914
Issued on reinvestment of
distributions............... -- -- 110,103 2,622,547
Repurchased.................. (363,256) (9,680,373) (730,995) (16,526,105)
-------- ----------- --------- ------------
Net increase................. 595,163 $17,079,558 466,575 $ 11,258,356
========== ============= ========== ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------- -------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sold......................... 513,459 $14,260,803 566,894 $ 12,816,329
Issued on reinvestment of
distributions............... -- -- 37,942 903,781
Repurchased.................. (208,368) (5,394,321) (297,917) (6,852,618)
-------- ----------- --------- ------------
Net increase................. 305,091 $ 8,866,482 306,919 $ 6,867,492
========== ============= ========== ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
----------------------
CLASS C SHARES AMOUNT
- ----------------------------- -------- -----------
<S> <C> <C>
Sold......................... 19,557 $ 593,195
-------- -----------
Net increase................. 19,557 $ 593,195
========== =============
</TABLE>
IEGF-3-896
<PAGE> 40
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
MONEY
MARKET During the first half of this year, IVY MONEY MARKET FUND SEEKS TO
FUND interest rates moved somewhat higher as the OBTAIN AS HIGH A LEVEL OF CURRENT
economy grew faster than expected. Helping INCOME AS IS CONSISTENT WITH THE
to fuel the rise were energy and grain prices PRESERVATION CAPITAL AND LIQUIDITY
that trended upward in response to colder than BY INVESTING AT HIGH-QUALITY, SHORT-
- ------------------- normal temperatures, and low inventories with TERM SECURITIES.
SEMI-ANNUAL respect to both commodities. This should allay fears of a resurgence of
REPORT These factors, along with the surprising inflation. Additionally, the Federal Reserve
- ------------------- increase in new jobs and a drop in the unem- Board is firmly committed to price stability
Ivy Management, Inc. ployment rate, which brought about increased and we expect that they will act to defend
Via Mizner Financial labor costs, has created apprehension about the this mission. Monetary Policy is currently
Plaza possibility of rising inflation. somewhat restrictive, which should act as a
700 South Federal Hwy. However, our research indicates that the brake on the economy over the near future.
Boca Raton, Fl 33432 pace of economic growth will likely moderate in As always, the Ivy Money Market Fund
1-800-456-5111 the months to come as the economy is in the continues to avoid the use of derivative prod-
later stages of a longer term economic recovery. ucts, and remains focused on only the highest
quality money market instruments with ratings
of A1+/P1. The average portfolio maturity
Portfolio Holdings remains less than 90 days.
June 30, 1996 We will continue to actively manage the
Ivy Money Market Fund to obtain the highest
[GRAPH] yield, while maintaining as much stability
possible.
26% -- Commercial Paper
74% -- U.S. Government Obligations IVY MANAGEMENT, INC.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 41
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMERCIAL PAPER -- 26.6% PRINCIPAL VALUE
<S> <C> <C>
American General, 5.34%, 08/02/96......... $ 548,000 $ 545,399
Associates Corp. of North America, 5.34%,
07/15/96................................ 750,000 748,443
AT&T Corporation, 5.35%, 08/22/96......... 750,000 744,204
Chevron Oil Finance Company, 5.32%,
07/26/96................................ 750,000 747,229
General Electric Capital Corp., 5.34%,
08/15/96................................ 707,000 703,329
National Rural Utilities, 5.30%,
08/08/96................................ 425,000 422,622
Prudential Funding Corp., 5.34%,
08/15/96................................ 700,000 696,359
-----------
TOTAL COMMERCIAL PAPER
(Cost -- $4,607,585).................... 4,607,585
-----------
U.S. GOVERNMENT AGENCIES AND
OBLIGATIONS -- 76.4%
- ------------------------------------------
Federal Farm Credit, 5.21%, 07/09/96...... 1,265,000 1,263,535
Federal Home Loan Bank, 5.23%,
07/07/96................................ 1,935,000 1,926,567
Federal Home Loan Mortgage Bank, 5.26%,
07/22/96................................ 1,245,000 1,241,180
Federal National Mortgage Association,
5.18%, 07/03/96......................... 1,115,000 1,114,679
<CAPTION>
U.S. GOVERNMENT AGENCIES AND OBLIGATIONS PRINCIPAL VALUE
<S> <C> <C>
Federal National Mortgage Association,
5.19%, 07/30/96......................... 500,000 497,910
Federal National Mortgage Association,
5.25%, 07/24/96......................... $ 565,000 $ 563,105
Student Loan Marketing Association, 5.46%,
07/02/96*............................... 1,000,000 1,008,006
Tennessee Valley Authority, 5.22%,
07/18/96................................ 2,765,000 2,758,184
U.S. Treasury Bill, 4.90%, 07/11/96....... 1,435,000 1,433,047
U.S. Treasury Bill, 4.92%, 07/11/96....... 1,400,000 1,398,087
-----------
TOTAL U.S. GOVERNMENT AGENCIES AND
OBLIGATIONS
(Cost -- $13,204,300)................... 13,204,300
-----------
TOTAL INVESTMENTS -- 103.0%
(Cost -- $17,811,885)**................. 17,811,885
OTHER ASSETS, LESS
LIABILITIES -- (3.0%)................... (521,843)
-----------
NET ASSETS -- 100%........................ $17,290,042
===========
* Floating rate note; reflects variable rate as of
June 30, 1996 and maturity date reflects reset
date.
** Cost is the same for Federal income tax purposes.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 42
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $17,811,885).............................................................. $17,811,885
Cash................................................................................................................ 100,000
Receivables -- manager for expense reimbursement.................................................................... 27,161
Deferred organization expenses...................................................................................... 29,161
Other assets........................................................................................................ 32,124
-----------
Total assets...................................................................................................... 18,000,331
-----------
LIABILITIES
Payables:
Management fee.................................................................................................... 5,501
Administrative services fee....................................................................................... 1,375
Fund accounting................................................................................................... 2,424
Transfer agent.................................................................................................... 7,315
Due to custodian.................................................................................................... 682,893
Other accrued expenses and liabilities.............................................................................. 10,781
-----------
Total liabilities................................................................................................. 710,289
-----------
Net assets.......................................................................................................... $17,290,042
===========
CLASS A:
Net asset value, offering price, and redemption price per share ($14,960,381 / 14,960,381 shares outstanding)....... $ 1.00
===========
CLASS B:
Net asset value and offering price per share ($2,329,660 / 2,329,660 shares outstanding)*........................... $ 1.00
===========
CLASS C:
Net asset value and offering price per share ($1 / 1 share outstanding)*............................................ $ 1.00
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $17,290,042
-----------
NET ASSETS.......................................................................................................... $17,290,042
===========
</TABLE>
* Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Interest.................................................................................................. $ 511,135
---------
Expenses
Management fee............................................................................................ $38,681
Transfer agent............................................................................................ 48,975
Administrative services fee............................................................................... 9,670
Custodian fees............................................................................................ 6,387
Blue Sky fees............................................................................................. 20,592
Auditing and accounting fees.............................................................................. 6,206
Shareholder reports....................................................................................... 3,792
Amortization of organization expenses..................................................................... 8,215
Fund accounting........................................................................................... 13,567
Trustees' fees............................................................................................ 1,664
Legal..................................................................................................... 22,756
Other..................................................................................................... 4,917
---------
185,422
Expenses reimbursed by manager............................................................................ (102,914)
---------
Net expenses............................................................................................ 82,508
---------
NET INVESTMENT INCOME....................................................................................... 428,627
Net realized gain on investments............................................................................ 800
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ 429,427
=========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 43
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX YEAR ENDED
MONTHS ENDED DECEMBER
JUNE 30, 31,
------------ -----------
1996* 1995
------------ -----------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations:
Net investment income................................................................................ $ 428,627 $ 1,359,236
Net realized gain on sale of investments............................................................. 800 --
------------ -----------
Net increase resulting from operations............................................................... 429,427 1,359,236
------------ -----------
Class A distributions
From net investment income......................................................................... (386,850) (1,359,236)
From net realized gain............................................................................. (734) --
------------ -----------
Total distributions to Class A shareholders...................................................... (387,584) (1,359,236)
------------ -----------
Class B distributions
From net investment income......................................................................... (41,777) --
From net realized gain............................................................................. (66) --
------------ -----------
Total distributions to Class B shareholders...................................................... (41,843) --
------------ -----------
Class C distributions
From net investment income......................................................................... -- --
From net realized gain............................................................................. -- --
------------ -----------
Total distributions to Class C shareholders...................................................... -- --
------------ -----------
Fund share transactions (Note 4):
Class A............................................................................................ (9,648,381) (2,218,643)
Class B............................................................................................ 2,329,660 --
Class C............................................................................................ 1 --
------------ -----------
Net decrease resulting from fund share transactions.............................................. (7,318,720) (2,218,643)
------------ -----------
TOTAL DECREASE IN NET ASSETS......................................................................... (7,318,720) (2,218,643)
NET ASSETS
Beginning of period................................................................................ 24,608,762 26,827,405
------------ -----------
END OF PERIOD...................................................................................... $ 17,290,042 $24,608,762
============ ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 44
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
CLASS A JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------- -------------------------------------------------------
SELECTED PER SHARE DATA 1996* 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income(a)............................ .02 .05 .04 .02 .03 .05
Less distributions
From net investment income.......................... (.02) (.05) (.04) (.02) (.03) (.05)
------------- ------- ------- ------- ------- -------
Net asset value, end of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============== ======= ======= ======= ======= =======
Total return(%)....................................... 2.21(b) 4.80 4.21 2.42 2.81 5.16
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $14,960 $24,609 $26,827 $25,782 $18,839 $21,675
Ratio of expenses to average net assets
With expense reimbursement(%)....................... .85(c) .85 .85 .85 .85 .85
Without expense reimbursement(%).................... 1.92(c) 1.39 1.24 1.56 1.45 1.21
Ratio of net investment income to average net
assets(%)(a)........................................ 4.45(c) 4.91 3.29 2.22 2.75 5.06
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
CLASS B JUNE 30,
------------
SELECTED PER SHARE DATA 1996*
------------
<S> <C>
Net asset value, beginning of period............................................................................... $ 1.00
------------
Income from investment operations
Net investment income(a)......................................................................................... .02
Less distributions
From net investment income....................................................................................... (.02)
------------
Net asset value, end of period..................................................................................... $ 1.00
============
Total return(%).................................................................................................... 2.21(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................................................................... $ 2,330
Ratio of expenses to average net assets
With expense reimbursement(%).................................................................................... .85(c)
Without expense reimbursement(%)................................................................................. 1.92(c)
Ratio of net investment income to average net assets(%)(a)......................................................... 4.45(c)
</TABLE>
<TABLE>
<CAPTION>
FOR APRIL 30,
1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
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(%).................................................................................................. 2.21(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......................................................................... $ --
Ratio of expenses to average net assets
With expense reimbursement(%).................................................................................. .85(c)
Without expense reimbursement(%)............................................................................... 1.92(c)
Ratio of net investment income to average net assets(%)(a)....................................................... 4.45(c)
</TABLE>
(a) Net investment income is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return.
(c) Annualized
* Unaudited.
Note: The seven day yield as of June 30, 1996 was 4.35%.
The thirty day yield as of June 30, 1996 was 4.36%.
(See Notes to Financial Statements)
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Money Market Fund (the Fund), is a series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B and Class C are authorized. Ivy Fund was organized
as a Massachusetts business trust under a Declaration of Trust dated December
21, 1983 and is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Short-term obligations and commercial paper are valued
at amortized cost, which approximates market.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions of net investment income and
net realized capital gain are declared daily, and are paid at the earlier of
redemption or the last business day of the month.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .40% of
the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. In addition, IMI may
voluntarily reimburse a Fund's expenses. Expenses reimbursed by manager
reflected in the Statement of Operations consists of a voluntary reimbursement.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions and equivalent dollar amounts for Class A, Class B
and Class C were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED DECEMBER 31,
CLASS A JUNE 30, 1996 1995
- ----------------------------------- ---------------- ----------------
<S> <C> <C>
Sold............................... 21,810,033 67,708,114
Issued on reinvestment of
distributions..................... 344,783 1,245,290
Repurchased........................ (31,803,197) (71,172,047)
---------------- ----------------
Net decrease....................... (9,648,381) (2,218,643)
====================== =====================
</TABLE>
<TABLE>
<CAPTION>
FROM
JANUARY 1, 1996
(COMMENCEMENT)
CLASS B TO JUNE 30, 1996
- ----------------------------------- ----------------
<S> <C>
Sold............................... 11,167,275
Issued on reinvestment of
distributions..................... 32,090
Repurchased........................ (8,869,705)
----------------
Net increase....................... 2,329,660
======================
</TABLE>
<TABLE>
<CAPTION>
FROM
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30, 1996
- ----------------------------------- ----------------
<S> <C>
Sold............................... 1
Issued on reinvestment of
distributions..................... --
----------------
Net increase....................... 1
======================
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
LATIN
AMERICA Latin America markets have rebounded 38% of the Fund invested in Brazil and 22%
STRATEGY strongly since the Mexican peso crisis 18 in Argentina.
FUND months ago. From the lows reached in March We are less confident that the Mexican
of 1995 Argentina has gained 65%, Brazil 85%, government is taking the necessary steps to
and Mexico 80% in US dollar terms. The ensure future prosperity. History has shown
- ------------------- noticeable laggard has been Chile, where stock sustained economic success requires tight
SEMI-ANNUAL prices are essentially flat for this period. fiscal policy, a commitment to low inflation,
REPORT Over the past year investors have been and productivity-enhancing investments that
- ------------------- focusing on the turnaround of Latin Ameri- would allow Mexican manufactures to
This report and the can economies. Our research confirms the compete on efficiency and quality rather than
financial statements Mexican recovery was given a shot in the arm simply on price. Most important, a program
contained herein are from the 50% devaluation in the peso. Since to encourage domestic savings, currently the
submitted for the general then exports have grown at a rapid rate, lowest in the region, must be instituted. The
information of the share- providing much needed foreign exchange Ivy Latin America Strategy Fund will remain
holders. This report is reserves. We believe Argentina, which underweighted in Mexican equities until we
not authorized for distri- experienced a flight of capital as a result see progress on these reforms.
bution to prospective of a confidence crisis related to Mexico peso Among Latin economies Chile remains
investors unless preced- devaluation, is also showing signs of recovery. the role model. Chile's economic adjustment
ed or accompanied by The Brazilian economy was relatively unaf- period in the early 1980s required a painful
an effective prospectus. fected by the Mexican crisis, but economic transition, but resulted in one of the most
growth, which boomed ahead following the stable, well-managed economies in the world.
Ivy Management, Inc. introduction of the Plano Real, was unsus- Chilean equities, lacking the turnaround
Via Mizner Financial tainable and fell back to more modest levels. appeal of their neighbors, have been over-
Plaza These countries survived a turbulent year looked for the past several months. Charac-
700 South Federal Hwy. in 1995 and in the case of Brazil and Argen- terized by solid management operating in
Boca Raton, FL 33432 tina, we believe may have emerged stronger attractive growth industries, we believe shares
1-800-456-5111 than ever. Inflation is a fraction of levels seen of Chilean companies could outpace the rest
five to seven years ago, currencies have of the region in the months ahead.
stabilized and confidence has returned. But It is important to remember that the
more work needs to be done. road to reform is rarely smooth and corrections
Our research confirms in recent months are to be expected. We intend to utilize our
Brazil has taken concrete steps toward 14% cash position when temporary setbacks
privatization of the telecom and electric present attractive buying opportunities. The
utilities. Argentina has made substantial democratic process can slow down the
progress in increasing tax collections and has progress of reform programs which may
established a Chilean-style pension program. unnerve the impatient investor. We believe
We believe successful implementation of Latin government policy is headed in the
these reforms should provide a solid founda- right direction. And ultimately this should
tion for future economic growth. The Ivy result in a favorable environment for both
Latin America Strategy Fund remains economic and corporate growth.
overweighted in both of these markets with
IVY MANAGEMENT, INC.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 47
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 83.5% SHARES VALUE
<S> <C> <C>
- -------------------------------------------
ARGENTINA -- 21.7%
Acindar Ind Argentina S.A.*................ 54,000 $ 42,946
Astra Cia Argentina De Petro
(C.A.P.S.A.)............................. 11,800 27,976
Banco Frances del Rio Plata................ 5,520 52,349
Banco Galicia Y Buenos Aires -- ADR........ 7,198 46,084
Bansud S.A.*............................... 7,100 83,101
Buenos Aires Embotelladora
(BAESA) ADR.............................. 3,400 45,050
Central Costanera S.A. 'B'................. 15,500 57,061
Cia Interamericana de Automo (Ciadea
Renault)*................................ 7,467 51,912
Cia Naviera Perez Companc.................. 11,706 76,703
Comercial del Plata S.A.*.................. 11,800 36,594
Disco S.A. ADR*............................ 2,000 44,250
Dragados Y Construcciones Argentina........ 10,400 48,378
Inversiones Y Representacion (IRSA)........ 18,107 60,681
Juan Minnetti S.A.......................... 8,800 40,495
Quilmes Industrial......................... 1,500 15,375
Quilmes Industrial S.A.*................... 750 7,688
Telecom Argentina.......................... 1,100 51,563
Telefonica de Argentina S.A. ADR........... 1,500 44,438
Transportadora de Gas Sur.................. 27,400 66,057
Yacimientos Petroliferos Fiscades S.A.
Sponsered ADR............................ 2,800 62,650
----------
961,351
----------
BRAZIL -- 37.7%
Aracruz Celulose S.A. ADR.................. 7,700 72,188
Banco Bradesco S.A......................... 11,206,032 91,510
Banco Nacional S.A......................... 1,600,000 --(a)
Brasmotor S.A.............................. 280,000 87,558
Casa Anglo................................. 650,000 31,072
Centrais Eletricas Brasileiras S.A......... 100,000 28,581
Cia Brasileira de Distribuicao Grupo Pao de
Acucar................................... 3,000,000 49,594
Cia Cervejaria Brahma Rights............... 91,551 54,612
Companhia Energetica de Minas Gerais
(CEMIG).................................. 2,465,000 65,543
Ericsson Telecomunicacoes.................. 4,400,000 65,946
Iochpe Maxion S.A. -- ADR*................. 3,000 9,750
Iparanga Brasileira de Petroleo............ 4,700,000 67,400
Itabanco................................... 200,000 81,261
Marco Polo S.A............................. 610,000 136,683
OSA S.A.................................... 5,400,000 52,164
Petroleo Brasileiro S.A. (Petrobras)....... 1,040,000 127,909
Refripar S.A............................... 37,100,000 92,367
Tam Transport Aeros Reg.................... 1,750,000 126,351
Telecomunicacoes Brasieiras S.A.
(Telebras)............................... 1,800 125,325
Telecomunicacoes de Minas Gerais
(Telemig)................................ 364,861 37,611
Telecomunicacoes do Rio Janeiro S.A.
(Telerj)*................................ 207,724 23,376
Telecomunicacoes de Sao Paulo S.A.
(Telesp)................................. 166,856 35,726
Telecomunicacoes do Parana (Telepar)....... 80,000 38,799
Uniao de Bancos Brasileiros................ 2,859,694 77,434
Usinas Siderurgicas de Minas Gerais
(USIMINAS)............................... 86,100,000 90,888
----------
1,669,648
----------
CHILE -- 12.0%
A.F.P. Provida S.A. ADR.................... 3,100 76,725
Banco O'Higgins ADR........................ 1,700 37,100
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Banco Osorno Y La Union ADR................ 2,800 $ 41,013
Chilgener S.A. ADR......................... 1,300 31,038
Cia de Telecomunicaciones de Chile S.A.
ADR*..................................... 700 68,687
Empresa Nacional Electricidad S.A.......... 3,400 73,525
Laboratorio Chile S.A. -- ADR.............. 3,400 45,475
Madeco S.A. ADR............................ 1,700 47,600
Santa Isabel S.A. ADR...................... 2,200 60,225
Vina Concha Y Toro S.A. ADR................ 2,800 51,800
----------
533,188
----------
COLOMBIA -- 1.3%
Banco Ganadero S.A. ADR.................... 1,200 29,100
Banco Industrial Colombiano ADR............ 1,600 27,000
----------
56,100
----------
MEXICO -- 3.9%
Banacci Series 'B'*........................ 4,000 8,311
Banacci Series 'L'*........................ 326 619
Cementos de Mexico S.A. 'B'................ 2,000 7,765
Corporation GEO, S.A. 'B'*................. 16,912 75,140
Grupo Elektra, S.A. de C.V................. 1,000 7,278
Groupo Posadas S.A. -- Series A*........... 127,500 57,151
Vitro Sociedad Anonima ADR................. 2,400 16,500
----------
172,764
----------
PANAMA -- 3.8%
Banco Latinamericano de Exportaciones
S.A. -- E*............................... 1,000 56,250
Panamerican Beverages Inc.................. 2,500 111,250
----------
167,500
----------
PERU -- 3.1%
Banco Wiese ADR............................ 7,000 49,875
CPT Telefonica del Peru S.A. -- B*......... 25,500 51,771
Credicorp Limited.......................... 1,762 35,020
----------
136,666
----------
TOTAL EQUITY SECURITIES -- 83.5%
(Cost -- $3,207,533)(b).................. 3,697,217
OTHER ASSETS, LESS LIABILITIES -- 16.5%.... 728,712
----------
NET ASSETS -- 100%......................... $4,425,929
==========
ADR -- American Depository Receipt
* Non-income producing security.
(a) Security valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
this security at June 30, 1996 aggregated $39,649.
See Note 1 of the Notes to the Financial
Statements.
(b) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $ 791,535
Gross unrealized depreciation...................... (301,851)
----------
Net unrealized appreciation.................... $ 489,684
==========
Purchases and sales of securities other than short-term obligations
aggregated $1,157,528 and $480,486, respectively, for the period
ended June 30, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 48
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $3,207,533)................................................................ $3,697,217
Cash................................................................................................................. 616,385
Receivables:
Fund shares sold................................................................................................... 62,816
Dividends.......................................................................................................... 8,118
Manager for expense reimbursement.................................................................................. 15,377
Deferred organization expenses....................................................................................... 41,466
Other assets......................................................................................................... 9,493
----------
Total assets....................................................................................................... 4,450,872
----------
LIABILITIES
Payables:
Management fee..................................................................................................... 3,437
12b-1 service and distribution fees................................................................................ 1,661
Administrative services fee........................................................................................ 344
Fund accounting.................................................................................................... 1,227
Transfer agent..................................................................................................... 1,246
Other accrued expenses and liabilities............................................................................... 17,028
----------
Total liabilities.................................................................................................. 24,943
----------
NET ASSETS........................................................................................................... $4,425,929
==========
CLASS A:
Net asset value and redemption price per share ($2,985,829/343,747 shares outstanding)............................... $ 8.69
==========
Maximum offering price per share ($8.69 X 100/94.25)*................................................................ $ 9.22
==========
CLASS B:
Net asset value and offering price per share ($1,411,286 / 163,112 shares outstanding)**............................. $ 8.65
==========
CLASS C:
Net asset value and offering price per share ($28,814/3,326 shares outstanding)**.................................... $ 8.66
==========
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................... $3,864,953
Accumulated net realized gain on investments and foreign currency transactions..................................... 49,651
Accumulated undistributed net investment income.................................................................... 21,641
Net unrealized appreciation on investments......................................................................... 489,684
----------
NET ASSETS........................................................................................................... $4,425,929
==========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 49
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends (net of $7,000 foreign taxes withheld)........................................................... $ 61,757
--------
Expenses
Management fee............................................................................................. $16,564
Transfer agent............................................................................................. 6,010
Administrative services fee................................................................................ 1,656
Custodian fees............................................................................................. 16,040
Blue Sky fee............................................................................................... 10,646
Auditing and accounting fees............................................................................... 8,548
Shareholder reports........................................................................................ 2,393
Amortization of organization expenses...................................................................... 6,211
Fund accounting............................................................................................ 7,679
Trustees' fees............................................................................................. 1,788
12b-1 service and distribution fees
Class A.................................................................................................. 2,914
Class B.................................................................................................. 4,887
Class C.................................................................................................. 19
Legal...................................................................................................... 14,493
Other...................................................................................................... 2,695
--------
102,543
Expenses reimbursed by manager............................................................................. (59,130)
Fees paid indirectly....................................................................................... (3,297)
--------
Net expenses............................................................................................. 40,116
--------
NET INVESTMENT INCOME........................................................................................ 21,641
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions......................................... 91,229
Net unrealized appreciation during the period on investments............................................... 660,442
--------
Net gain on investment transactions...................................................................... 751,671
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................................... $773,312
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- ------------
1996* 1995
----------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income............................................................................ $ 21,641 $ 353
Net realized gain(loss) on investments and foreign currency transactions......................... 91,229 (42,053)
Net unrealized appreciation (depreciation) during the period on investments...................... 660,442 (56,614)
----------- ------------
Net increase resulting from operations......................................................... 773,312 (98,314)
----------- ------------
Class A distributions
From capital paid-in............................................................................. -- (7,792)
----------- ------------
Total distributions to Class A shareholders.................................................... -- (7,792)
----------- ------------
Fund share transactions (Note 5):
Class A.......................................................................................... 415,884 1,545,520
Class B.......................................................................................... 509,897 565,794
Class C.......................................................................................... 28,193 --
----------- ------------
Net increase resulting from Fund share transactions............................................ 953,974 2,111,314
----------- ------------
TOTAL INCREASE IN NET ASSETS....................................................................... 1,727,286 2,005,208
NET ASSETS
Beginning of period.............................................................................. 2,698,643 693,435
----------- ------------
END OF PERIOD.................................................................................... $4,425,929 $2,698,643
============ ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME.................................................... $ 21,641 $ --
============ ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 50
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR NOVEMBER 1, 1994
MONTHS ENDED ENDED (COMMENCEMENT)
CLASS A JUNE 30, DECEMBER 31, TO DECEMBER 31,
----------------- ------------ ----------------
SELECTED PER SHARE DATA 1996* 1995 1994
----------------- ------------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period.................................... $ 6.88 $ 8.37 $10.00
------ ------ ------
Income (loss) from investment operations
Net investment income(a).............................................. .05 .01 --
Net gain (loss) on investment transactions (both realized
and unrealized)..................................................... 1.76 (1.45) (1.63)
------ ------ ------
Total from investment operations.................................... 1.81 (1.44) (1.63)
------ ------ ------
Less distributions
From capital paid-in.................................................. -- .05 --
------ ------ ------
Total distributions................................................. -- .05 --
------ ------ ------
Net asset value, end of period.......................................... $ 8.69 $ 6.88 $ 8.37
=================== ============== ==================
Total return(%)......................................................... 26.31(b) (17.28)(c) (16.10)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................ $ 2,986 $2,015 $ 571
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(e)............. 2.20(d) 2.20 2.20(d)
Without expense reimbursement and fees paid indirectly(%)(e).......... 5.97(d) 9.26 16.22(d)
Ratio of net investment income to average net assets (%)(a)............. 1.53(d) .22 .21(d)
Portfolio turnover rate(%).............................................. 32(d) 45 82(d)
Average commission rate(f).............................................. $ .0001 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR NOVEMBER 1, 1994
MONTHS ENDED ENDED (COMMENCEMENT)
CLASS B JUNE 30, DECEMBER 31, TO DECEMBER 31,
----------------- ------------ ----------------
SELECTED PER SHARE DATA 1996* 1995 1994
----------------- ------------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period.................................... $ 6.88 $ 8.37 $10.00
------ ------ ------
Income (loss) from investment operations
Net investment income(loss)(a)........................................ .02 (.02) (.01)
Net gain (loss) on investment transactions (both realized and
unrealized)......................................................... 1.75 (1.47) (1.62)
------ ------ ------
Total from investment operations.................................... 1.77 (1.49) (1.63)
------ ------ ------
Net asset value, end of period.......................................... $ 8.65 $ 6.88 $ 8.37
=================== ============== ==================
Total return(%)......................................................... 25.73(b) (17.90)(c) (16.20)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................ $ 1,411 $ 684 $ 122
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(e)............. 2.95(d) 2.95 2.95(d)
Without expense reimbursement and fees paid indirectly(%)(e).......... 6.72(d) 10.01 16.97(d)
Ratio of net investment income (loss) to average net assets(%)(a)....... .78(d) (.53) (.54)(d)
Portfolio turnover rate(%).............................................. 32(d) 45 82(d)
Average commission rate(f).............................................. $ .0001 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 51
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period........................................................................... $ 7.96
------
Income from investment operations
Net investment income(a)..................................................................................... .02
Net gain on investment transactions (both realized and unrealized)........................................... .68
------
Total from investment operations........................................................................... .70
------
Net asset value, end of period................................................................................. $ 8.66
==============
Total return(%)................................................................................................ 8.92(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....................................................................... $ 29
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(e).................................................... 2.95(d)
Without expense reimbursement and fees paid indirectly(%)(e)................................................. 6.72(d)
Ratio of net investment income to average net assets(%)(a)..................................................... .78(d)
Portfolio turnover rate(%)..................................................................................... 32(d)
Average commission rate(f)..................................................................................... $.0001
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return and does not reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Annualized.
(e) Beginning in 1995, total expenses include fees paid indirectly through an expense offset arrangement.
(f) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average
commission rate per share for security trades on which commissions are charged. This amount may vary
from period to period and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Latin America Strategy Fund (the Fund) is a series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund is a
non-diversified series of Ivy Fund.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect.
All other securities are valued at their fair value as determined in good
faith by the Valuation Committee of the Board. As of June 30, 1996, securities
valued in good faith by the Valuation Committee of the Board amounted to $0
(0.00% of net assets) and have been noted as such in the investment portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$40,610 as of December 31, 1995 which may be applied against any realized net
taxable gain of each succeeding fiscal year until fully utilized or until the
expiration date, whichever occurs first. The carryforward expires $4,250 in 2002
and $36,360 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared in December if necessary to avoid the payment of a
four percent Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement whereby a certain
percentage of quarterly cumulative credits resulting from cash balances on
deposit with the custodian are used to offset custody fees, including
transaction and out of pocket expenses. For the period, custody fees were
reduced by $3,297 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. Currently, IMI
voluntarily limits the Fund's total operating expenses (excluding taxes, 12b-1
fees, brokerage commissions, interest, litigation and indemnification expenses,
and other extraordinary expenses) to an annual rate of 1.95% of its average net
assets. The voluntary expense limitation may be terminated or revised at any
time. Expenses reimbursed by manager reflected in the Statement of Operations
consists of required and voluntary reimbursements of $50,021 and $9,109,
respectively.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $6,360.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses.
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Such fees and expenses are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in Latin
America. Therefore, the Fund is more susceptible to factors adversely affecting
securities in Latin America than is an equity fund that is not concentrated in
such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
-------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold............................ 140,873 $1,117,469 442,664 $ 2,994,237
Issued on reinvestment of
distributions.................. -- -- 834 5,772
Repurchased..................... (89,752) (701,585) (219,064) (1,454,489)
------- ---------- -------- -----------
Net increase.................... 51,121 $ 415,884 224,434 $ 1,545,520
======== ============ ========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
-------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold............................ 73,618 $ 589,278 86,962 $ 581,025
Repurchased..................... (9,862) (79,381) (2,256) (15,231)
------- ---------- -------- -----------
Net increase.................... 63,756 $ 509,897 84,706 $ 565,794
======== ============ ========== =============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
--------------------
CLASS C SHARES AMOUNT
- -------------------------------- ------- ----------
<S> <C> <C>
Sold............................ 3,326 $ 28,193
------- ----------
Net increase.................... 3,326 $ 28,193
======== ============
</TABLE>
ILASF-3-896
<PAGE> 54
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C>
JUNE 30, 1996
IVY CANADA MARKET COMMENTARY:
FUND
The Ivy Canada Fund continues to Our research indicates natural gas
emphasize the natural resources and basic storage levels are extremely low, leading to
industry sectors of the Canadian economy. better prices and higher future demand for
This allows investors to participate in producers. The Ivy Canada Fund focuses on
Canada's most important industries and companies that have strong balance sheets,
- ------------------- market sectors. Mines and metals, paper and are demonstrating above average growth,
SEMI-ANNUAL forest products, and oil and gas are all and are trading below net asset value and at
REPORT industries in which Canada has many low cash multiples. The Fund manager
- ------------------- competitive advantages. In general, resource has scaled back holdings in this sector
This report and the companies are benefiting from continued because some companies have met and
financial statements world demand growth, tighter supply exceeded targets and because of concerns
contained herein are conditions, an undervalued Canadian dollar about intermediate consolidation in the
submitted for the general and most important, more profitable total shares and energy prices.
information of the share- cycle commodity prices. The base mining sector has stalled in
holders. This report is Paper and forest products remain a recent months. Copper and aluminum have
not authorized for distri- major component of the Fund. This sector softened but remain at very profitable levels.
bution to prospective has underperformed recently, is completely Low inventory levels for most metals suggest
investors unless preced- out of favor but our research indicates that prices should remain firm.
ed or accompanied by it has excellent recovery potential and According to our research, the re-
an effective prospectus. minimal risk. The industry is experiencing synchronization of world economies should
solid earnings and cash flow. Pulp and chip bring stronger and broader economic growth
Ivy Management, Inc. prices have receded recently but we expect later this year and early next year. We
Via Mizner Financial prices will firm once inventories are worked believe the Ivy Canada Fund, with its
Plaza down in the months to come. Newsprint concentration on selected, attractively
700 South Federal Hwy. prices are slipping but margins are still high. priced, growth-oriented companies in the
Boca Raton, FL 33432 Lumber prices are also firming. resource sectors, is well positioned as an
1-800-456-5111 The price of gold retraced most of its inflation hedge and for the "late cycle"
early advance. Jewelry demand is exceeding outperformance that these sectors have
new supply and this should lead to further historically enjoyed.
increases over the next year. However, we
believe share prices, particularly for senior IVY MANAGEMENT, INC.
companies, are expensive on a cash flow
basis and trade at significant premiums to
net present value. We will respond to
changes in prices in the context of the
improved long-term trend since this sector
can be quite volatile. Companies that are
growing through new discoveries continue
to perform well.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 55
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 100.1% SHARES VALUE
<S> <C> <C>
BASIC INDUSTRIES -- 8.5%
Enscor, Inc.*............................... 79,999 $ 61,526
Noranda Inc................................. 30,000 614,173
Nova Corporation............................ 25,000 226,149
Schneider Corporation Class A............... 8,500 81,404
Stelco Inc. Series A Convertible*........... 75,000 337,850
-----------
1,321,102
-----------
CAPITAL GOODS -- 3.5%
CHC Helicopter Corporation Class A.......... 150,000 538,363
-----------
CONSUMER NON-DURABLES -- 10.5%
Slater Industries Inc....................... 30,000 283,464
Stone Consolidated Corp..................... 40,000 490,753
Teck Corp. Class B.......................... 25,000 512,727
William Resources, Inc.*.................... 300,000 353,781
-----------
1,640,725
-----------
CONSUMER SERVICES -- 1.1%
Acklands Ltd.*.............................. 15,000 135,140
Hard Suits, Inc.*........................... 52,000 41,897
-----------
177,037
-----------
ENERGY -- 19.0%
Blue Range Resources*....................... 46,918 338,504
Canadian Conquest Exploration Co Ltd.*...... 776,200 739,103
Denbury Resources*.......................... 101,400 512,477
HCO Ltd. Energy*............................ 150,000 139,535
Hurricane Hydrocarbons Ltd. Series 1*....... 125,000 73,247(a)
Hurricane Hydrocarbons Ltd. Series 2*....... 125,000 45,779(a)
Maxx Petroleum Ltd.*........................ 25,200 32,855
Olympia Energy, Inc Class A*................ 725,000 371,727
Penn West Petroleum Ltd.*................... 50,000 324,116
Petromet Resources Ltd.*.................... 75,000 151,071
Truax Resources Corp. Class A*.............. 250,000 250,870
-----------
2,979,284
-----------
ENERGY SERVICES -- 1.9%
Artisan Drilling Ltd........................ 100,000 296,649
-----------
MINES & METALS -- 16.8%
Dakota Mining Corp.*........................ 130,000 269,474
Exall Resources Ltd.*....................... 300,000 92,291
Golden Knight Resources, Inc.*.............. 100,000 618,934
Inco Ltd. .................................. 12,500 402,399
International Curator Resources, Ltd.*...... 44,700 405,992
Princeton Mining Corp.*..................... 389,750 108,482
Princeton Mining Warrants*.................. 151,800 10,007
Redfern Resources Ltd.*..................... 105,500 153,005
Stampeder Exploration Ltd.*................. 75,000 282,915
Western Garnet Company Ltd.*................ 70,000 279,436
-----------
2,622,935
-----------
PAPER & FOREST -- 21.5%
Ainsworth Lumber Company*................... 77,500 428,584
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Alliance Forest Products, Inc.*............. 30,000 472,441
Donohue, Inc................................ 54,500 $ 714,558
H.J. Forest Products, Inc.*................. 88,400 210,438
St. Laurent Paperboard Inc.*................ 25,000 333,272
Tembec Inc. Class A*........................ 20,000 136,971
Timberwest Forest Ltd....................... 40,000 439,480
Weldwood of Canada Ltd...................... 4,900 144,820
West Fraser Timber Co. Ltd.................. 20,000 483,429
-----------
3,363,993
-----------
PRECIOUS METALS -- 9.9%
Aber Resources, Ltd.*....................... 20,000 260,026
Goldcorp Inc. Class A*...................... 19,200 317,832
Orvana Minerals Corporation*................ 97,222 562,574
Platinova A/S*.............................. 75,000 156,565
REA Gold Corporation*....................... 119,000 252,774
-----------
1,549,771
-----------
TECHNOLOGY -- 7.4%
Offshore Systems International Ltd.*........ 308,824 486,337
Offshore Systems International
Ltd Warrants*............................. 75,000 10,987(a)
Semi-Tech Corporation....................... 140,000 666,545
-----------
1,163,869
-----------
TOTAL EQUITY SECURITIES
(Cost -- $17,005,826)..................... 15,653,728
-----------
SHORT-TERM OBLIGATIONS -- 0.6% PRINCIPAL
- -------------------------------------------- --------
U.S. Treasury Bill, 5.17%, 09/05/96
(Cost -- $98,792)......................... $100,000 98,792
-----------
TOTAL INVESTMENTS -- 100.7%
(Cost -- $17,104,618)(b).................. 15,752,520
OTHER ASSETS, LESS LIABILITIES -- (0.7%).... (106,401)
-----------
NET ASSETS -- 100%.......................... $15,646,119
===========
* Non-income producing security.
(a) Securities valued in good faith by the Valuation Committee of
the Board of Trustees. The cost of these securities at June 30,
1996 aggregated $385,706. See Note 1 of the Notes to the
Financial Statements.
(b) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 2,194,227
Gross unrealized depreciation..................... (3,546,325)
-----------
Net unrealized depreciation................... $(1,352,098)
===========
Purchases and sales of investments (excluding short-term
obligations) aggregated $2,960,045 and $7,107,431, respectively, for
the period ended June 30, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 56
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $17,104,618).............................................................. $15,752,520
Receivables:
Fund shares sold.................................................................................................. 17,592
Dividends and interest............................................................................................ 7,657
Deferred organization expenses...................................................................................... 24,148
Other assets........................................................................................................ 10,969
-----------
Total assets...................................................................................................... 15,812,886
-----------
LIABILITIES
Payables:
Distributions to shareholders..................................................................................... 963
Fund shares repurchased........................................................................................... 10,320
Management and advisory fees...................................................................................... 11,428
12b-1 service and distribution fees............................................................................... 5,860
Administrative services fee....................................................................................... 1,344
Fund accounting................................................................................................... 2,678
Transfer agent.................................................................................................... 9,013
Due to custodian.................................................................................................... 106,313
Other accrued expenses and liabilities.............................................................................. 18,848
-----------
Total liabilities................................................................................................. 166,767
-----------
NET ASSETS.......................................................................................................... $15,646,119
===========
CLASS A:
Net asset value and redemption price per share ($14,474,368/1,580,788 shares outstanding)........................... $ 9.16
===========
Maximum offering price per share ($9.16 X 100/94.25)*............................................................... $ 9.72
===========
CLASS B:
Net asset value and offering price per share ($1,147,735/125,767 shares outstanding)**.............................. $ 9.13
===========
CLASS C:
Net asset value and offering price per share ($24,016/2,627 shares outstanding)**................................... $ 9.14
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $16,998,217
Net unrealized depreciation on investments........................................................................ (1,352,098)
-----------
NET ASSETS.......................................................................................................... $15,646,119
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 57
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends (net of $13,377 foreign taxes withheld)........................................................ $ 66,477
Interest................................................................................................. 43,224
----------
109,701
----------
Expenses
Management fee........................................................................................... $50,469
Advisory fee............................................................................................. 35,328
Transfer agent........................................................................................... 53,621
Administrative services fee.............................................................................. 10,094
Custodian fees........................................................................................... 15,004
Blue Sky fees............................................................................................ 14,621
Auditing and accounting fees............................................................................. 19,839
Shareholder reports...................................................................................... 4,639
Amortization of organization expenses.................................................................... 3,740
Fund accounting.......................................................................................... 16,316
Trustees' fees........................................................................................... 1,690
12b-1 service and distribution fees
Class A................................................................................................ 37,862
Class B................................................................................................ 6,187
Class C................................................................................................ 13
Legal.................................................................................................... 14,366
Other.................................................................................................... 4,019
----------
Total expenses......................................................................................... 287,808
----------
NET INVESTMENT LOSS........................................................................................ (178,107)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions....................................... 1,395,890
Net unrealized appreciation during the period on investments............................................. 913,000
----------
Net gain on investment transactions........................................................................ 2,308,890
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................................... $2,130,783
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1996* 1995
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations:
Net investment loss............................................................................... $ (178,107 ) $ (413,829 )
Net realized gain on investments and foreign currency transactions................................ 1,395,890 1,423,512
Net unrealized appreciation during the period on investments...................................... 913,000 20,707
------------ ------------
Net increase resulting from operations.......................................................... 2,130,783 1,030,390
------------ ------------
Class A distributions
From net realized gain............................................................................ (1,289,721 ) (519,054 )
In excess of net realized gain.................................................................... (41,041 ) --
------------ ------------
Total distributions to Class A shareholders..................................................... (1,330,762 ) (519,054 )
------------ ------------
Class B distributions
From net realized gain............................................................................ (103,894 ) (23,912 )
In excess of net realized gain.................................................................... (3,306 ) --
------------ ------------
Total distributions to Class B shareholders..................................................... (107,200 ) (23,912 )
------------ ------------
Class C distributions
From net realized gain............................................................................ (2,128 ) --
In excess of net realized gain.................................................................... (68 ) --
------------ ------------
Total distributions to Class C shareholders..................................................... (2,196 ) --
------------ ------------
Fund share transactions (Note 5):
Class A......................................................................................... (5,583,640 ) (4,372,745 )
Class B......................................................................................... 17,354 343,265
Class C......................................................................................... 27,206 --
------------ ------------
Net decrease resulting from Fund share transactions............................................. (5,539,080 ) (4,029,480 )
------------ ------------
TOTAL DECREASE IN NET ASSETS........................................................................ (4,848,455 ) (3,542,056 )
NET ASSETS
Beginning of period............................................................................... 20,494,574 24,036,630
------------ ------------
END OF PERIOD..................................................................................... $15,646,119 $20,494,574
=============== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT LOSS....................................................... $ -- $ (185,467 )
=============== ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 58
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE EIGHT FOR THE
MONTHS ENDED ENDED MONTHS ENDED MONTHS ENDED YEAR ENDED
SELECTED JUNE 30, DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30, JUNE 30, OCTOBER 31,
PER SHARE ------------- ------------ ------------ ----------------------------------- ------------- -----------
DATA 1996* 1995 1994 1994 1993 1992 1991 1990
------------- ------------ ------------ ------- ------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning
of
period... $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43 $ 8.89 $ 8.55 $ 10.53
---------- ------------ ------------ ------- ------- ------- ------------- -----------
Income
(loss)
from
investment
operations
Net
investment
loss... (.10) (.19)(a) (.11) (.11) (.01) (.12) (.03) .02
Net gain
(loss)
on
investment
transactions
(both
realized and
unrealized)... .97 .75 (.81) .24 3.35 (1.34) .41 (1.98)
------- ------------ ------------ ------- ------- ------- ------------- -----------
Total
from
investment
operations.... .87 .56 (.92) .13 3.34 (1.46) .38 (1.96)
------- ------------ ------------ ------- ------- ------- ------------- -----------
Less
distributions
From net
investment
income........ -- -- -- -- -- -- -- .02
From net
realized
gain... .89 .25 -- .31 .73 -- .04 --
In excess
of net
realized
gain.......... .03 -- -- -- -- -- -- --
From
capital
paid-in....... -- -- .03 .01 -- -- -- --
------- ------------ ------------ ------- ------- ------- ------------- -----------
Total
distributions. 92 .25 .03 .32 .73 -- .04 .02
------- ------------ ------------ ------- ------- ------- ------------- -----------
Net asset
value,
end of
period.......... $ 9.16 $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43 $ 8.89 $ 8.55
======= ============ ============ ======== ======== ======== ============== ===========
Total
return(%)........ 9.45(c) 6.37(b) (9.38)(c) 1.05(b) 47.10(b) (16.42)(b) 6.59(b)(d) (18.69)(
RATIOS AND
SUPPLEMENTAL
DATA
Net
assets,
end of
period
(in
thousands)...... $14,474 $ 19,353 $ 23,296 $34,549 $30,971 $11,280 $14,369 $14,268
Ratio of
expenses
to
average
net
assets(%)....... 2.82(d) 2.90(e) 2.44(d) 2.05 2.63 2.70 2.78(d) 2.89
Ratio of
net
investment
loss to
average
net
assets(%)....... (1.73)(d) (2.13)(a) (1.85)(d) (1.09) (1.41) (1.39) (.52)(d) .16
Portfolio
turnover
rate(%)......... 32(d) 21 36(d) 62 32 2 4(d) 0
Average
commission
rate(f)......... $ .0143 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE SIX APRIL 1, 1994
MONTHS ENDED ENDED MONTHS ENDED (COMMENCEMENT)
CLASS B JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
------------- ------------ ------------ --------------
SELECTED PER SHARE DATA 1996* 1995 1994 1994
------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 9.21 $ 8.90 $ 9.85 $10.16
------ ------ ------ ------
Income (loss) from investment operations
Net investment loss......................... (.11) (.20)(a) (.09) (.02)
Net (gain) loss on investment transactions
(both realized and unrealized)............ .95 .71 (.86) (.29)
------ ------ ------ ------
Total from investment operations.......... .84 .51 (.95) (.31)
------ ------ ------ ------
Less distributions
From net realized gain...................... .89 .20 -- --
In excess of net realized gain.............. .03 -- -- --
------ ------ ------ ------
Total distributions....................... .92 .20 -- --
------ ------ ------ ------
Net asset value, end of period................ $ 9.13 $ 9.21 $ 8.90 $ 9.85
=============== ============== =============== ==================
Total return(%)............................... 9.12(c) 5.74(b) (9.64)(c) (3.05)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...... $ 1,148 $1,142 $ 741 $ 227
Ratio of expenses to average net assets(%).... 3.42(d) 3.50(e) 3.03(d) 2.68(d)
Ratio of net investment loss to average net
assets(%)................................... (2.33)(d) (2.73)(a) (2.44)(d) (1.72)(d)
Portfolio turnover rate(%).................... 32(d) 21 36(d) 62
Average commission rate(f).................... $ .0143 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 59
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
---------------
SELECTED PER SHARE DATA 1996*
---------------
<S> <C>
Net asset value, beginning of period............................................................................ $ 10.67
------
Loss from investment operations
Net investment loss........................................................................................... (.01)
Net loss on investment transactions (both realized and unrealized)............................................ (.60)
------
Total from investment operations............................................................................ (.61)
------
Less distributions
From net realized gain........................................................................................ .89
In excess of net realized gain................................................................................ .03
------
Total distributions......................................................................................... .92
------
Net asset value, end of period.................................................................................. $ 9.14
==================
Total return(%)................................................................................................. (5.72)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................................................................ $ 24
Ratio of expenses to average net assets(%)...................................................................... 3.42(d)
Ratio of net investment loss to average net assets(%)........................................................... (2.33)(d)
Portfolio turnover rate(%)...................................................................................... 32(d)
Average commission rate(f)...................................................................................... $ .0143
(a) Net investment loss is net of expenses reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not reflect a sales charge.
(d) Annualized.
(e) The ratio of expenses to average net assets is net of expenses reimbursed by manager. Without the expense
reimbursement, the ratio of expenses to average daily net assets would have been 3.23% and 3.83% for Class A and Class
B, respectively, for the year ended December 31, 1995.
(f) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average
commission rate per share for security trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in various markets where trading practices
and commission rate structures may differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Canada Fund (the Fund) is a series of shares of Ivy Fund. The shares of
beneficial interest are assigned no par value and an unlimited number of shares
of Class A, Class B and Class C are authorized. Ivy Fund was organized as a
Massachusetts business trust under a Declaration of Trust dated December 21,
1983 and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect.
All other securities are valued at their fair value as determined in good
faith by the Valuation Committee of the Board. As of June 30, 1996, securities
valued in good faith by the Valuation Committee of the Board amounted to
$130,013 (.83% of net assets) and have been noted as such in the investment
portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund earned Canadian source dividends of $144,298 ($.08 per share).
These dividends were subject to Canadian withholding tax in the amount of
$21,630 ($.01 per share). The Fund intends to elect to pass through to its
shareholders their proportionate share of such taxes. Shareholders may apply
their proportionate share of such foreign taxes paid as either a tax credit or
itemized deduction.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$1,839,804 as capital gain dividends for its taxable year ended June 30, 1996.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in June. An additional
distribution may be declared in December if necessary to avoid the payment of a
four percent Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with issuing Class B shares have been deferred and are being
amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Mackenzie Financial Corporation (MFC) in Toronto, Ontario, Canada is the
Investment Adviser of the Fund. For its services, MFC receives a fee monthly at
the annual rate of .35% of the Fund's average net assets. The fee is collected
from the Fund and remitted to MFC by Mackenzie Investment Management Inc.
(MIMI), a subsidiary of MFC.
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of MIMI,
a management fee monthly at the annual rate of .50% of the Fund's average net
assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. In addition, IMI may
voluntarily reimburse a Fund's expenses.
MIMI also provides certain administrative, accounting and pricing services
for the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $4,083.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class A shares are also subject to an ongoing distribution fee
at an annual rate of .15% of the average net asset value of Class A shares.
Class B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net asset value attributable to Class B and
Class C shares. IMDI may use such distribution fee for purposes of advertising
and marketing shares of the Fund. Such fees are reflected as 12b-1 service and
distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. ACQUISITION OF MACKENZIE CANADA FUND
On February 1, 1995, the Fund acquired the net assets (valued at
$19,896,976) of Mackenzie Canada Fund (MCF) d/b/a Ivy Canada Fund, approved by
the Board September 29, 1994, and approved by MCF's shareholders on January 27,
1995. The acquisition was accomplished by a tax-free exchange, based on values
computed as of the close of January 31, 1995, of 2,513,884 (NAV $7.91) shares
(2,427,796 Class A and 86,088 Class B) of the Fund for 2,513,884 (NAV $7.91)
shares (2,427,796 Class A and 86,088 Class B) of MCF outstanding. MCF's net
assets at that date of $19,896,976 including $631,992 net realized capital loss
and $4,664,975 unrealized depreciation on investments, were combined with the
Fund for total net assets after acquisition of $19,896,992.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,082,196 $ 10,752,961 926,528 $ 8,132,834
Issued on reinvestment of
distributions........... 138,818 1,271,152 46,215 419,175
Repurchased.............. (1,741,488) (17,607,753) (1,490,048) (12,924,754)
---------- ------------ ---------- ------------
Net decrease............. (520,474) $ (5,583,640) (517,305) $ (4,372,745)
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 68,332 $ 668,134 73,447 $ 630,818
Issued on reinvestment of
distributions........... 9,244 84,401 2,291 20,775
Repurchased.............. (75,792) (735,181) (35,009) (308,328)
---------- ------------ ---------- ------------
Net increase............. 1,784 $ 17,354 40,729 $ 343,265
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------------------------- ---------- ------------
<S> <C> <C>
Sold..................... 2,387 $ 25,010
Issued on reinvestment of
distributions........... 240 2,196
---------- ------------
Net increase............. 2,627 $ 27,206
============ ==============
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
BOND
FUND During the first six months of this year During this period of time, the Ivy
interest rates trended higher in response to faster Bond Fund has increased the duration of the
than expected economic growth. Additionally, portfolio from a fairly neutral point to one
energy and grain prices went up because of which is more sensitive to changes in
colder than normal weather and low inventories interest rates. This is because we expect
- ------------------- of these commodities. On the labor front, a interest rates to be stable or even decline.
SEMI-ANNUAL surprising number of new jobs have been Additionally, the credit quality of the
REPORT created and unemployment has declined, portfolio has been upgraded somewhat in
- ------------------- leading to an increase in labor costs. Histori- advance of the expected moderating in the
This report and the cally, these factors have presaged an increase in economy.
financial statements inflation and as market participants fear a repeat The Fund continues to invest for
contained herein are of the downturn in bond prices similar to 1994, total return across the broad spectrum of
submitted for the general the tone of the fixed income markets has swung vehicles available in the fixed income
information of the share- dramatically from complacency to caution. universe. Areas with the best values in the
holders. This report is Our research indicates the pace of eco- past have been corporate bonds with lower
not authorized for distri- nomic growth should moderate in the months credit quality. The Fund has invested in
bution to prospective to come as the economy appears to be in the these bonds and has reaped the benefits of
investors unless preced- later stages of a longer term economic recovery. significant spread tightening in the
ed or accompanied by This should allay fears of a resurgence of corporate bond sector. We expect better
an effective prospectus. inflation. Additionally, the Federal Reserve returns from somewhat higher rated bonds in
Board is firmly committed to price stability the future. Thus, we have upgraded the
Ivy Management, Inc. and we expect that they will act to defend this portfolio accordingly.
Via Mizner Financial mission. Monetary policy is currently somewhat The Ivy Bond Fund continues to be
Plaza restrictive which should act as a brake on the invested in US dollars denominated corporate
700 South Federal Hwy. economy over the near future. bonds in high-growth nations. These invest-
Boca Raton, FL 33432 Corporate earnings and cash flows continue ments provide added diversification and high
1-800-456-5111 to be good, with second quarter earnings relative yields. Economic reforms put in
generally coming in better than expected and place in several Latin American countries
up about 8% over the past year. There were, have significantly reduced inflation,
however, a few highly publicized earnings increased currency stability and economic
disappointments. According to Moody's activity which have been positive for these
Investors Service, defaults on corporate bonds investments.
have declined, credit upgrades are outpacing We believe our outlook for low
downgrades and corporate balance sheets are inflation stable to lower interest rates and
stronger than they have been in a decade. Many a typically healthier corporate America,
companies have been busy deleveraging and will continue to provide a favorable
have taken advantage of lower interest rate levels environment for the Ivy Bond Fund.
to pay off higher coupon debt thus cutting their
interest costs significantly. IVY MANAGEMENT, INC.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 63
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
CORPORATE BONDS -- 75.5% PRINCIPAL VALUE
<S> <C> <C>
360 Communications Co., 7.50%, 03/01/06.. $2,000,000 $ 1,910,000
ACME Metals Inc., 13.50%, 08/01/04*...... 1,000,000 908,750
Affinity Group Inc., 11.50%, 10/15/03*... 1,000,000 1,007,500
American President Co. Ltd., 8.00%,
01/15/24............................... 1,000,000 956,250
Berkeley Federal Bank & Trust, 12.00%,
06/15/05*.............................. 1,000,000 1,022,500
CBS, Inc., 8.875%, 06/01/22*............. 1,000,000 962,500
Caremark International, 6.875%,
08/15/03............................... 2,000,000 1,835,000
Clark R&M Holdings, 0.0%, 02/15/00*...... 1,000,000 688,750
Cobb Theatres, 10.625%, 03/01/03*........ 1,000,000 1,022,500
Conseco Inc., 10.50%, 12/15/04........... 1,500,000 1,657,500
Delphi Financial Group Inc., 8.00%,
10/01/03............................... 2,500,000 2,368,750
Delta Air Lines, 9.20%, 09/23/14......... 1,000,000 1,068,750
Delta Air Lines, 9.59%, 01/12/17......... 1,500,000 1,689,375
Developers Diversified Realty Corp.,
7.28%, 11/24/05........................ 1,000,000 937,500
Duke Realty Investments, 7.375%,
09/22/05............................... 1,000,000 955,000
Duty Free International Inc., 7.00%,
01/15/04............................... 2,000,000 1,847,500
FHP International Corp., 7.00%,
09/15/03............................... 2,000,000 1,905,000
Ferrellgas Partners LP 144A, 9.375%,
06/15/06*.............................. 1,000,000 965,000
Fort Howard, 10.92%, 02/15/12*........... 1,500,000 1,518,750
Franchise Finance Corp., 7.875%,
11/30/05............................... 1,000,000 947,500
Freeport-McMoran Res., 7.00%,
02/15/08............................... 1,000,000 923,750
Georgia-Pacific Corp., 7.375%,
12/01/25............................... 1,000,000 915,000
Great Atlantic & Pacific Tea Inc., 7.70%,
01/15/04............................... 1,000,000 932,500
Greenwich Air Services, 10.50%,
06/01/06*.............................. 1,000,000 996,250
HMC Acquisition Properties Inc., 9.00%,
12/15/07*.............................. 1,000,000 909,330
Hills Stores Corp., 12.50%, 07/01/03*.... 1,500,000 1,470,000
Indianapolis Life Insurance Co., 8.66%,
04/01/11............................... 1,000,000 1,026,250
K-III Communication Corp., 8.50%,
02/01/06*.............................. 1,000,000 910,000
Leucadia National Corp., 8.25%,
06/15/05............................... 2,000,000 1,997,500
Long Island Lighting Co., 8.625%,
04/15/04............................... 2,000,000 2,020,000
Long Island Lighting Co., 8.90%,
07/15/19*.............................. 1,000,000 903,750
Maxus Energy Corp, 9.375%, 11/01/03*..... 1,500,000 1,447,500
Mitchell Energy & Development Corp.,
6.75%, 02/15/04........................ 1,000,000 937,500
News America Holdings, 7.75%, 01/20/24... 2,000,000 1,845,000
News America Holdings, 7.70%, 10/30/25... 1,000,000 915,000
Overseas Shipholding Group, Inc., 8.75%,
12/01/13............................... 4,000,000 3,970,000
PDV America Inc., 7.25%, 08/01/98........ 1,000,000 993,750
PDV America Inc., 7.875%, 08/01/03....... 1,000,000 962,500
Pegasus Media & Communications, 12.50%,
07/01/05*.............................. 1,000,000 1,071,250
RHG Finance Corp., 8.875%, 10/01/05...... 2,000,000 2,057,500
RJR Nabisco Inc., 8.75%, 07/15/07........ 3,600,000 3,568,500
RJR Nabisco Inc., 9.25%, 08/15/13........ 2,000,000 2,027,500
Sithe/Independence Funding, 8.50%,
06/30/07............................... 1,000,000 990,000
<CAPTION>
CORPORATE BONDS PRINCIPAL VALUE
<S> <C> <C>
Southdown, Inc., 10.00%, 03/01/06*....... $1,000,000 $ 985,000
TCI Communications, Inc., 8.75%,
08/01/15............................... 1,000,000 981,250
TCI Communications, Inc., 9.25%,
01/01/23............................... 2,000,000 1,985,000
Terex Corp., 13.25%, 05/15/02*........... 1,000,000 1,045,000
Time Warner Inc., 8.11%, 08/15/06........ 750,000 747,188
Time Warner Inc., 8.18%, 08/15/07........ 750,000 748,125
Time Warner Inc., 9.125%, 01/15/13....... 1,500,000 1,575,000
Time Warner Inc., 9.15%, 02/01/23........ 2,000,000 2,080,000
Turner Broadcasting System, 8.40%,
02/01/24*.............................. 1,000,000 940,000
USX Marathon Group, 9.375%, 05/15/22..... 1,000,000 1,098,750
USX Marathon Group, 8.50%, 03/01/23...... 1,000,000 1,018,750
United Air Lines, 9.75%, 08/15/21........ 2,500,000 2,843,750
Weirton Steel Corp., 11.50%, 03/01/98*... 600,000 627,000
------------
TOTAL CORPORATE BONDS
(Cost -- $76,337,722).................. 76,639,518
------------
U.S. GOVERNMENT OBLIGATIONS -- 1.7%
- -----------------------------------------
U.S. Treasury Note, 6.00%, 02/15/26
(Cost -- $1,766,406)................... 2,000,000 1,773,125
------------
U.S. DOLLAR DENOMINATED FOREIGN
BONDS -- 19.5%
- -----------------------------------------
APP International Finance, 11.75%,
10/01/05*.............................. 1,000,000 1,030,000
Banco de Nordeste Brasil 144A REGD,
9.00%, 11/12/96*....................... 1,400,000 1,400,000
Banco Ganadero S.A., 9.75%, 08/26/99..... 1,000,000 1,038,750
Banpais 144A REGD, 7.25%, 01/28/97*...... 500,000 494,375
Banpais S.A., 7.25%, 01/28/97*........... 200,000 197,750
Companhia Suzano Papel 144A REGD, 10.25%,
10/06/01*.............................. 900,000 868,500
General Electric Capital Corp., FRN,
10/29/96............................... 1,000,000 476,800(a)
General Electric Capital Corp., FRN,
03/10/97............................... 1,000,000 508,500(a)
Grupo Industrial Durango 144A REGD, FRN,
11/18/96*.............................. 500,000 499,375
Grupo Simec S.A. de CV 144A REGD, 8.875%,
12/15/98*.............................. 1,500,000 1,076,250
Grupo Televisa S.A. 144A, 13.25%,
05/15/08*.............................. 1,000,000 533,750
Guangdong Enterprises, 8.75%, 12/15/03*.. 2,500,000 2,284,375
Inco Ltd., 9.60%, 06/15/22............... 2,000,000 2,157,500
Industrias Unidas, 8.50%, 01/27/99*...... 1,000,000 912,500
Iochpe-Maxion S.A., 12.275%,
11/08/02*.............................. 900,000 843,750
Metalurgica Gerdau S.A., 10.25%,
11/23/01*.............................. 500,000 486,250
Metalurgica Gerdau S.A., 11.125%,
05/24/04*.............................. 500,000 497,500
PanAmerican Beverage Inc., 8.125%,
04/01/03............................... 2,000,000 2,015,000
Polysindo International Finance, 11.375%,
06/15/06*.............................. 500,000 506,875
Republic of Brazil Variable, 6.25%,
04/15/24*.............................. 1,000,000 550,000
Singer Co. NV, 7.00%, 04/01/03........... 1,500,000 1,393,125
------------
TOTAL U.S. DOLLAR DENOMINATED FOREIGN
BONDS(Cost -- $20,733,788)............. 19,770,925
------------
COMMON STOCK -- 0.1% SHARES
- ----------------------------------------- ----------
Pegasus Media Class B
(Cost -- $12,500)...................... 100 60,000
------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 64
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATION -- 1.1% PRINCIPAL VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.26%,
07/01/96 (Cost -- $1,115,000).......... $1,115,000 $ 1,115,000
------------
TOTAL INVESTMENTS -- 97.9%
(Cost -- $99,965,416)(b)............... 99,358,568
OTHER ASSETS, LESS LIABILITIES -- 2.1%... 2,143,830
------------
NET ASSETS -- 100%....................... $101,502,398
============
FRN - Floating Rate Note
REGD - Registered
* Below investment grade security.
(a) Securities valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
these securities at June 30, 1996 aggregated
$1,616,166. See Note 1 of the Notes to the
Financial Statements.
(b) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 2,653,608
Gross unrealized depreciation..................... (3,260,456)
-----------
Net unrealized depreciation................... $ (606,848)
===========
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $47,839,743 and
$57,083,541, respectively, for the period ended June 30, 1996.
Purchases and sales of U.S. Government and Government Agency
obligations aggregated $5,044,688 and $4,268,985, respectively, for
the period ended June 30, 1996.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $99,965,416)............................................................. $ 99,358,568
Receivables:
Investments sold................................................................................................. 1,994,861
Fund shares sold................................................................................................. 80,848
Interest......................................................................................................... 2,296,399
Deferred organization expenses..................................................................................... 52,844
Other assets....................................................................................................... 19,500
------------
Total assets..................................................................................................... 103,803,020
------------
LIABILITIES
Payables:
Distributions to shareholders.................................................................................... 753
Investments purchased............................................................................................ 1,811,571
Management fee................................................................................................... 62,164
12b-1 service and distribution fees.............................................................................. 23,276
Administrative services fee...................................................................................... 8,289
Fund accounting.................................................................................................. 8,250
Transfer agent................................................................................................... 14,509
Due to custodian................................................................................................... 349,128
Other accrued expenses and liabilities............................................................................. 22,682
------------
Total liabilities................................................................................................ 2,300,622
------------
NET ASSETS......................................................................................................... $101,502,398
============
CLASS A:
Net asset value and redemption price per share ($96,549,052 / 10,123,446 shares outstanding)....................... $ 9.54
============
Maximum offering price per share ($9.54 x 100 / 95.25)*............................................................ $ 10.02
============
CLASS B:
Net asset value and offering price per share ($4,847,516 / 508,479 shares outstanding)**........................... $ 9.53
============
CLASS C:
Net asset value and offering price per share ($105,830 / 11,094 shares outstanding)**.............................. $ 9.54
============
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................. $108,954,445
Accumulated net realized loss on investments..................................................................... (6,760,720)
Accumulated undistributed net investment loss.................................................................... (84,479)
Net unrealized depreciation on investments....................................................................... (606,848)
------------
NET ASSETS......................................................................................................... $101,502,398
============
</TABLE>
* On sales of more than $100,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 65
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Interest............................................................................................... $ 4,498,991
-----------
Expenses
Management fee......................................................................................... $396,823
Transfer agent fees.................................................................................... 86,005
Administrative services fee............................................................................ 52,910
Custodian fees......................................................................................... 23,254
Blue Sky fees.......................................................................................... 14,195
Auditing and accounting fees........................................................................... 27,901
Shareholder reports.................................................................................... 6,365
Amortization of organization expenses.................................................................. 4,030
Fund accounting........................................................................................ 51,088
Trustees' fees......................................................................................... 1,574
12b-1 service and distribution fees
Class A.............................................................................................. 125,809
Class B.............................................................................................. 25,498
Class C.............................................................................................. 24
Legal.................................................................................................. 14,980
Other.................................................................................................. 10,050
-----------
Total expenses....................................................................................... 840,506
-----------
NET INVESTMENT INCOME.................................................................................... 3,658,485
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments....................................................................... 480,430
Net unrealized depreciation during the period on investments........................................... (3,174,016)
-----------
Net loss on investments.............................................................................. (2,693,586)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ 964,899
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1996* 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income............................................................................. $ 3,658,485 $ 8,001,078
Net realized gain (loss) on investments........................................................... 480,430 (2,940,340)
Net unrealized gain (loss) during the period on investments....................................... (3,174,016) 13,121,035
------------ -------------
Net increase resulting from operations.......................................................... 964,899 18,181,773
------------ -------------
Class A distributions
From net investment income........................................................................ (3,500,115) (7,254,790)
In excess of net investment income................................................................ (79,660) --
From capital paid-in.............................................................................. -- (1,327,021)
------------ -------------
Total distributions to Class A shareholders..................................................... (3,579,775) (8,581,811)
------------ -------------
Class B distributions
From net investment income........................................................................ (158,220) (213,541)
In excess of net investment income................................................................ (4,623) --
From capital paid-in.............................................................................. -- (47,497)
------------ -------------
Total distributions to Class B shareholders..................................................... (162,843) (261,038)
------------ -------------
Class C distributions
From net investment income........................................................................ (150) --
In excess of net investment income................................................................ (196) --
------------ -------------
Total distributions to Class C shareholders..................................................... (346) --
------------ -------------
Fund share transactions (Note 5):
Class A........................................................................................... (9,655,829) (10,437,361)
Class B........................................................................................... (192,497) 2,470,240
Class C........................................................................................... 105,377 --
------------ -------------
Net decrease resulting from Fund share transactions............................................. (9,742,949) (7,967,121)
------------ -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................................. (12,521,014) 1,371,803
NET ASSETS
Beginning of period............................................................................. 114,023,412 112,651,609
------------ -------------
END OF PERIOD................................................................................... $101,502,398 $114,023,412
=============== ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT LOSS....................................................... $ (84,479) $ --
============ ============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 66
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FOR THE SIX
CLASS A MONTHS ENDED YEAR ENDED MONTHS ENDED
JUNE 30, DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
SELECTED PER SHARE ------------- ------------ --------------- ----------------------------------------------------
DATA 1996* 1995 1994 1994 1993 1992 1991
------------- ------------ --------------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95 $ 9.61 $ 9.84
------------- ------------ --------------- -------- -------- -------- -------
Income from
investment
operations
Net investment
income......... .33 .67(a) .33(a) .63 .55 .63(a) .62(a)
Net gain (loss)
on investments
(both realized
and
unrealized).... (.23) .84 (.29) (.60) 1.00 .73 .10
------------- ------------ --------------- -------- -------- -------- -------
Total from
investment
operations... .10 1.51 .04 .03 1.55 1.36 .72
------------- ------------ --------------- -------- -------- -------- -------
Less
distributions
From net
investment
income......... .33 .63 .32 .61 .64 .63 .62
In excess of net
investment
income......... .01 -- -- -- -- -- --
From net realized
gain........... -- -- -- .38 .52 .25 .13
In excess of net
realized
gain........... -- -- .09 -- -- -- --
From capital
paid-in........ -- .11 -- -- -- .14 .20
------------- ------------ --------------- -------- -------- -------- -------
Total
distributions... .34 .74 .41 .99 1.16 1.02 .95
------------- ------------ --------------- -------- -------- -------- -------
Net asset value,
end of period.... $ 9.54 $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95 $ 9.61
================== ================ ==================== ========== ========== ========== ========
Total return(%)... 1.09(c) 17.41(b) .43(c) 0.00(b) 16.29(b) 14.77(b) 7.58(b)
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period (in
thousands)....... $96,549 $108,840 $ 110,232 $120,073 $132,721 $102,328 $92,687
Ratio of expenses
to average net
assets
With expense
reimbursement(%)... -- 1.54 1.50(d) -- -- 1.50 1.50
Without expense
reimbursement(%)... 1.55(d) 1.54 1.52(d) 1.45 1.49 1.55 1.65
Ratio of net
investment income
to average net
assets(%)........ 6.96(d) 7.09(a) 6.92(a)(d) 6.19 6.42 6.92(a) 6.77(a)
Portfolio turnover
rate(%).......... 93(d) 93 44(d) 78 134 129 118
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE FOR THE SIX APRIL 1, 1994
MONTHS ENDED YEAR ENDED MONTHS ENDED (COMMENCEMENT)
CLASS B JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
------------- ------------ --------------- --------------
SELECTED PER SHARE DATA 1996* 1995 1994 1994
------------- ------------ --------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 9.78 $ 9.01 $ 9.38 $ 9.82
------------- ------------ --------------- --------------
Income (loss) from investment operations
Net investment income.............................. .30 .60(a) .30(a) .10
Net gain (loss) on investments (both realized and
unrealized)...................................... (.24) .84 (.29) (.32)
------------- ------------ --------------- --------------
Total from investment operations................. .06 1.44 .01 (.22)
------------- ------------ --------------- --------------
Less distributions
From net investment income......................... .30 .56 .29 .14
In excess of net investment income................. .01 -- -- --
From net realized gain............................. -- -- -- .08
In excess of net realized gain..................... -- -- .09 --
From capital paid-in............................... -- .11 -- --
------------- ------------ --------------- --------------
Total distributions.............................. .31 .67 .38 .22
------------- ------------ --------------- --------------
Net asset value, end of period....................... $ 9.53 $ 9.78 $ 9.01 $ 9.38
=============== ============== ================== ==================
Total return(%)...................................... .61(c) 16.54(b) .06(c) (2.24)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 4,848 $ 5,184 $ 2,420 $ 761
Ratio of expenses to average net assets
With expense reimbursement(%)...................... -- 2.29 2.25(d) --
Without expense reimbursement(%)................... 2.30(d) 2.29 2.27(d) 2.20(d)
Ratio of net investment income to average
net assets(%)...................................... 6.21(d) 6.34(a) 6.17(a)(d) 5.44(d)
Portfolio turnover rate(%)........................... 93(d) 93 44(d) 78
</TABLE>
(See Notes to Financial Statements)
<PAGE> 67
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period............................................................................. $ 9.44
-----
Income from investment operations
Net investment income.......................................................................................... .04
Net gain on investments
(both realized and unrealized)............................................................................... .16
-----
Total from investment operations............................................................................. .20
-----
Less distributions
From net investment income..................................................................................... .04
In excess of net investment income............................................................................. .06
-----
Total distributions.......................................................................................... .10
-----
Net asset value, end of period................................................................................... $ 9.54
==============
Total return (%)................................................................................................. 2.16(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......................................................................... $ 106
Ratio of expenses to average net assets(%)....................................................................... 2.30(d)
Ratio of net investment income to average net assets(%).......................................................... 6.23(d)
Portfolio turnover rate(%)....................................................................................... 93(d)
</TABLE>
(a) Net investment income is net of expenses reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not reflect
a sales charge.
(d) Annualized.
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 68
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Bond Fund (the Fund) is a series of shares of Ivy Fund. The shares of
beneficial interest are assigned no par value and an unlimited number of shares
of Class A, Class B, Class C and Class I are authorized. Ivy Fund was organized
as a Massachusetts business trust under a Declaration of Trust dated December
21, 1983 and is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect.
All other securities are valued at their fair value as determined in good
faith by the Valuation Committee of the Board. As of June 30, 1996, securities
valued in good faith by the Valuation Committee of the Board amounted to
$985,300 (.97% of net assets) and have been noted as such in the investment
portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$6,693,000 as of December 31, 1995, which may be applied against any realized
net taxable gain of each succeeding fiscal year until fully utilized or until
the expiration date, whichever occurs first. The carryforward expires $646,000
in 1996, $636,000 in 1997, $17,000 in 1998, $1,968,000 in 1999, $984,000 in 2001
and $2,442,000 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared monthly. Distributions of net realized capital gains, if any, are
declared in December. An additional distribution may be declared if necessary to
avoid the payment of a four percent Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with issuing Class B shares have been deferred and are being
amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 certain securities sold at a
loss. As a result, Net investment income (loss) and Net realized gain (loss) on
investments and foreign currency transactions for a reporting period may differ
significantly in amount and character from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .75% of
the Fund's first $500 million of average net assets; .60% of the Fund's next
$500 million of average net assets; and .40% of the Fund's average net assets in
excess of $1 billion.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. In addition, IMI may
voluntarily reimburse the Fund's expenses.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $9,244.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
<PAGE> 69
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. ACQUISITION OF MACKENZIE FIXED INCOME TRUST
On January 1, 1995, the Fund acquired the net assets of Mackenzie Fixed
Income Trust (MFIT) d/b/a Ivy Bond Fund pursuant to a plan of reorganization
adopted by the Board September 29, 1994 and approved by MFIT's shareholders on
December 15, 1994. The reorganization was accomplished by a tax-free exchange of
12,502,434 (12,233,828 Class A and 268,606 Class B) (NAV $9.01) shares of the
Fund for the 12,502,434 (12,233,828 Class A and 268,606 Class B) (NAV $9.01)
shares of MFIT outstanding on December 31, 1994. MFIT's net assets at that date
of $112,651,609, including $4,967,139 realized loss and $10,553,867 unrealized
depreciation, were combined with the Fund for total net assets after acquisition
of $112,651,636.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class I* were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 427,937 $ 4,107,869 1,092,290 $ 10,252,225
Issued on reinvestment of
distributions........... 229,420 2,195,887 551,438 5,173,367
Repurchased.............. (1,658,113) (15,959,585) (2,753,354) (25,862,953)
---------- ------------ ---------- ------------
Net decrease............. (1,000,756) $ (9,655,829) (1,109,626) $(10,437,361)
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 91,697 $ 884,211 359,904 $ 3,357,250
Issued on reinvestment of
distributions........... 13,276 127,105 20,582 194,470
Repurchased.............. (126,290) (1,203,813) (119,296) (1,081,480)
---------- ------------ ---------- ------------
Net increase (decrease).. (21,317) $ (192,497) 261,190 $ 2,470,240
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------------------------- ---------- ------------
<S> <C> <C>
Sold..................... 11,076 $ 105,201
Issued on reinvestment of
distributions........... 18 176
---------- ------------
Net increase............. 11,094 $ 105,377
============ ==============
</TABLE>
* There were no Class I shares outstanding during the periods.
IBF-3-896
<PAGE> 70
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
SHORT TERM
BOND FUND During the first six months of this year IVY SHORT-TERM BOND FUND SEEKS TO
interest rates trended higher in response to faster OBTAIN AS HIGH A LEVEL OF CURRENT
than expected economic growth. Additionally, INCOME AS IS CONSISTENT WITH THE
energy and grain prices went up because of PRESERVATION OF CAPITAL AND LIQUIDITY
colder than normal weather and low inventories BY INVESTING IN HIGH-QUALITY,
- ------------------- of these commodities. On the labor front, a SHORT-TERM INSTRUMENTS.
SEMI-ANNUAL surprising number of new jobs were
REPORT created and unemployment declined, Given these circumstances, the Ivy
- ------------------- leading to an increase in labor costs. Histori- Short-term Bond Fund remains primarily
This report and the cally, these factors have presaged an increase in concentrated in short-term government
financial statements inflation and as market participants feared a repeat issues which include both US agency and
contained herein are of the downturn in bond prices similar to 1994, short-term treasury notes.
submitted for the general the tone of the fixed income markets has swung The Fund remains invested in longer
information of the share- dramatically from complacency to caution. maturity corporate bonds with underlying
holders. This report is Our research indicates the pace of eco- credit fundamentals that, we believe,
not authorized for distri- nomic growth will moderate in the months continue to bode well for the issuing
bution to prospective to come as the economy appears to be in the companies.
investors unless preced- later stages of a longer term economic recovery. It is out opinion that low inflation,
ed or accompanied by This deceleration should allay fears of a stable to lower interest rates an a typically
an effective prospectus. resurgence of inflation. Additionally, the healthier corporate America, will continue
Federal Reserve Board is firmly committed to to provide a favorable environment for the
Ivy Management, Inc. price stability and we expect that they will act Ivy Short-term Bond Fund.
Via Mizner Financial to defend this mission. Monetary policy is
Plaza currently somewhat restrictive which should act as IVY MANAGEMENT, INC.
700 South Federal Hwy. a brake on the economy over the near future.
Boca Raton, FL 33432 Corporate earnings and cash flows continue
1-800-456-5111 to be good, with second quarter earnings
generally coming in better than expected and
up about 8% over the past year. There were,
however, a few highly publicized earnings
disappointments. According to Moody's
Investors Service, defaults on corporate bonds
have declined, credit upgrades are outpacing
downgrades and corporate balance sheets are
stronger than they have been in a decade. Many
companies have been busy deleveraging and
have taken advantage of lower interest rate levels
to pay off higher coupon debt thus cutting their
interest costs significantly.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 71
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 83.4% PRINCIPAL VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
DIRECT U.S. OBLIGATIONS -- 33.1%
U.S. Treasury Note, 6.125%, 07/31/96.................................................................... $ 500,000 $ 500,480
U.S. Treasury Note, 6.25%, 01/31/97..................................................................... 500,000 502,000
U.S. Treasury Note, 5.75%, 10/31/97..................................................................... 500,000 498,935
U.S. Treasury Strip, 0.00%, 11/15/98.................................................................... 500,000 432,475
----------
1,933,890
----------
GOVERNMENT AGENCY OBLIGATIONS -- 50.3%
Federal Home Loan Mortgage Association, 7.843%, 10/01/20................................................ 28,273 28,679
Federal National Mortgage Association, 5.284%, 07/24/96................................................. 250,000 249,162
Federal National Mortgage Association, 5.74%, 12/01/18.................................................. 166,640 171,639
Student Loan Marketing Association, FRN, 5.39%, 07/19/96................................................ 400,000 399,996
Student Loan Marketing Association, FRN, 5.54%, 02/17/98................................................ 1,500,000 1,500,000
Student Loan Marketing Association, FRN, 5.43%, 01/13/99................................................ 500,000 497,060
Student Loan Marketing Association, FRN, 5.50%, 03/07/01................................................ 100,000 99,125
----------
2,945,661
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost -- $4,855,266).................................................................................. 4,879,551
----------
DOMESTIC CORPORATE BONDS -- 1.8%
- --------------------------------------------------------------------------------------------------------
Weirton Steel Inc., 11.50%, 03/01/98
(Cost -- $100,000).................................................................................... 100,000 104,500
----------
U.S. DOLLAR DENOMINATED FOREIGN BONDS -- 9.3%
- --------------------------------------------------------------------------------------------------------
Banco Do Nordeste Brasil -- 144A REGD, 9.00%, 11/12/96.................................................. 250,000 250,000
Banpais S.A. -- 144A REGD, 7.25%, 01/28/97.............................................................. 300,000 296,625
----------
TOTAL U.S. DOLLAR DENOMINATED FOREIGN BONDS
(Cost -- $453,745).................................................................................... 546,625
----------
TOTAL INVESTMENTS -- 94.5%
(Cost -- $5,409,011)*................................................................................. 5,530,676
OTHER ASSETS, LESS LIABILITIES -- 5.5%.................................................................. 319,260
----------
NET ASSETS -- 100%...................................................................................... $5,849,936
==========
* Cost is approximately the same for Federal income tax purposes.
FRN - Floating Rate Note; reflects rate at June 30, 1996.
REGD - Registered.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation................................................................................... $ 122,808
Gross unrealized depreciation................................................................................... (1,143)
----------
Net unrealized appreciation................................................................................. $ 121,665
==========
Purchases and sales of securities other than short-term, U.S. Government and Government Agency obligations aggregated $284,250
and $584,250, respectively, for the period ended June 30, 1996. Purchases and sales of U.S. Government and Government Agency
obligations aggregated $0 and $31,304, respectively, for the period ended June 30, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 72
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $5,409,011)................................................................ $5,530,676
Cash................................................................................................................. 201,388
Receivables:
Interest........................................................................................................... 64,259
Manager for expense reimbursement.................................................................................. 18,064
Deferred organization expenses....................................................................................... 52,035
Other assets......................................................................................................... 582
----------
Total assets....................................................................................................... 5,867,004
----------
LIABILITIES
Payables:
Management fee..................................................................................................... 2,882
12b-1 service and distribution fees................................................................................ 896
Administrative services fee........................................................................................ 480
Fund accounting.................................................................................................... 1,801
Other accrued expenses and liabilities............................................................................... 11,009
----------
Total liabilities.................................................................................................. 17,068
----------
NET ASSETS........................................................................................................... $5,849,936
==========
CLASS A:
Net asset value and redemption price per share ($5,765,549 / 592,727 shares outstanding)............................. $ 9.73
==========
Maximum offering price per share ($9.73 x 100 / 97)*................................................................. $ 10.03
==========
CLASS B:
Net asset value and offering price per share ($84,387 / 8,689 shares outstanding)**.................................. $ 9.71
==========
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................... $6,522,221
Accumulated net realized loss on investments....................................................................... (813,787)
Accumulated undistributed net investment income.................................................................... 19,837
Net unrealized appreciation on investments......................................................................... 121,665
----------
NET ASSETS........................................................................................................... $5,849,936
==========
</TABLE>
* On sales of more than $25,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 73
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Interest................................................................................................. $176,062
--------
Expenses
Management fee........................................................................................... $17,850
Transfer agent........................................................................................... 5,372
Administrative services fee.............................................................................. 2,975
Custodian fees........................................................................................... 4
Blue Sky fees............................................................................................ 1,992
Auditing and accounting fees............................................................................. 12,021
Shareholder reports...................................................................................... 2,279
Amortization of organization expenses.................................................................... 13,620
Fund accounting.......................................................................................... 11,207
Trustees' fees........................................................................................... 1,788
12b-1 service and distribution fees
Class A................................................................................................ 7,365
Class B................................................................................................ 202
Legal.................................................................................................... 13,774
Other.................................................................................................... 1,815
--------
92,264
Expenses reimbursed by manager........................................................................... (62,190)
Fees paid indirectly..................................................................................... (504)
--------
Net expenses........................................................................................... 29,570
--------
NET INVESTMENT INCOME...................................................................................... 146,492
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss on investments......................................................................... (7,317)
Net unrealized appreciation during the period on investments............................................. 9,774
--------
Net gain on investment transactions.................................................................... 2,457
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................................................... $148,949
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- ------------
1996* 1995
----------- ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations:
Net investment income............................................................................ $ 146,492 $ 387,040
Net realized loss on investments................................................................. (7,317 ) (321,600 )
Net unrealized appreciation during the period on investment transactions......................... 9,774 313,952
----------- ------------
Net increase resulting from operations......................................................... 148,949 379,392
----------- ------------
Class A distributions
From net investment income....................................................................... (145,296 ) (384,755 )
In excess of net investment income............................................................... (5,148 ) (572 )
----------- ------------
Total distributions to Class A shareholders.................................................... (150,444 ) (385,327 )
----------- ------------
Class B distributions
From net investment income....................................................................... (1,196 ) (2,285 )
In excess of net investment income............................................................... (232 ) --
----------- ------------
Total distributions to Class B shareholders.................................................... (1,428 ) (2,285 )
----------- ------------
Fund share transactions (Note 6):
Class A.......................................................................................... (258,908 ) (2,720,391 )
Class B.......................................................................................... 57,848 27,045
----------- ------------
Net decrease resulting from Fund share transactions............................................ (201,060 ) (2,693,346 )
----------- ------------
Capital contributed by manager..................................................................... -- 183,827
----------- ------------
TOTAL DECREASE IN NET ASSETS....................................................................... (203,983 ) (2,517,739 )
NET ASSETS
Beginning of period.............................................................................. 6,053,919 8,571,658
----------- ------------
END OF PERIOD.................................................................................... $5,849,936 $ 6,053,919
============= ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME.................................................... $ 19,837 $ 25,217
============= ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 74
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE FOR THE SIX APRIL 18, 1991
MONTHS ENDED YEAR ENDED MONTHS ENDED (COMMENCEMENT)
CLASS A JUNE 30, DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30, TO JUNE 30,
------------- ------------ ------------ ----------------------------------- --------------
SELECTED PER SHARE DATA 1996* 1995 1994 1994 1993 1992 1991
------------- ------------ ------------ ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 9.73 $ 9.49 $ 9.71 $ 9.92 $ 9.96 $ 9.97 $ 10.00
------ ------ ------ ------- ------- ------- -------
Income from investment
operations
Net investment income
(a)................... .24 .54 .23 .36 .46 .66 .16
Net gain (loss) on
investment
transactions (both
realized and
unrealized)........... .01 (.02) (.22) (.21) (.04) -- (.03)
------ ------ ------ ------- ------- ------- -------
Total from investment
operations.......... .25 .52 .01 .15 .42 .66 .13
------ ------ ------ ------- ------- ------- -------
Less distributions
From net investment
income................ .24 .54 .23 .36 .46 .66 .16
In excess of net
investment income..... .01 -- -- -- -- -- --
From capital paid-in.... -- -- -- -- -- .01 --
------ ------ ------ ------- ------- ------- -------
Total distributions... .25 .54 .23 .36 .46 .67 .16
------ ------ ------ ------- ------- ------- -------
Capital contributed by
manager (Note 5)...... -- .26 -- -- -- -- --
------ ------ ------ ------- ------- ------- -------
Net asset value, end of
period.................. $ 9.73 $ 9.73 $ 9.49 $ 9.71 $ 9.92 $ 9.96 $ 9.97
================== ================ ================= ======== ======== ======== ===========
Total return(%).......... 2.58(b) 8.56(c)(d) .03(b) 1.57(c) 4.33(c) 6.80(c) 1.33(b)
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period
(in thousands).......... $ 5,766 $6,027 $8,572 $12,267 $44,375 $25,259 $ 13,708
Ratio of total expenses
to average net assets
With expense
reimbursement and fees
paid
indirectly(%)(e)...... .99(f) .93 1.38(f) .92 .82 .86 .25(f)
Without expense
reimbursement and fees
paid
indirectly(%)(e)...... 3.10(f) 3.27 2.80(f) 1.52 1.45 1.30 3.00(f)
Ratio of net investment
income to
average net
assets(%)(a)............ 4.93(f) 5.53 4.65(f) 3.73 4.54 6.43 8.70(f)
Portfolio turnover
rate(%)................. 11(f) 54 143(f) 37 69 106 7(f)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 12,
1995
FOR THE SIX (COMMENCEMENT)
MONTHS ENDED TO DECEMBER
CLASS B JUNE 30, 31,
------------ --------------
SELECTED PER SHARE DATA 1996* 1995
------------ --------------
<S> <C> <C>
Net asset value, beginning of period............................................................ $ 9.73 $ 9.44
----- ------
Income from investment operations
Net investment income(a)...................................................................... .19 .49
Net gain on investment transactions
(both realized and unrealized).............................................................. .02 .03
----- ------
Total from investment operations............................................................ .21 .52
----- ------
Less distributions
From net investment income.................................................................... .19 .49
In excess of net investment income............................................................ .04 --
----- ------
Total distributions......................................................................... .23 .49
----- ------
Capital contributed by manager (Note 5)....................................................... -- .26
----- ------
Net asset value, end of period.................................................................. $ 9.71 $ 9.73
=============== =============
Total return(%)(b).............................................................................. 2.16 8.53(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................................................ $ 84 $ 27
Ratio of total expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(e)(f).................................. 1.49 1.43
Without expense reimbursement and fees paid indirectly(%)(e)(f)............................... 3.60 3.77
Ratio of net investment income to
average net assets(%)(a)(f)................................................................... 4.43 5.03
Portfolio turnover rate(%)...................................................................... 11(f) 54
</TABLE>
(See Notes to Financial Statements)
<PAGE> 75
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE FOR THE SIX JULY 3, 1993
MONTHS ENDED YEAR ENDED MONTHS ENDED (COMMENCEMENT)
CLASS I JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
------------ ------------ ------------ --------------
SELECTED PER SHARE DATA 1996*(G) 1995(G) 1994 1994
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ -- $ -- $ 9.71 $ 9.92
------------ ------------ ------------ --------------
Income (loss) from investment operations
Net investment income(a)................................. -- -- .14 .39
Net loss on investment transactions
(both realized and unrealized)......................... -- -- (.22) (.21)
------------ ------------ ------------ --------------
Total from investment operations....................... -- -- (.08) .18
------------ ------------ ------------ --------------
Less distributions
From net investment income............................... -- -- .14 .39
------------ ------------ ------------ --------------
Total distributions.................................... -- -- .14 .39
------------ ------------ ------------ --------------
Net asset value, end of period............................. $ -- $ -- $ 9.49 $ 9.71
=============== ============== =============== ==================
Total return(%)(b)......................................... -- -- (.99) 1.77
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ -- $ -- $ -- $ 1,495
Ratio of total expenses to average net assets
With expense reimbursement and fees paid
indirectly(%)(e)....................................... -- -- 1.13(f) .67(f)
Without expense reimbursement and fees paid
indirectly(%)(e)....................................... -- -- 2.55(f) 1.27(f)
Ratio of net investment income to average net
assets(%)(a)............................................. -- -- 4.90(f) 3.98(f)
Portfolio turnover rate(%)................................. -- -- 143(f) 37
(a) Net investment income is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return and does not reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Without a capital contribution by the manager, total return for Class A and Class B would have been 5.82% and 5.78%,
respectively.
(e) Beginning in 1995, total expenses include fees paid indirectly through an expense offset arrangement.
(f) Annualized.
(g) There were no Class I shares outstanding during the periods ended December 31, 1995 and June 30, 1996.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Short-Term Bond Fund (the Fund) is a series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B and Class I are authorized. Ivy Fund was organized
as a Massachusetts business trust under a Declaration of Trust dated December
21, 1983 and is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Debt securities (other than short-term obligations)
are valued on the basis of valuations furnished by a pricing service authorized
by the Board of Trustees (the Board), which determines valuations based upon
market transactions for normal, institutional-size trading units of such
securities. Short-term obligations are valued at amortized cost, which
approximates market. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board; as of June 30,
1996, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$751,000 as of December 31, 1995, which may be applied against any realized net
taxable gain of each succeeding year until fully utilized or until the
expiration date, whichever occurs first. The carryforward expires $21,000 in
2001, $570,000 in 2002 and $160,000 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared monthly. Distributions of net realized capital gain, if any, are
declared in December. An additional distribution may be declared if necessary to
avoid the payment of a four percent Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization and issuing Class B and Class I shares have
been deferred and are being amortized on a straight-line basis over a five year
period.
RECLASSIFICATIONS -- 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 certain securities sold at a
loss. As a result, Net investment income (loss) and Net realized gain (loss) on
investments and foreign currency transactions for a reporting period may differ
significantly in amount and character from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement whereby a certain
percentage of quarterly cumulative credits resulting from cash balances on
deposit with the custodian are used to offset custody fees, including
transaction and out of pocket expenses. For the six months ended June 30, 1996,
custody fees were reduced by $504 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .60% of
the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. In addition, IMI may
voluntarily reimburse the Fund's expenses. Expenses reimbursed by manager
reflected in the Statement of Operations consists of required and voluntary
reimbursements of $9,861 and $52,329, respectively.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $518.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of Class A and Class B shares. Class B shares are also subject
to an ongoing distribution fee at an annual rate of .75% of the average net
asset value attributable to Class B shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. ACQUISITION OF MACKENZIE SHORT-TERM U.S. GOVERNMENT SECURITIES FUND
On January 1, 1995, the Fund acquired the net assets of Mackenzie Short-Term
U.S. Government Securities Fund (MSTUSGSF) d/b/a Ivy Short-Term U.S. Government
Securities Fund pursuant to a plan of reorganization adopted by the Board
September 29, 1994 and approved by MSTUSGSF's shareholders December 31, 1994.
The reorganization was accomplished by a tax-free exchange of 903,236 Class A
shares (NAV $9.49) of the Fund for the 903,236 Class A shares (NAV $9.49) of
MSTUSGSF outstanding on December 31, 1994. MSTUSGSF's net assets at that date of
$8,571,658, including $645,132 realized loss and $202,061 unrealized
depreciation, were combined with the Fund for total net assets after acquisition
of $8,571,686.
5. NET REALIZED LOSS ON INVESTMENTS AND MIMI'S CONTRIBUTION OF CAPITAL
In January, 1995 certain notes held by the Fund and collateralized by the
Mexican peso matured and were paid at 63.23% of par value. The notes provided
that they would mature at par value and the amount paid at maturity would not be
affected by currency fluctuations except if the Mexican peso, relative to the
U.S. dollar, declined in
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
value more that 40% as of the note's maturity date. Prior to the maturity date,
MIMI, the former Manager, believed that the bonds would mature at par and they
were priced accordingly. The substantial devaluation of the Mexican peso, which
was occurring at about the same time as the notes matured, resulted in a
downward adjustment to the par value of the notes in an aggregate amount of
$183,827, when the notes were paid off. Because of the significance of this
trading loss to the Fund and for other business-related reasons, MIMI made a
contribution of capital to the Fund in the amount of the loss. The contribution
was made in January, 1995.
6. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class I* were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
--------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------- ------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold........................... 14,480 $ 141,570 29,579 $ 283,933
Issued on reinvestment of
distributions................. 11,391 110,919 28,768 276,261
Repurchased.................... (52,415) (511,397) (342,312) (3,280,585)
------- ----------- -------- -----------
Net decrease................... (26,544) $ (258,908) (283,965) $(2,720,391)
======== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
JANUARY 12, 1995
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1996 TO DECEMBER 31, 1995
--------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------- ------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold........................... 6,049 $ 58,924 20,705 $ 198,314
Issued on reinvestment of
distributions................. 140 1,364 169 1,615
Repurchased.................... (251) (2,440) (18,123) (172,884)
------- ----------- -------- -----------
Net increase................... 5,938 $ 57,848 2,751 $ 27,045
======== ============= ========== =============
</TABLE>
* There were no Class I shares outstanding during the periods.
ISTBF-3-896
<PAGE> 78
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
CHINA
REGION Despite the increased volatility in US were cut by 0.75%. We believe more rate
FUND markets, emerging markets, including those in cuts are likely to follow.
the China Region, have held up remarkably. This more accommodative credit policy
well. We believe this is particularly positive should not only give a boost to China's domes-
considering the historically strong correlations tic companies, but it should also provide the
- ------------------- with the US during market declines. potential for strong growth for Hong Kong
SEMI-ANNUAL According to our research China's companies operating in he mainland.
REPORT economy has grown an average of 11.8% in The economics of Hong Kong and
- ------------------- real terms over the past three years. Despite China are becoming increasingly integrated
This report and the this broad economic growth, many Chinese as Hong Kong's 1997 handover date ap-
financial statements companies have seen their profits come under proaches. According to the Chinese Ministry
contained herein are severe pressure brought on by China's tight of Foreign Trade and Economic Cooperation,
submitted for the general grip on credit growth that began in 1994. Hong Kong invested more than $78 billion
information of the share- At its peak, money supply in China was, in China in 1995 making it by far the largest
holders. This report is growing more than 60% year-on-year. With foreign investor in the People's Republic of
not authorized for distri- banks willing to lend money at interest rates China (Taiwan, the second largest investor,
bution to prospective significantly below the level of inflation, directed $11.6 billion and the US invested
investors unless preced- credit was cheap and plentiful. As a result, $10.9 billion).
ed or accompanied by while China's economy boomed, inflation But investments flow both ways. The
an effective prospectus. rose consistently. Chinese officials became Chinese have been gradually building
increasingly concerned about rising prices positions in Hong Kong's property market
Ivy Management, Inc. and speculative excesses in the economy. In over the past several years and are now
Via Mizner Financial the second half of 1995 the People's Bank of estimated to control 5% of the territory's real
Plaza China, through primarily administrative estate. Also, they have recently announced
700 South Federal Hwy. measures, orchestrated a 5% contraction in important investments in Hong Kong's
Boca Raton, FL 33432 the money supply. China's economy deceler- transportation sector, and in the financial
1-800-456-5111 ared from more than 14% growth in the first sector with a stake in one of Hong Kong's
quarter of 1993 to less than 9% in the third oldest financial services groups. Mre an-
quarter of 1995. nouncements, such as these, are expected and
Throughout 1995, inflation responded should provide pricing and psychological
to tight monetary policies which is what support to Hong Kong-based assets.
the Chinese authorities had hoped would With 13% of the Ivy China Region Fund
happen. By year's end, the nationwide invested in mainland China, 57% in Hong
consumer price index had fallen to 10.1% Kong and 7% in Taiwan, we believe the Fund
and was below 10% for the first quarter of is positioned to benefit from the growth and
1996. This improvement has prompted the future integration of the China Region.
Chinese to gradually ease credit. By some Markets often climb a wall of worry. They
accounts the easing policy began as early as climb even faster with a little support.
the third quarter of 1995. (It was at that
time that money supply growth began to IVY MANAGEMENT, INC.
pick up sharply.) But the definitive signal
came a month ago when interest rates on
deposits were cut 0.98% and lending rates
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 79
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 99.4% SHARES VALUE
<S> <C> <C>
AMERICAS -- 0.3%
- ------------------------------------------
UNITED STATES -- 0.3%
Amway Asia Pacific Ltd.................... 2,500 $ 75,938
-----------
ASIA / PACIFIC -- 99.1%
- ------------------------------------------
CHINA -- 13.1%
China Southern Glass Co. -- Class B....... 235,300 138,308
Huaneng Power International, Inc. ADR*.... 15,000 268,125
Inner Mongolia Erdos Cashmere Products
Co. -- Class B.......................... 276,000 134,136
Qinling Motors Company Ltd................ 1,100,000 369,473
Shanghai Dazhong Taxi Company -- Class
B....................................... 300,000 219,000
Shanghai Diesel Engine Co. Ltd. -- Class
B*...................................... 648,000 272,160
Shanghai Erfangji Company Limited*........ 907,500 114,345
Shanghai Haixing Shipping Co. 'H'......... 847,000 55,805
Shanghai Industrial Sewing Machine Co.
Ltd. -- Class B......................... 600,000 82,800
Shanghai Narcissus Electric Appliances
Industrial Company Ltd.*................ 467,500 79,475
Shanghai Post & Telecom Eq. -- Class B.... 393,000 192,570
Shanghai Shangling Electric Appliances Co.
Ltd. -- Class B*........................ 312,000 164,736
Shenzhen China Bicycles -- Class B........ 865,800 200,211
Shenzhen Konka Electronics Group
Limited -- Class B...................... 200,000 180,861
Tingyi (Cayman Isln) Holding Co.*......... 810,000 222,362
Yaohua Pilkington Glass Class B*.......... 200,000 120,000
Zhenhai Refining and Chemical Company
Limited................................. 900,000 255,789
-----------
3,070,156
-----------
HONG KONG -- 57.0%
Asia Satellite Telecom ADR*............... 4,000 118,500
C.P. Pokphand............................. 1,242,000 493,382
Chen Hsong Holdings*...................... 226,000 121,164
Cheung Kong (Holdings) Ltd................ 109,000 785,034
China Light & Power Co. Ltd............... 90,600 410,821
China Travel International Investment Hong
Kong Ltd................................ 762,000 174,239
Citic Pacific Ltd......................... 161,000 651,009
Consoldiated Electric Power Asia Ltd...... 375 620
Esprit Asia Holdings Ltd.................. 696,000 220,289
Giordano Holdings Ltd..................... 476,000 461,196
Gold Peak Industries...................... 923,000 521,671
Guangdong Investments..................... 799,000 505,778
HSBC Holdings............................. 36,867 557,238
Hang Seng Bank............................ 27,900 281,136
Hong Kong Land Holdings Ltd............... 102,000 229,500
Hong Kong Telecommunications Limited...... 299,600 537,989
Hopewell Holdings......................... 683,945 371,097
Jardine International Motor Holdings Co... 136,000 166,909
Jardine Strategic Holdings Ltd............ 100,250 320,800
Jardine Strategic Holdings Warrants*...... 13,250 4,108
Johnson Electric Holdings Ltd............. 297,000 667,610
Kumagai Gumi (Hong Kong) Ltd.............. 300,000 269,354
Kumagai Gumi (Hong Kong) Ltd. Warrants*... 60,000 9,146
Li & Fung................................. 615,800 580,737
M.C. Packaging (Hong Kong) Ltd............ 648,000 274,159
Manhattan Card Company Ltd................ 868,000 414,895
Melco International Development Ltd.*..... 15,900 4,416
National Mutual Asia Ltd.................. 440,000 386,526
New World Development Company Ltd......... 80,000 371,023
New World Infrastructure Ltd.*............ 133 284
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Peregrine Investment Holdings Ltd......... 262,000 $ 377,392
Peregrine Investment Holdings Ltd.
Warrants*............................... 26,200 3,249
Shangri-La Asia Ltd....................... 230,000 322,385
Shun Tak Holdings Ltd..................... 318,000 195,136
Siu-Fung Ceramics Holdings, Ltd........... 1,110,327 213,724
Sun Hung Kai Properties Ltd............... 42,800 432,658
Swire Pacific Ltd Class A................. 59,500 509,237
Techtronic Industries Co.................. 1,888,000 260,977
Tsingtao Brewery Co. Ltd Series H......... 600,000 217,033
Union Bank of Hong Kong Ltd.*............. 245,000 257,953
Wharf (Holdings) Ltd...................... 80,000 286,277
Wo Kee Hong Holdings Ltd.................. 562,000 72,603
Wo Kee Hong Holdings Ltd Warrants*........ 112,400 3,340
Yue Yuen Industrial Holdings.............. 1,146,000 325,705
-----------
13,388,299
-----------
INDONESIA -- 3.4%
Bank Niaga*............................... 60,000 149,517
PT Astra International.................... 28,000 40,602
PT Chareon Pokphand Indonesia............. 48,000 92,803
PT Hanjaya Mandala Sampoerna.............. 22,500 256,176
Semen Gresik.............................. 84,000 244,511
-----------
783,609
-----------
KOREA -- 7.8%
Daewoo Corporation........................ 400 3,881
Fidelity Advisor Korea Fund*.............. 25,000 278,125
Hyundai Motor Co, Ltd..................... 2,500 113,166
Keum Kang Development Ind. Company*....... 8,800 159,467
Korea Electric Power Corporation.......... 6,300 256,598
Korea Fund Inc............................ 15,100 320,875
L.G. Electronics (with 422 rights)........ 8,000 175,542
Pohang Iron & Steel Co. Ltd............... 2,000 163,141
Samsung Electronics Co. -- GDR............ 640 15,680
Samsung Electronics Co. -- GDR 144A
REGD*................................... 275 14,163
Samsung Electronics Co. -- New Common..... 1,423 119,460
Samsung Heavy Industries.................. 509 7,906
Shinhan Bank.............................. 8,000 188,284
-----------
1,816,288
-----------
MALAYSIA -- 3.7%
Edaran Otomobil Nasional Berhad........... 21,000 201,203
Leader Universal Holdings -- Class A...... 61,666 174,282
Lion Land Berhad*......................... 100,000 111,846
London & Pacific Insurance Company........ 29,000 191,822
Malayan Banking Berhad.................... 20,000 192,423
-----------
871,576
-----------
SINGAPORE -- 3.8%
Clipsal Industries Limited................ 100,000 281,000
DBS Land Limited.......................... 45,000 154,359
Fraser & Neave Ltd........................ 28,200 291,793
Jurong Shipyard Limited................... 33,000 167,222
-----------
894,374
-----------
TAIWAN -- 7.3%
ROC Taiwan Fund*.......................... 70,600 803,075
Taiwan Fund Inc........................... 38,000 912,000
-----------
1,715,075
-----------
THAILAND -- 2.6%
Bank of Ayudhya -- Foreign Registered..... 68,750 379,116
Krung Thai Bank Public Company
Limited................................. 50,000 234,363
-----------
613,479
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 80
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
VIETNAM -- 0.4%
The Vietnam Fund Limited*................. 7,800 $ 97,500
-----------
TOTAL INVESTMENTS -- 99.4%
(Cost -- $24,412,361)(a)................ 23,326,294
OTHER ASSETS, LESS LIABILITIES -- 0.6%.... 149,068
-----------
NET ASSETS -- 100%........................ $23,475,362
===========
ADR - American Depository Receipt
GDR - Global Depository Receipt
* Non-income producing security.
(a) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 3,109,558
Gross unrealized depreciation..................... (4,195,625)
-----------
Net unrealized depreciation................... $(1,086,067)
===========
Purchases and sales of securities other than short-term obligations
aggregated $3,719,720 and $1,656,801, respectively, for the period
ended June 30, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 81
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $24,412,361).............................................................. $23,326,294
Cash................................................................................................................ 175,977
Receivables:
Fund shares sold.................................................................................................. 3,775
Dividends and interest............................................................................................ 100,433
Manager for expense reimbursement................................................................................. 15,667
Deferred organization expenses...................................................................................... 25,234
Other assets........................................................................................................ 12,312
-----------
Total assets...................................................................................................... 23,659,692
-----------
LIABILITIES
Payables:
Investments purchased............................................................................................. 72,202
Fund shares repurchased........................................................................................... 47,004
Management fee.................................................................................................... 19,495
12b-1 service and distribution fees............................................................................... 10,475
Administrative services fee....................................................................................... 1,949
Fund accounting................................................................................................... 2,578
Transfer agent.................................................................................................... 8,672
Other accrued expenses and liabilities.............................................................................. 21,955
-----------
Total liabilities................................................................................................. 184,330
-----------
NET ASSETS.......................................................................................................... $23,475,362
===========
CLASS A:
Net asset value and redemption price per share ($15,043,628/1,596,446 shares outstanding)........................... $ 9.42
===========
Maximum offering price per share ($9.42 X 100/94.25)*............................................................... $ 9.99
===========
CLASS B:
Net asset value and offering price per share ($8,431,725/897,947 shares outstanding)**.............................. $ 9.39
===========
CLASS C:
Net asset value and offering price per share ($9.41/1 share outstanding)**.......................................... $ 9.41
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $25,809,476
Accumulated net realized loss on investments and foreign currency transactions.................................... (1,303,448)
Accumulated undistributed net investment income................................................................... 55,401
Net unrealized depreciation on investments........................................................................ (1,086,067)
-----------
NET ASSETS.......................................................................................................... $23,475,362
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 82
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends (net of $11,508 foreign taxes withheld)....................................................... $ 338,072
Interest................................................................................................ 3,943
----------
342,015
----------
Expenses
Management fee.......................................................................................... $116,662
Transfer agent.......................................................................................... 51,791
Administrative services fee............................................................................. 11,666
Custodian fees.......................................................................................... 21,355
Blue Sky fees........................................................................................... 13,103
Auditing and accounting fees............................................................................ 8,122
Shareholder reports..................................................................................... 4,538
Amortization of organization expenses................................................................... 5,449
Fund accounting......................................................................................... 16,322
Trustees' fees.......................................................................................... 1,664
12b-1 service and distribution fees
Class A............................................................................................... 18,660
Class B............................................................................................... 41,963
Legal................................................................................................... 15,146
Other................................................................................................... 4,337
----------
330,778
Expenses reimbursed by manager.......................................................................... (40,551)
Fees paid indirectly.................................................................................... (2,231)
----------
Net expenses.......................................................................................... 287,996
----------
NET INVESTMENT INCOME..................................................................................... 54,019
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency transactions...................................... (735,741)
Net unrealized appreciation during the period on investments............................................ 2,671,235
----------
Net gain on investment transactions................................................................... 1,935,494
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $1,989,513
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1996* 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income............................................................................. $ 54,019 $ 269,887
Net realized loss on investments and foreign currency transactions................................ (735,741 ) (304,802 )
Net unrealized appreciation during the period on investments...................................... 2,671,235 370,010
------------ ------------
Net increase resulting from operations.......................................................... 1,989,513 335,095
------------ ------------
Class A distributions
From net investment income........................................................................ -- (209,871 )
In excess of net realized gain.................................................................... -- (20,020 )
------------ ------------
Total distributions to Class A shareholders..................................................... -- (229,891 )
------------ ------------
Class B distributions
From net investment income........................................................................ -- (60,016 )
In excess of net realized gain.................................................................... -- (12,354 )
------------ ------------
Total distributions to Class B shareholders..................................................... -- (72,370 )
------------ ------------
Fund share transactions (Note 5):
Class A........................................................................................... 862,545 (329,623 )
Class B........................................................................................... 863,127 (459,143 )
Class C........................................................................................... 9 --
------------ ------------
Net increase (decrease) resulting from Fund share transactions.................................. 1,725,681 (788,766 )
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................................. 3,715,194 (755,932 )
NET ASSETS
Beginning of period............................................................................... 19,760,168 20,516,100
------------ ------------
END OF PERIOD..................................................................................... $23,475,362 $19,760,168
=============== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME..................................................... $ 55,401 $ 1,382
=============== ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 83
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
YEAR
FOR THE SIX ENDED
MONTHS ENDED DECEMBER
CLASS A JUNE 30, 31,
------------ -------
SELECTED PER SHARE DATA 1996* 1995
------------ -------
<S> <C> <C>
Net asset value, beginning of period....................................................... $ 8.58 $ 8.61
------------ -------
Income (loss) from investment operations
Net investment income (loss)(a)........................................................... .02 .14
Net gain (loss) on investment transactions (both realized and unrealized)................. .82 (.01)
------------ -------
Total from investment operations........................................................ .84 .13
------------ -------
Less distributions
From net investment income................................................................ -- .14
In excess of net investment income........................................................ -- --
In excess of net realized gain............................................................ -- .02
From capital paid-in...................................................................... -- --
------------ -------
Total distributions..................................................................... -- .16
------------ -------
Net asset value, end of period............................................................. $ 9.42 $ 8.58
================= ========
Total return(%)............................................................................ 9.66(b) 1.59(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................... $ 15,044 $12,855
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(d)................................. 2.20(e) 2.20
Without expense reimbursement and fees paid indirectly(%)(d).............................. 2.57(e) 2.73
Ratio of net investment income (loss) to average net assets(%)(a).......................... .73(e) 1.61
Portfolio turnover rate(%)................................................................. 17(e) 25
Average commission rate(f)................................................................. $ 0.0035 N/A
<CAPTION>
FOR THE
YEAR FOR THE PERIOD
CLASS A ENDED OCTOBER 23, 1993
DECEMBER (COMMENCEMENT)
31, TO DECEMBER 31,
------- ----------------
SELECTED PER SHARE DATA 1994 1993
------- ----------------
<S> <C> <C>
Net asset value, beginning of period....................................................... $ 11.55 $ 10.00
------- -------
Income (loss) from investment operations
Net investment income (loss)(a)........................................................... .05 (.01)
Net gain (loss) on investment transactions (both realized and unrealized)................. (2.91) 1.57
------- -------
Total from investment operations........................................................ (2.86) 1.56
------- -------
Less distributions
From net investment income................................................................ .05 --
In excess of net investment income........................................................ .03 --
In excess of net realized gain............................................................ -- --
From capital paid-in...................................................................... -- .01
------- -------
Total distributions..................................................................... .08 .01
------- -------
Net asset value, end of period............................................................. $ 8.61 $ 11.55
======== ====================
Total return(%)............................................................................ (24.88)(c) 15.65(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................... $13,180 $ 8,371
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(d)................................. 2.20 1.98(e)
Without expense reimbursement and fees paid indirectly(%)(d).............................. 2.76 2.45(e)
Ratio of net investment income (loss) to average net assets(%)(a).......................... .55 (.91)(e)
Portfolio turnover rate(%)................................................................. 4 --
Average commission rate(f)................................................................. N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR
THE
YEAR
FOR THE SIX ENDED
MONTHS ENDED DECEMBER
CLASS B JUNE 30, 31,
------------ ------
SELECTED PER SHARE DATA 1996* 1995
------------ ------
<S> <C> <C>
Net asset value, beginning of period...................................................... $ 8.58 $ 8.61
------------ ------
Income (loss) from investment operations
Net investment income (loss)(a).......................................................... -- .08
Net gain (loss) on investment transactions (both realized and unrealized)................ .81 (.02)
------------ ------
Total from investment operations....................................................... .81 .06
------------ ------
Less distributions
From net investment income............................................................... -- .08
In excess of net realized gain........................................................... -- .01
------------ ------
Total distributions.................................................................... -- .09
------------ ------
Net asset value, end of period............................................................ $ 9.39 $ 8.58
================= =======
Total return(%)........................................................................... 9.31(b) .83(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................................................. $ 8,432 $6,905
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(d)................................ 2.95(e) 2.95
Without expense reimbursement and fees paid indirectly(%)(d)............................. 3.32(e) 3.48
Ratio of net investment income (loss) to average net assets(%)(a)......................... (.02)(e) .86
Portfolio turnover rate(%)................................................................ 17(e) 25
Average commission rate(f)................................................................ $ 0.0035 N/A
<CAPTION>
FOR THE
CLASS B YEAR FOR THE PERIOD
ENDED OCTOBER 23, 1993
DECEMBER (COMMENCEMENT)
31, TO DECEMBER 31,
SELECTED PER SHARE DATA ------- ----------------
1994 1993
------- ----------------
<S> <C> <C>
Net asset value, beginning of period...................................................... $ 11.55 $10.00
------- ------
Income (loss) from investment operations
Net investment income (loss)(a).......................................................... (.02) (.02)
Net gain (loss) on investment transactions (both realized and unrealized)................ (2.92) 1.57
------- ------
Total from investment operations....................................................... (2.94) 1.55
------- ------
Less distributions
From net investment income............................................................... -- --
In excess of net realized gain........................................................... -- --
------- ------
Total distributions.................................................................... -- --
------- ------
Net asset value, end of period............................................................ $ 8.61 $11.55
======== ====================
Total return(%)........................................................................... (25.45)(c) 15.50(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................................................. $ 7,336 $3,565
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(d)................................ 2.95 2.74(e)
Without expense reimbursement and fees paid indirectly(%)(d)............................. 3.51 3.20(e)
Ratio of net investment income (loss) to average net assets(%)(a)......................... (.20) (1.66)(e)
Portfolio turnover rate(%)................................................................ 4 --
Average commission rate(f)................................................................ N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period............................................................................ $ 9.44
-------
Loss from investment operations
Net investment loss(a)......................................................................................... --
Net loss on investment transactions (both realized and unrealized)............................................. (.03)
-------
Total from investment operations............................................................................. (.03)
-------
Net asset value, end of period.................................................................................. $ 9.41
===============
Total return(%)................................................................................................. (.32)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................................................................ $ --
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(d)...................................................... 2.95(e)
Without expense reimbursement and fees paid indirectly(%)(d)................................................... 3.32(e)
Ratio of net investment loss to average net assets(%)(a)........................................................ (.02)(e)
Portfolio turnover rate(%)...................................................................................... 17(e)
Average commission rate(f)...................................................................................... $ 0.0035
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return and does not reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Beginning in 1995, total expenses include fees paid indirectly through an expense offset arrangement.
(e) Annualized.
(f) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per
share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets where trading practices and commission rate structures may
differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy China Region Fund (the Fund) is a series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B and Class C are authorized. Ivy Fund was organized
as a Massachusetts business trust under a Declaration of Trust dated December
21, 1983 and is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect. All
other securities are valued at their fair value as determined in good faith by
the Valuation Committee of the Board; as of June 30, 1996 there were no such
securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$467,000 as of December 31, 1995, which may be applied against any realized net
taxable capital gain of each succeeding fiscal year until fully utilized or
until the expiration date, whichever occurs first. The carryover expires
$264,000 in 2002 and $203,000 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization and issuing Class B shares have been deferred
and are being amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement with its custodian
whereby a certain percentage of quarterly cumulative credits resulting from cash
balances on deposit with the custodian are used to offset custody fees,
including transaction and out-of-pocket expenses. For the period, custody fees
were reduced by $2,231 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. Currently, IMI
voluntarily limits the Fund's total operating expenses (excluding taxes, 12b-1
fees, brokerage commissions, interest, litigation and indemnification expenses,
and other extraordinary expenses) to an annual rate of 1.95% of its average net
assets. The voluntary expense limitation may be terminated or revised at any
time. Expenses reimbursed by manager reflected in the Statement of Operations
consists of a voluntary reimbursements.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $6,997.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses.
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
Such fees and expenses are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in the China
region. Therefore, the Fund is more susceptible to factors adversely affecting
securities within the China region than is an equity fund that is not
concentrated in such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 885,237 $ 8,283,446 1,416,644 $ 11,904,966
Issued on reinvestment of
distributions............. -- -- 23,477 201,191
Repurchased................ (786,450) (7,420,901) (1,473,931) (12,435,780)
-------- ----------- ---------- ------------
Net increase (decrease).... 98,787 $ 862,545 (33,810) $ (329,623)
========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 359,687 $ 3,358,257 575,358 $ 5,085,871
Issued on reinvestment of
distributions............. -- -- 7,766 66,561
Repurchased................ (266,194) (2,495,130) (631,083) (5,611,575)
-------- ----------- ---------- ------------
Net increase (decrease).... 93,493 $ 863,127 (47,959) $ (459,143)
========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
----------------------
CLASS C SHARES AMOUNT
- --------------------------- -------- -----------
<S> <C> <C>
Sold....................... 1 $ 9
-------- -----------
Net increase............... 1 $ 9
========== =============
</TABLE>
ICRF-3-896
<PAGE> 86
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
GLOBAL
FUND With investors feeling less certain about and their stock markets are new and
the prospects for the US markets, we believe strong untested, we continue to invest in Hong
cash flows will be increasingly redirected Kong as a proxy for China. Hong Kong
overseas, in particular to Europe and the high- enjoys the advantages of China---a low
growth nations, such as those found in non- wage economy, a well-trained work force
- ------------------- Japan Asia and Latin America. These markets and a pro-business environment--without
SEMI-ANNUAL have held up remarkably well considering the having to handle the difficulties. Where
REPORT increased volatility of the US markets. appropriate, we will continue to prudently
- ------------------- We continue to believe European stock increase our exposure in Chinese companies
This report and the markets offer more upside potential with less that meet our criteria. Hong Kong is the
financial statements volatility than does the US. Interest rates in largest Asian position in the Ivy Global
contained herein are Europe are likely to fall even further and the Fund. As for Japan, we continue to
submitted for the general major European currencies, such as the German believe better, more predictable
information of the share- mark, French franc, Dutch guilder and Swiss opportunities exist elsewhere.
holders. This report is franc, should weaken against the US dollar Like Asia, Latin America is
not authorized for distri- more than most investors think. This, in turn, benefitting from secular growth as well as
bution to prospective we believe should create many positive earnings cyclical growth. Our research confirms
investors unless preced- surprises in the export and interest rate sensitive a new-found emphasis on fiscal austerity
ed or accompanied by sectors. As well, European multinationals with and disinflationary monetary policies have
an effective prospectus. significant dollar earnings should benefit. The helped to stabilize Latin America's
Ivy Globe Fund remains heavily weighted in economic environment. Privatization has
Ivy Management, Inc. the mature economies of Europe and should provided access to capital and increased
Via Mizner Financial profit if, as we expect, these themes continue market efficiency; trade liberalization and
Plaza to develop. deregulation have helped to increase
700 South Federal Hwy. Hindsight now confirms that in early economic efficiency. Our research
Boca Raton, FL 33432 1994, emerging markets were expensive. supports our belief that Argentina and
1-800-456-5111 However, according to our research, follow- Brazil may provide the greatest potential
ing a two-year correction, these markets no for positive surprises. Argentina's
longer appear to be overvalued and are recession appears to be over and strong
particularly attractive for investors with a economic growth should resume. Brazil
longer term horizon. Non-Japan Asia was has made tremendous progress in bringing
trading at a 70% premium to the US market; inflation under control. The Ivy Global
currently the premium is only 10%. This Fund is positioned to benefit from
should translate into attractive long-term improving fundamentals in Latin America.
investment opportunities. We believe a The Fund holds no Mexican stocks. This
stronger US dollar would also be positive reflects our opinion that overly optimistic
for non-Japan Asia markets. investor sentiment has driven the Mexican
The World Bank estimates that over market to record level highs rather than
the next five years, growth rates in Asia improving fundamentals.
should be more than double those of most As investors realize how much money
mature economies. We believe that no place they will need for retirement and other
on earth will this be more evident than in financial obligations, many will look
China. But because Chinese business managers outside the US for greater returns. We
believe they should find investing in
Europe, Non-Japan Asia and Latin America
offers a good balance between risk and
return.
IVY MANAGEMENT, INC.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 87
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 100.5% SHARES VALUE
<S> <C> <C>
- -----------------------------------------
AFRICA -- 2.4%
- -----------------------------------------
SOUTH AFRICA -- 2.4%
Anglo American Corporation of South
Africa Ltd. ADR........................ 6,400 $ 405,447
Nampak Ltd. ............................. 446 1,842
Rembrandt Group Ltd. .................... 35,300 331,574
South African Breweries Ltd. ............ 71 2,081
------------
740,944
------------
EUROPE -- 34.7%
- -----------------------------------------
AUSTRIA -- 0.6%
OMV AG................................... 2,000 201,829
------------
FINLAND -- 1.0%
Enso OY -- R Shares...................... 20,000 155,850
UPM -- Kymmene Corp...................... 7,420 154,561
------------
310,411
------------
FRANCE -- 8.2%
Compagnie Financiere de Paribas.......... 5,189 306,645
Compagnie Generale des Establissements
Michelin Class B....................... 3,000 146,726
Elf Gabon................................ 850 173,164
Galeries Lafayette*...................... 720 245,773
Lyonnaise Des Eaux -- Dumez.............. 2,500 238,908
Rhone-Poulence S.A....................... 5,100 134,136
Schneider S.A............................ 6,600 346,406
Societe Generale......................... 4,400 484,113
Societe Generale -- Temporary
Non-Tradable Certs*.................... 119 13,093
Societe Nationale Elf Aquitaine.......... 2,400 176,632
Total Compagnie Francaise des Petroles
ADR.................................... 7,601 282,187
------------
2,547,783
------------
GERMANY -- 0.6%
Volkswagen AG............................ 500 185,940
------------
IRELAND -- 0.8%
Bank of Ireland.......................... 36,000 246,493
------------
ITALY -- 1.3%
Banca Popolare Di Brescia................ 33,250 187,581
Fiat Sp A*............................... 61,000 205,819
------------
393,400
------------
NETHERLANDS -- 3.0%
Akzo NV.................................. 1,100 131,907
Akzo NV ADR.............................. 900 53,775
Hunter Douglas NV........................ 3,900 266,423
ING Groep NV............................. 10,310 307,721
Royal Dutch Petroleum ADR................ 1,100 168,988
------------
928,814
------------
NORWAY -- 1.5%
Norsk Hydro Sponsored ADR................ 5,400 263,925
UNI Storebrand Fria AS*.................. 46,700 210,075
------------
474,000
------------
PORTUGAL -- 3.6%
Filmes Lusomundo S.A. Preferred Shares... 13,000 105,133
Portugal Fund............................ 19,000 237,500
Portugal Telecom S.A. ADR................ 20,000 525,000
Sonae Industria E Investimentos.......... 9,100 236,777
------------
1,104,410
------------
SPAIN -- 2.4%
Banco Bilbao Vizcaya ADR................. 3,900 156,488
Empresa Nacional de Electricidad ADR..... 3,900 244,238
Telefonica de Espana S.A................. 6,300 347,288
------------
748,014
------------
SWEDEN -- 6.3%
AssiDoman AB............................. 6,600 153,977
Astra AB "B" Free Shares................. 6,400 279,293
Electrolux AB............................ 6,600 332,370
S.K.F. AB Series "B"..................... 15,400 366,255
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Sandvik AB -- "B" Shares................. 17,500 $ 404,308
Stora Kopparbergs Bergslags Aktiebolag
(STORA)................................ 11,600 153,267
Trelleborg AB "B" Free Shares............ 21,700 271,970
------------
1,961,440
------------
SWITZERLAND -- 3.1%
CS Holdings AG........................... 1,400 133,280
Holderbank Financiere Glaris AG.......... 190 152,000
Nestle AG Registered..................... 276 315,523
S.M.H. AG-PC -- Registered*.............. 300 208,800
Swiss Bank Corporation Bearer............ 750 148,200
------------
957,803
------------
UNITED KINGDOM -- 2.3%
Barclays PLC ADR......................... 1,500 71,250
Cadbury Schweppes PLC ADR................ 25,000 197,682
Hanson PLC ADR........................... 8,200 116,850
National Westminster Bank PLC ADR........ 2,400 138,000
RTZ Corporation PLC ADR.................. 3,089 186,112
------------
709,894
------------
ASIA/PACIFIC -- 37.8%
- -----------------------------------------
AUSTRALIA -- 1.9%
Brambles Industries Ltd.................. 24,000 333,493
CRA Ltd.................................. 12,040 185,092
Pacific Dunlop Limited................... 38,100 85,642
------------
604,227
------------
CHINA -- 1.0%
Shanghai Diesel Class B*................. 120,000 50,400
Shanghai Haixing Shipping Co. 'H'........ 178,000 11,728
Shenzhen Konka Electronics Group Ltd.
Class B................................ 200,000 180,861
Tsingtao Brewery Company Ltd. ........... 210,000 75,962
------------
318,951
------------
HONG KONG -- 9.0%
Cheung Kong (Holdings) Ltd. ............. 99,000 713,012
China Light & Power Co., Ltd. ........... 47,200 214,026
Citic Pacific Ltd. ...................... 90,000 363,918
Esprit Asia Holdings Ltd. ............... 534,000 169,015
HSBC Holdings............................ 13,539 204,639
Hopewell Holdings Ltd. .................. 156,833 85,095
National Mutual Asia Ltd. ............... 360,000 316,248
New World Development Company Ltd. ...... 60,000 278,268
Peregrine Investment Holdings Limited.... 140,000 201,660
Peregrine Investment Holdings Limited
Warrants*.............................. 14,000 1,736
Swire Pacific Ltd........................ 29,500 252,479
------------
2,800,096
------------
INDIA -- 1.2%
The India Fund Incorporated*............. 40,000 370,000
------------
INDONESIA -- 1.8%
PT Astra International................... 77,500 112,379
PT Chareon Pokphand Indonesia*........... 59,000 114,071
PT Mulia Industrindo..................... 96,600 143,188
Semen Gresik -- Foreign Registered....... 66,000 192,116
------------
561,754
------------
KOREA -- 4.4%
Fidelity Advisor Korea Fund*............. 58,000 645,250
Hyundai Motor Company Ltd................ 1,500 67,899
Hyundai Motor GDR........................ 5,000 64,375
Keum Kang Development Ind. Company*...... 11,600 210,207
Korea Electric Power Corporation......... 6,400 260,671
Korea Fund Inc........................... 1,000 21,250
Pohang Iron & Steel Company Ltd.......... 500 40,785
Samsung Electronics Company GDS*......... 2,413 59,119
Samsung Electronics Company Rights....... 170 8,755
Samsung Heavy Industries................. 337 5,234
------------
1,383,545
------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 88
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- -----------------------------------------
MALAYSIA -- 3.7%
Arab Malaysian Corporation*.............. 59,000 $ 231,790
DCB Holdings Berhad...................... 60,000 205,652
Land & General Berhad.................... 83,000 204,630
London & Pacific Insurance Company
Berhad................................. 42,000 277,811
Technology Resources Industries Berhad*.. 63,000 219,723
------------
1,139,606
------------
NEW ZEALAND -- 2.6%
Fletcher Challenge Ltd.*................. 98,202 188,176
Helicopter Line Ltd...................... 162,300 312,268
Lion Nathan Ltd.......................... 121,000 316,782
------------
817,226
------------
PHILIPPINES -- 2.1%
Bacnotan Cement Corporation*............. 150,000 114,504
Benpres Holdings Corporation GDR*........ 24,100 192,800
Philippine National Bank*................ 10,000 166,985
Universal Robina Corporation............. 310,000 165,649
------------
639,938
------------
SINGAPORE -- 4.6%
Clipsal Industries Ltd................... 118,000 331,580
DBS Land Limited......................... 71,000 243,544
Fraser & Neave Ltd....................... 15,200 157,279
Jardine Strategic Holdings Ltd........... 91,187 291,798
Jardine Strategic Warrants (05/02/98)*... 4,687 1,453
Jurong Shipyards Ltd..................... 79,000 400,319
------------
1,425,973
------------
TAIWAN -- 2.0%
ROC Taiwan Fund*......................... 28,000 318,500
Taiwan Fund Inc.......................... 13,000 312,000
------------
630,500
------------
THAILAND -- 3.0%
Bank Of Ayudhya Public Company Limited... 53,750 296,400
Krung Thai Bank Public Company Limited... 60,000 281,235
Robinson Department Store Public Company
Limited................................ 82,000 203,482
Siam Makro Public Company Limited*....... 31,800 162,833
------------
943,950
------------
VIETNAM -- 0.5%
The Vietnam Fund Limited*................ 12,200 152,500
------------
NORTH AMERICA -- 17.6%
- -----------------------------------------
CANADA -- 3.0%
Alcan Aluminium Ltd...................... 5,472 166,212
Brascan, Ltd............................. 9,600 178,605
Dofasco Inc.............................. 15,000 221,388
Inco Limited............................. 5,824 187,486
Power Financial Corp..................... 6,500 177,587
------------
931,278
------------
UNITED STATES -- 14.6%
Air Express International Corp........... 8,800 248,600
Aluminum Company of America.............. 3,100 178,250
Basic Petroleum International Ltd.*...... 10,600 283,550
Bay Apartment Communities, Inc........... 6,600 170,775
Carnival Corporation..................... 8,800 254,100
Chrysler Corporation..................... 3,200 198,400
Developers Diversified Realty
Corporation............................ 5,600 177,800
Equity Residential Properties Trust...... 5,300 174,900
Federal Realty Investment Trust.......... 7,800 177,450
Ford Motor Company....................... 5,700 184,537
General Motors Corp...................... 3,700 193,787
Irvine Apartment Communities, Inc........ 8,400 170,100
Kerr-McGee Corporation................... 3,300 200,887
Kimco Realty Corporation................. 6,400 179,200
Occidental Petroleum Corporation......... 7,500 186,563
Phelps Dodge Corp........................ 2,700 168,413
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Royal Caribbean Cruises Ltd.............. 7,500 213,750
Security Capital Pacific Trust........... 7,800 $ 169,650
Simon Property Group, Inc................ 7,200 176,400
Singer Company NV (The).................. 8,800 176,000
Storage Trust Realty..................... 7,700 157,850
Storage USA, Inc......................... 5,000 162,500
United Dominion Realty Trust............. 11,500 165,313
Weingarten Realty Investors.............. 4,600 178,250
------------
4,547,025
------------
SOUTH AMERICA -- 8.0%
- -----------------------------------------
ARGENTINA -- 2.9%
Buenos Aires Embotelladora (BAESA)....... 20,300 268,975
CIADEA S.A.*............................. 20,000 139,051
Perez Companc S.A.*...................... 25,000 163,811
Telefonica De Argentina S.A.............. 6,700 198,487
Yacimientos Petroliferos Fiscades S.A.
ADR.................................... 5,200 116,350
------------
886,674
------------
BRAZIL -- 2.8%
Brasmotor S.A............................ 240,000 75,049
Petroleo Brasileiro S.A.................. 1,700,000 209,082
Telecomunicacoes Brasileiras S.A. ADR.... 8,300 577,888
------------
862,019
------------
CHILE -- 2.3%
Genesis Chile Fund....................... 14,700 606,375
Santa Isabel S.A. ADR.................... 400 10,950
Vina Concha Y Toro S.A. ADR.............. 6,000 111,000
------------
728,325
------------
TOTAL EQUITY SECURITIES
(Cost -- $27,359,575).................. 31,254,762
------------
CONVERTIBLE BONDS -- 0.3% PRINCIPAL
- ----------------------------------------- ----------
Banco Commercial De Portugal, 8.75%,
05/21/02 (Cost -- $102,720)(a)......... $ 80,000 103,917
------------
TOTAL INVESTMENTS -- 100.8%
(Cost -- $27,462,295)(b)............... 31,358,679
OTHER ASSETS, LESS
LIABILITIES -- (0.8%).................. (251,875)
------------
NET ASSETS -- 100%....................... $ 31,106,804
============
ADR - American Depository Receipt
GDR - Global Depository Receipt
GDS - Global Depository Share
NV - Non-voting
* Non-Income producing security.
(a) Below investment grade.
(b) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 5,486,716
Gross unrealized depreciation.................... (1,590,332)
------------
Net unrealized appreciation.................. $ 3,896,384
============
Purchases and sales of securities other than short-term obligations
aggregated $8,753,649 and $5,451,667, respectively, for the period
ended June 30, 1996.
Forward foreign currency exchange contracts at June 30, 1996 were:
<CAPTION>
FORWARD CONTRACTS PRINCIPAL VALUE OF UNREALIZED
(CURRENCY/EXPIRATION/COMMITMENT) AMOUNT OBLIGATION DEPRECIATION
- ------------------------------------ --------- ----------- ------------
<S> <C> <C> <C>
Deutsch Marks/
September 96/Sell................. 387,597 US $ (389,729) $ (2,132)
French Francs/September 96/Sell.... 2,486,912 US (2,508,201) (21,289)
Netherland Guilders/
September 96/Sell................. 951,844 US (955,904) (4,060)
Swiss Francs/September 96/Sell..... 907,999 US (916,049) (8,050)
----------- ------------
Total forward foreign currency
exchange contracts sold........... $(4,769,883) $(35,531)
============= ==============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 89
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $27,462,295).............................................................. $31,358,679
Receivables:
Dividends and interest............................................................................................ 169,225
Manager for expense reimbursement................................................................................. 5,491
Deferred organization expenses...................................................................................... 31,717
Other assets........................................................................................................ 11,431
-----------
Total assets...................................................................................................... 31,576,543
-----------
LIABILITIES
Payables:
Investments purchased............................................................................................. 27,570
Open forward foreign currency contracts........................................................................... 35,531
Management fee.................................................................................................... 25,534
12b-1 service and distribution fees............................................................................... 10,233
Administrative services fee....................................................................................... 2,553
Fund accounting................................................................................................... 2,800
Transfer agent.................................................................................................... 5,329
Due to custodian.................................................................................................... 334,235
Other accrued expenses and liabilities.............................................................................. 25,954
-----------
Total liabilities................................................................................................. 469,739
-----------
NET ASSETS.......................................................................................................... $31,106,804
===========
CLASS A:
Net asset value and redemption price per share ($24,691,575/1,847,061 shares outstanding)........................... $ 13.37
===========
Maximum offering price per share ($13.37 X 100/94.25)*.............................................................. $ 14.19
===========
CLASS B:
Net asset value and offering price per share ($6,415,216/481,683 shares outstanding)**.............................. $ 13.32
===========
CLASS C:
Net asset value and offering price per share ($13.33/1 share outstanding)**......................................... $ 13.33
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $25,833,542
Accumulated net realized gain on investments and foreign currency transactions.................................... 1,146,784
Accumulated undistributed net investment income................................................................... 265,625
Net unrealized appreciation (depreciation) on:
Investments..................................................................................................... 3,896,384
Forward foreign currency contracts.............................................................................. (35,531)
-----------
NET ASSETS.......................................................................................................... $31,106,804
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 90
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends (net of $19,230 foreign taxes withheld)....................................................... $ 536,381
Interest................................................................................................ 21,176
----------
557,557
----------
Expenses
Management fee.......................................................................................... $146,989
Transfer agent.......................................................................................... 32,719
Administrative services fee............................................................................. 14,699
Custodian fees.......................................................................................... 33,301
Blue Sky fees........................................................................................... 12,887
Auditing and accounting fees............................................................................ 11,767
Shareholder reports..................................................................................... 5,235
Fund accounting......................................................................................... 16,727
Trustees' fees.......................................................................................... 1,729
12b-1 service and distribution fees
Class A............................................................................................... 29,447
Class B............................................................................................... 29,177
Legal................................................................................................... 13,983
Other................................................................................................... 2,033
----------
350,693
Expenses reimbursed by manager.......................................................................... (5,491)
----------
Net expenses.......................................................................................... 345,202
----------
NET INVESTMENT INCOME..................................................................................... 212,355
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on
Investments and foreign currency transactions......................................................... 873,945
Forward foreign currency contracts.................................................................... 259,445
Net unrealized appreciation during the period on
Investments........................................................................................... 1,750,020
Forward foreign currency contracts.................................................................... 23,403
----------
Net gain on investment transactions................................................................... 2,906,813
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $3,119,168
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 91
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- ------------
1996* 1995
---------------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income......................................................................... $ 212,355 $ 143,490
Net realized gain on investments and foreign currency transactions............................ 1,133,390 998,646
Net unrealized appreciation (depreciation) during the period on
Investments................................................................................. 1,750,020 1,649,554
Forward foreign currency contracts.......................................................... 23,403 (41,767 )
---------------- ------------
Net increase resulting from operations.................................................... 3,119,168 2,749,923
---------------- ------------
Class A distributions
From net investment income.................................................................... -- (71,425 )
From net realized gain........................................................................ -- (827,783 )
In excess of net realized gain................................................................ -- (120,215 )
---------------- ------------
Total distributions to Class A shareholders............................................... -- (1,019,423 )
---------------- ------------
Class B distributions
From net realized gain........................................................................ -- (170,863 )
In excess of net realized gain................................................................ -- (24,814 )
---------------- ------------
Total distributions to Class B shareholders............................................... -- (195,677 )
---------------- ------------
Fund share transactions (Note 5):
Class A....................................................................................... 893,405 591,261
Class B....................................................................................... 1,019,010 1,665,995
Class C....................................................................................... 13 --
---------------- ------------
Net increase resulting from Fund share transactions....................................... 1,912,428 2,257,256
---------------- ------------
TOTAL INCREASE IN NET ASSETS.................................................................... 5,031,596 3,792,079
NET ASSETS
Beginning of period........................................................................... 26,075,208 22,283,129
---------------- ------------
END OF PERIOD................................................................................. $ 31,106,804 $26,075,208
=================== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME................................................. $ 265,625 $ 53,270
=================== ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 92
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE FOR THE SIX APRIL 18, 1991
MONTHS ENDED YEAR ENDED MONTHS ENDED (COMMENCEMENT)
CLASS A JUNE 30, DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30, TO JUNE 30,
----------------- ------------ ------------ ---------------------------------- --------------
SELECTED PER SHARE DATA 1996* 1995 1994 1994 1993 1992 1991
----------------- ------------ ------------ ------- ------- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.97 $ 11.23 $ 11.52 $ 10.62 $ 10.55 $ 9.40 $10.00
------- ------------ ------------ ------- ------- ------ ------
Income (loss) from
investment operations
Net investment
income(a)............ .10 .09 -- -- .03 .06 .02
Net gain (loss) on
investment
transactions (both
realized and
unrealized).......... 1.30 1.25 (.10) 1.79 .44 1.79 (.61)
------- ------------ ------------ ------- ------- ------ ------
Total from investment
operations......... 1.40 1.34 (.10) 1.79 .47 1.85 (.59)
------- ------------ ------------ ------- ------- ------ ------
Less distributions
From net investment
income............... -- .04 -- .01 .03 .06 .01
From net realized
gain................. -- .49 .09 .88 .37 .62 --
In excess of net
realized gain........ -- .07 -- -- -- -- --
From capital paid-in... -- -- .10 -- -- .02 --
------- ------------ ------------ ------- ------- ------ ------
Total
distributions...... -- .60 .19 .89 .40 .70 .01
------- ------------ ------------ ------- ------- ------ ------
Net asset value, end of
period................. $ 13.37 $ 11.97 $ 11.23 $ 11.52 $ 10.62 $10.55 $ 9.40
======================= ================ ================ ======== ======== ======= ================
Total return(%)......... 11.70(c) 12.08(b) (1.00)(c) 16.71(b) 4.54(b) 19.91(b) (24.65)(c)
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, end of
period (in
thousands)............. $24,692 $ 21,264 $ 19,327 $17,393 $12,391 $8,780 $1,667
Ratio of expenses to
average net assets
With expense
reimbursement(%)..... 2.20(d) 2.20 2.20(d) 2.20 1.95 2.02 2.50(d)
Without expense
reimbursement(%)..... 2.24(d) 2.46 2.34(d) 2.42 2.76 2.97 11.70(d)
Ratio of net investment
income (loss) to
average net
assets(%)(a)........... 1.59(d) .71 (.06)(d) .01 .38 .82 .81(d)
Portfolio turnover
rate(%)................ 38(d) 53 23(d) 85 67 59 24(d)
Average commission
rate(e)................ $ .0133 N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE FOR THE SIX APRIL 1, 1994
MONTHS ENDED YEAR ENDED MONTHS ENDED (COMMENCEMENT)
CLASS B JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
----------------- ------------ ------------ --------------
SELECTED PER SHARE DATA 1996* 1995 1994 1994
----------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 11.97 $11.23 $11.52 $12.12
------ ------ ------ ------
Income (loss) from investment operations
Net investment income (loss)(a)........................ .05 -- (.03) (.01)
Net gain (loss) on investment transactions (both
realized and unrealized)............................. 1.30 1.25 (.12) (.04)
------ ------ ------ ------
Total from investment operations..................... 1.35 1.25 (.15) (.05)
------ ------ ------ ------
Less distributions
From net realized gain................................. -- .45 .08 .55
In excess of net realized gain......................... -- .06 -- --
From capital paid-in................................... -- -- .06 --
------ ------ ------ ------
Total distributions.................................. -- .51 .14 .55
------ ------ ------ ------
Net asset value, end of period........................... $ 13.32 $11.97 $11.23 $11.52
=================== ============== ============== =================
Total return(%).......................................... 11.28(c) 11.25(b) (1.37)(c) .38(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................. $ 6,415 $4,811 $2,956 $ 376
Ratio of expenses to average net assets
With expense reimbursement(%).......................... 2.95(d) 2.95 2.95(d) 2.95(d)
Without expense reimbursement(%)....................... 2.99(d) 3.21 3.09(d) 3.17(d)
Ratio of net investment income (loss) to average
net assets(%)(a)....................................... .84(d) (.04) (.81)(d) (.74)(d)
Portfolio turnover rate(%)............................... 38(d) 53 23(d) 85
Average commission rate(e)............................... $ .0133 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 93
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period........................................................................... $13.31
------
Income from investment operations
Net investment income(a)..................................................................................... --
Net gain on investment transactions (both realized and unrealized)........................................... .02
------
Total from investment operations........................................................................... .02
------
Net asset value, end of period................................................................................. $13.33
================
Total return(%)................................................................................................ .15(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....................................................................... $ --
Ratio of expenses to average net assets
With expense reimbursement(%)................................................................................ 2.95(d)
Without expense reimbursement(%)............................................................................. 2.99(d)
Ratio of net investment income to average net assets(%)(a)..................................................... .84(d)
Portfolio turnover rate(%)..................................................................................... 38(d)
Average commission rate(e)..................................................................................... $.0133
(a) Net investment income is net of expenses reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not reflect a sales charge.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary
from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission
rate structures may differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Global Fund (the Fund) is a series of shares of Ivy Fund. The shares of
beneficial interest are assigned no par value and an unlimited number of shares
of Class A, Class B and Class C are authorized. Ivy Fund was organized as a
Massachusetts business trust under a Declaration of Trust dated December 21,
1983 and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect. All
other securities are valued at their fair value as determined in good faith by
the Valuation Committee of the Board; as of June 30, 1996 there were no such
securities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Forward foreign currency
exchange contracts may be entered into for purposes of hedging specific
securities denominated in foreign currencies. Forward contracts are marked to
market daily, and the change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The Fund
could be exposed to risk if the counter parties are unable to meet the terms of
the contracts.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has 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. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with issuing Class B shares have been deferred and are being
amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
on the Fund's first $500 million of average net assets, and .75% of the Fund's
average net assets in excess of $500 million.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. Currently, IMI
voluntarily limits the Fund's total operating expenses (excluding taxes, 12b-1
fees, brokerage commissions, interest, litigation and indemnification expenses,
and other extraordinary expenses) to an annual rate of 1.95% of its average net
assets. The voluntary expense limitation may be terminated or revised at any
time. Expenses reimbursed by manager reflected in the Statement of Operations
consists of a voluntary reimbursement.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $13,842.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. ACQUISITION OF MACKENZIE GLOBAL FUND
On February 1, 1995, the Fund acquired the net assets (valued at
$21,204,846) of Mackenzie Global Fund (MGF) d/b/a Ivy Global Fund, approved by
MGF's shareholders on January 27, 1995. The acquisition was accomplished by a
tax-free exchange, based on values computed as of the close of business on
January 31, 1995, of 1,981,232 (NAV $10.72) shares (1,711,238 Class A and
269,994 Class B) of the Fund for 1,981,232 (NAV $10.72) shares (1,711,238 Class
A and 269,994 Class B) of MGF outstanding. MGF's net assets at that date of
$21,204,846 including $562,366 unrealized depreciation, were combined with the
Fund for total net assets after acquisition of $21,204,867.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 285,608 $ 3,699,760 2,228,655 $ 24,282,852
Issued on reinvestment of
distributions............. -- -- 74,044 885,461
Repurchased................ (215,355) (2,806,355) (2,247,642) (24,577,052)
-------- ----------- ---------- ------------
Net increase............... 70,253 $ 893,405 55,057 $ 591,261
========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 103,859 $ 1,332,637 424,399 $ 4,741,733
Issued on reinvestment of
distributions............. -- -- 14,695 175,609
Repurchased................ (24,199) (313,627) (300,410) (3,251,347)
-------- ----------- ---------- ------------
Net increase............... 79,660 $ 1,019,010 138,684 $ 1,665,995
========== ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
----------------------
CLASS C SHARES AMOUNT
- --------------------------- -------- -----------
<S> <C> <C> <C> <C>
Sold....................... 1 $ 13
-------- -----------
Net increase............... 1 $ 13
========== =============
</TABLE>
IGLF-3-896
<PAGE> 96
<TABLE>
<CAPTION>
IVY FUNDS
<S> <C> <C> <C> <C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
NEW
CENTURY With investors feeling less certain stock markets are new and untested, we
FUND about the prospects for the US market, we continue to invest in Hong Kong as a proxy for
believe strong cash flows will be increasingly China. Hong Kong enjoys the advantages of
redirected toward high-growth nations, such as China---a low wage economy, a well-trained
those found in non-Japan Asia and Latin America. work force and a pro-business environment---
- ------------------- These markets have held up remarkably well without having to handle the difficulties.
SEMI-ANNUAL considering the increased volatility of the US Where appropriate, we will continue to
REPORT markets. Unlike the rough patch the US market prudently increase our exposure in Chinese
- ------------------- went through in 1994, which was interest-rate companies that meet our criteria. Hong Kong
This report and the driven and brought the rally in emerging markets is the largest Asian position in the Ivy
financial statements to a screeching halt, this time the US sell-off New Century Fund.
contained herein are has been driven primarily by corporate earnings Like Asia, Latin America is benefitting
submitted for the general disappointments. We continue to believe that from not only secular growth but also cyclical
information of the share- inflation in the US is under control and rates growth. Our research confirms a new-found
holders. This report is should remain low. In an environment of stable emphasis on fiscal austerity and
not authorized for distri- rates and disappointing earnings reports in the disinflationary monetary policies have helped
bution to prospective US, emerging markets should not only hold to stabilize Latin America's economic
investors unless preced- up well, but could benefit as investors rotate environment. Privatization has provided access
ed or accompanied by funds out of US stock markets. But, if rates to capital and increased market efficiency;
an effective prospectus. in the US were to rise, we believe that many trade liberalization and deregulation have
emerging markets may not follow suit since helped to increase economic efficiency. Our
Ivy Management, Inc. their economies are not overheating. research supports our belief that Argentina
Via Mizner Financial Hindsight now confirms that in early and Brazil may provide the greatest potential
Plaza 1994, emerging markets were expensive. for positive surprises. Argentina's recession
700 South Federal Hwy. However, according to our research, following a appears to be over and strong economic growth
Boca Raton, FL 33432 two-year correction these markets no longer should resume. Brazil has made tremendous
1-800-456-5111 appear to be overvalued and are particularly progress in bringing inflation under control.
attractive for investors with a longer term The Ivy New Century Fund holds meaningful
horizon. Non-Japan Asia was trading at a 70% positions in both these countries. We remain
premium to the US market; currently the underweighted in Mexico in the Ivy New Century
premium is only 10%. This should translate Fund which reflects our opinion that overly
into attractive long-term investment opportuni- optimistic investor sentiment has driven the
ties. We believe a stronger US dollar would also Mexican market to record-level highs rather
be positive for non-Japan Asian markets. than improving fundamentals.
The World Bank estimates that over the With many emerging markets selling at
next five years, growth rates in Asia should be very low prices in relation to their potential
more than double those of most mature growth prospects, we believe the case for long-
economies. We believe that no place on earth term investing in these high growth markets
will this be more evident than in China. But should not be ignored.
because Chinese business managers and their
IVY MANAGEMENT, INC.
---------------------------------------------------------------------------------------------------
BOARD OF TRUSTEES OFFICERS TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Michael G. Landry, Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill President Services Corp. Boca Raton, FL
Stanley Channick Keith J. Carlson, P.O. Box 3022
Frank W. DeFriece, Jr. Vice President Boca Raton, FL DISTRIBUTOR
Roy J. Glauber James W. Broadfoot, 33431-0922 Ivy Mackenzie
Michael G. Landry Vice President 1-800-777-6472 Distributors, Inc.
Michael R. Peers C. William Ferris, Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer AUDITORS 700 South Federal Highway
Richard Silverman Michael R. Peers, Coopers & Lybrand L.L.P. Boca Raton, FL 33432
J. Brendan Swan Chairman Fort Lauderdale, FL
LEGAL COUNSEL CUSTODIAN [LOGO IVY MACKENZIE]
Dechert Price Brown Brothers
& Rhoads Harriman & Co.
Boston, MA Boston, MA
</TABLE>
<PAGE> 97
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 92.1% SHARES VALUE
<S> <C> <C>
AFRICA -- 3.8%
- -----------------------------------------
SOUTH AFRICA -- 3.8%
Anglo American Corporation S.A........... 2,400 $ 152,042
Nampak Ltd............................... 13,700 56,596
Rembrandt Group Ltd...................... 15,000 140,895
South African Breweries Ltd.............. 2,200 64,483
-----------
414,016
-----------
ASIA -- 50.1%
- -----------------------------------------
CHINA -- 2.7%
Huaneng Power International, Inc. ADR*... 1,200 21,450
Inner Mongolia Erdos Cashmere Products
Co. 'B'................................ 64,000 31,104
Qingling Motors Company Ltd.............. 106,000 35,604
Shanghai Dazhong Taxi Company 'B'........ 18,000 13,140
Shanghai Diesel Engine Co. Ltd. 'B'*..... 31,200 13,104
Shanghai Haixing Shipping Co. 'H'........ 38,000 2,504
Shanghai Petro Chemical.................. 400 11,400
Shanghai Post & Telecom Eq. 'B'.......... 43,000 21,070
Shanghai Shangling Electric Appliances
Co. Ltd. 'B'........................... 39,600 20,909
Shenzen Konka Electronic Group
Limited -- 'B'......................... 52,000 47,024
Tingyi (Cayman Isln) Holding Co.*........ 190,000 52,159
Zhenhai Refining and Chemical Co.
Limited................................ 100,000 28,421
-----------
297,889
-----------
HONG KONG -- 21.1%
C.P. Pokphand............................ 220,000 87,395
Cheung Kong (Holdings) Ltd............... 47,000 338,501
Citic Pacific............................ 41,000 165,785
Esprit Asia Holdings Ltd................. 140,000 44,311
Gold Peak Industries..................... 159,000 89,865
Guangdong Investments.................... 102,000 64,567
HSBC Holdings............................ 17,441 263,617
Hong Kong Telecommunications Ltd......... 5,700 103,313
Hopewell Holdings........................ 233,708 126,806
Jardine Strategic........................ 30,062 96,198
Jardine Strategic Warrants*.............. 562 174
Johnson Electric Holdings................ 50,000 112,392
Li & Fung................................ 160,000 150,890
M.C. Packaging (Hong Kong) Ltd........... 264,000 111,695
National Mutual Asia Ltd................. 152,000 133,527
New World Development Company Ltd........ 17,000 78,842
Peregrine Investment Holdings Ltd........ 149,000 214,624
Peregrine Investment Holdings Ltd.
Warrants*.............................. 14,900 1,848
Tsingtao Brewery Co. Ltd. 'H'............ 30,000 10,852
Union Bank of Hong Kong Ltd.............. 50,000 52,643
Yue Yuen Industrial Holdings............. 226,000 64,232
-----------
2,312,077
-----------
INDIA -- 2.7%
The India Fund, Inc.*.................... 32,100 296,925
-----------
INDONESIA -- 1.7%
Astra International...................... 15,000 21,751
Bank Dagang Nasional Indonesia........... 56,250 47,127
PT Chareon Pokphand Indonesia............ 14,000 27,068
PT Mulia Industrindo..................... 39,950 59,217
Semen Gresik............................. 12,000 34,930
-----------
190,093
-----------
ISRAEL -- 1.0%
Koor Industries Ltd...................... 6,200 106,950
-----------
KOREA -- 2.7%
Hana Bank................................ 1,456 26,255
Hyundai Motor Company Ltd. GDR........... 3,362 43,286
Hyundai Motor Company Ltd.
GDR 144A............................... 500 6,438
Keum Kang Development Ind. Company*...... 3,800 68,861
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Korea Electric Power Corporation......... 4,400 $ 106,700
Pohang Iron & Steel Ltd.................. 800 19,500
Samsung Electronics Co. -- GDR*.......... 14 721
Samsung Electronics Co. -- GDR 144A
REGD................................... 682 16,709
Shinhan Bank............................. 500 11,768
-----------
300,238
-----------
MALAYSIA -- 3.1%
Arab Malaysian Corporation Berhad*....... 15,000 58,930
Arab Malaysian Finance Foreign........... 13,000 56,805
DCB Holdings Berhad...................... 6,000 20,565
Genting Berhad........................... 1,000 7,817
Land & General Berhad.................... 16,000 39,447
Lion Land Berhad*........................ 50,000 55,923
London & Pacific Insurance Company
Berhad................................. 4,000 26,458
Malayan Banking Berhad................... 4,000 38,485
Technology Resources Industries Berhad*.. 10,000 34,877
-----------
339,307
-----------
PHILIPPINES -- 3.6%
Bacnotan Cement Corporation*............. 60,000 45,802
Benpres Holdings Corp. GDR*.............. 10,000 80,000
Metro Pacific Corporation................ 165,000 49,122
Philippine National Bank................. 10,900 182,013
Universal Robina Corporation............. 61,000 32,595
-----------
389,532
-----------
SINGAPORE -- 3.1%
Clipsal Industries Limited............... 46,000 129,260
DBS Land Limited......................... 16,000 54,883
Jardine Matheson Holdings Ltd............ 13,500 99,225
Jurong Shipyard Limited.................. 10,000 50,673
-----------
334,041
-----------
TAIWAN -- 4.9%
ROC Taiwan Fund*......................... 21,500 244,563
Taiwan Fund Inc.......................... 12,150 291,600
-----------
536,163
-----------
THAILAND -- 3.2%
Bank of Ayudhya Ltd...................... 8,750 48,251
Krung Thai Bank Public Company Limited... 24,300 113,900
Robinson Department Store Public Company
Limited................................ 34,000 84,371
Siam Makro Public Company Limited*....... 19,800 101,386
-----------
347,908
-----------
VIETNAM -- 0.3%
Beta Vietnam Fund*....................... 1,850 15,956
Beta Vietnam Fund Warrants*.............. 370 1,018
The Vietnam Fund Limited*................ 1,100 13,750
-----------
30,724
-----------
EUROPE -- 11.7%
- -----------------------------------------
AUSTRIA -- 0.4%
Julius Meinl International AG............ 1,500 47,514
-----------
CZECH REPUBLIC -- 0.9%
Restitucni Invest Fund*.................. 1,000 33,366
Sporitelni Privatizacni*................. 2,000 24,934
Zivnobanka -- Investicni Fond............ 2,400 43,180
-----------
101,480
-----------
FRANCE -- 0.9%
Lyonnaise Des Eaux S.A................... 740 70,717
Schneider S.A.*.......................... 600 31,491
-----------
102,208
-----------
GERMANY -- 0.1%
Volkswagen AG............................ 40 14,875
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 98
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
HUNGARY -- 0.5%
BorsodChem RT GDR*....................... 1,000 $ 19,500
Pick Szeged RT........................... 800 34,638
-----------
54,138
-----------
POLAND -- 0.4%
Bank Rozwoju Eksportu S.A................ 1,550 40,498
-----------
PORTUGAL -- 2.7%
BPI-SGPS S.A............................. 163 1,928
Filmes Lusomundo S.A..................... 800 6,470
Investec-Consultoria Internacional
S.A.*.................................. 1,500 49,865
Lusomundo, SGPS, S.A.*................... 1,200 7,449
Portugal Telecom S.A. ADR................ 7,000 183,750
Sonae Industria E Investimentos.......... 1,700 44,232
-----------
293,694
-----------
RUSSIA -- 1.8%
Lukoil Holding ADR....................... 4,500 192,375
-----------
SPAIN -- 0.4%
Telefonica de Espana ADR................. 700 38,588
-----------
SWITZERLAND -- 1.8%
Holderbank Financiere Glarus AG Bearer... 183 146,400
Nestle AG Registered..................... 49 56,017
-----------
202,417
-----------
TURKEY -- 1.8%
Cimentas A.S............................. 224,690 49,250
Otokar Otobus Karoseri................... 455,000 45,433
Turkiye Garanti Bankasi A.S.............. 1,422,000 96,970
-----------
191,653
-----------
NORTH AMERICA -- 1.5%
- -----------------------------------------
UNITED STATES -- 1.5%
Amway Asia Pacific Ltd................... 1,700 51,638
Basic Petroleum International, Ltd....... 2,400 64,200
Morgan Stanley Group, Inc................ 200 9,825
Occidental Petroleum..................... 500 12,437
The Singer Company NV.................... 1,300 26,000
-----------
164,100
-----------
SOUTH AND CENTRAL AMERICA -- 25.0%
- -----------------------------------------
ARGENTINA -- 8.6%
Acindar Ind Argentina S.A.*.............. 60,000 47,718
Banco Frances Del Rio Plata.............. 5,795 54,957
Banco Galicia Y Buenos Aires............. 9,372 60,003
Bansud S.A.*............................. 6,200 72,567
Buenos Aires Embotelladora (BAESA) ADR... 11,900 157,675
CIADEA S.A.*............................. 25,600 177,986
Cia Naviera Perez Compancciones 'B'...... 18,920 123,972
Disco S.A. ADR*.......................... 2,600 57,525
Dragados Y Construcciones Argentina 'B'.. 11,300 52,563
Telefonica De Argentina S.A. ADR......... 2,200 65,175
Yacimientos Petroliferos Fiscades S.A.
Sponsored.............................. 3,400 76,075
-----------
946,216
-----------
BRAZIL -- 7.8%
Aracruz Celulose S.A. ADR................ 7,700 72,188
Banco Nacional S.A....................... 2,100,000 --(a)
Brasmotor S.A............................ 360,000 112,574
Casa Anglo Brasileiras S.A.*............. 700,000 33,462
Centrais Electricas Brasileiras S.A.
(Electrobras) -- B..................... 138,000 39,442
CESP -- CIA Ener Sao Paulo*.............. 900,000 31,370
Itabanco................................. 266,000 108,077
Marcopolo S.A. -- B...................... 400,000 89,628
OSA S.A.................................. 5,200,000 50,232
Petrobas................................. 610,000 75,024
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Refripar S.A.*........................... 24,000,000 $ 59,751
Tam Transport Aereos..................... 1,000,000 72,200
Telecomunicacoes Brasileiras S.A.
(Telebras) ADR......................... 1,600 111,400
-----------
855,348
-----------
CHILE -- 4.6%
A.F.P Provida S.A. ADR................... 1,000 24,750
Banco O'Higgins ADR...................... 1,300 31,363
Banco Osorno Y La Union ADR.............. 2,000 26,500
Chilectra S.A. ADR....................... 500 27,625
Chilgener S.A. ADR....................... 1,100 26,263
Empresa Nacional Electricidad S.A........ 6,900 149,213
Genesis Chile Fund....................... 637 26,275
Laboratorio Chile ADR.................... 4,000 53,500
Medeco, S.A. ADR......................... 1,000 28,000
Santa Isabel S.A. ADR.................... 1,000 27,375
Vina Concha Y Toro S.A. ADR.............. 4,700 86,950
-----------
507,814
-----------
COLOMBIA -- 1.1%
Banco Ganadero S.A. ADR.................. 2,500 60,625
Banco Industrial Colombiano ADR.......... 3,600 60,750
-----------
121,375
-----------
MEXICO -- 1.0%
Banacci Series 'B'*...................... 7,200 14,960
Banacci Series 'L'*...................... 587 1,114
Cementos de Mexico S.A. 'B'.............. 3,600 13,978
Grupo Mexicano Series 'L' ADS*........... 1,400 2,975
Grupo Posadas S.A. -- 'A'*............... 83,785 37,556
Telefonos de Mexico S.A. ADR Class L..... 1,000 33,500
-----------
104,083
-----------
PANAMA -- 0.5%
Panamerican Beverages, Inc -- A.......... 1,200 53,400
-----------
PERU -- 1.4%
Banco Wiese ADR.......................... 6,400 45,600
CPT Telefonica del Peru S.A. -- 'B'*..... 19,800 40,200
Credicorp Ltd............................ 3,290 65,388
-----------
151,188
-----------
TOTAL EQUITY SECURITIES -- 92.1%
(Cost -- $9,413,414)(b)................ 10,078,827
OTHER ASSETS, LESS LIABILITIES -- 7.9%... 867,963
-----------
NET ASSETS -- 100%....................... $10,946,790
===========
ADR - American Depository Receipt
ADS - American Depository Share
GDR - Global Depository Receipt
NV - Non-voting
* Non-income producing security.
(a) Security valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
this security at June 30, 1996 aggregated $42,742.
See Note 1 of the Notes to the Financial
Statements.
(b) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 1,277,876
Gross unrealized depreciation..................... (612,463)
-----------
Net unrealized appreciation................... $ 665,413
===========
Purchases and sales of securities other than short-term obligations
aggregated $6,558,288 and $1,015,556, respectively, for the six
months ended June 30, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 99
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $9,413,414)............................................................... $10,078,827
Cash................................................................................................................ 819,120
Receivables:
Investments sold.................................................................................................. 15,608
Fund shares sold.................................................................................................. 88,873
Dividends......................................................................................................... 30,936
Manager for expense reimbursement................................................................................. 18,392
Deferred organization expenses...................................................................................... 32,907
Other assets........................................................................................................ 9,785
-----------
Total assets...................................................................................................... 11,094,448
-----------
LIABILITIES
Payables:
Investments purchased............................................................................................. 109,921
Management fee.................................................................................................... 8,623
12b-1 service and distribution fees............................................................................... 4,180
Administrative services fee....................................................................................... 862
Fund accounting................................................................................................... 2,519
Transfer agent.................................................................................................... 1,867
Other accrued expenses and liabilities.............................................................................. 19,686
-----------
Total liabilities................................................................................................. 147,658
-----------
NET ASSETS.......................................................................................................... $10,946,790
===========
CLASS A:
Net asset value and redemption price per share ($7,311,279/715,921 shares outstanding).............................. $ 10.21
===========
Maximum offering price per share ($10.21 X 100/94.25)*.............................................................. $ 10.83
===========
CLASS B:
Net asset value and offering price per share ($3,573,776/351,202 shares outstanding)**.............................. $ 10.18
===========
CLASS C:
Net asset value and offering price per share ($61,735/6,057 shares outstanding)**................................... $ 10.19
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $10,146,536
Accumulated net realized gain on investments and foreign currency transactions.................................... 111,201
Accumulated undistributed net investment income................................................................... 23,640
Net unrealized appreciation on investments........................................................................ 665,413
-----------
NET ASSETS.......................................................................................................... $10,946,790
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 100
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends (net of $8,864 foreign taxes withheld)........................................................... $121,025
--------
Expenses
Management fee............................................................................................. $40,253
Transfer agent............................................................................................. 9,361
Administrative services fee................................................................................ 4,025
Custodian fees............................................................................................. 29,264
Blue Sky fee............................................................................................... 10,655
Auditing and accounting fees............................................................................... 8,572
Shareholder reports........................................................................................ 2,582
Amortization of organization expenses...................................................................... 4,923
Fund accounting............................................................................................ 9,081
Trustees' fees............................................................................................. 1,786
12b-1 service and distribution fees
Class A.................................................................................................. 7,109
Class B.................................................................................................. 11,780
Class C.................................................................................................. 24
Legal...................................................................................................... 14,283
Other...................................................................................................... 3,163
--------
156,861
Expenses reimbursed by manager............................................................................. (50,806)
Fees paid indirectly....................................................................................... (8,670)
--------
Net expenses............................................................................................. 97,385
--------
NET INVESTMENT INCOME........................................................................................ 23,640
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions......................................... 109,868
Net unrealized appreciation during the period on investments............................................... 640,225
--------
Net gain on investment transactions...................................................................... 750,093
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................................... $773,733
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- ------------
1996* 1995
---------------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income......................................................................... $ 23,640 $ 1,544
Net realized gain on investments and foreign currency transactions............................ 109,868 36,055
Net unrealized appreciation during the period on investments.................................. 640,225 112,073
---------------- ------------
Net increase resulting from operations...................................................... 773,733 149,672
---------------- ------------
Class A distributions
From net investment income.................................................................... -- (1,544)
From net realized gain........................................................................ -- (28,547)
In excess of net realized gain................................................................ -- (9,760)
---------------- ------------
Total distributions to Class A shareholders................................................. -- (39,851)
---------------- ------------
Class B distributions
From net realized gain........................................................................ -- (7,427)
---------------- ------------
Total distributions to Class B shareholders................................................. -- (7,427)
---------------- ------------
Fund share transactions (Note 4):
Class A....................................................................................... 3,302,745 2,771,336
Class B....................................................................................... 2,428,486 774,690
Class C....................................................................................... 61,137 --
---------------- ------------
Net increase resulting from Fund share transactions......................................... 5,792,368 3,546,026
---------------- ------------
TOTAL INCREASE IN NET ASSETS.................................................................... 6,566,101 3,648,420
NET ASSETS
Beginning of period........................................................................... 4,380,689 732,269
---------------- ------------
END OF PERIOD................................................................................. $ 10,946,790 $4,380,689
=================== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME................................................. $ 23,640 $ --
=================== ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 101
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE NOVEMBER 1, 1994
MONTHS ENDED YEAR ENDED (COMMENCEMENT)
CLASS A JUNE 30, DECEMBER 31, TO DECEMBER 31,
----------------- ------------ ----------------
SELECTED PER SHARE DATA 1996* 1995 1994
----------------- ------------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period................................ $ 9.05 $ 8.64 $ 10.00
------ ------ -------
Income (loss) from investment operations
Net investment income(a)........................................... .03 .01 --
Net gain (loss) on investment transactions (both realized and
unrealized)...................................................... 1.13 .54 (1.36)
------ ------ -------
Total from investment operations................................. 1.16 .55 (1.36)
------ ------ -------
Less distributions
From net investment income......................................... -- .01 --
From net realized gain............................................. -- .10 --
In excess of net realized gain..................................... -- .03 --
------ ------ -------
Total distributions.............................................. -- .14 --
------ ------ -------
Net asset value, end of period...................................... $ 10.21 $ 9.05 $ 8.64
======================= ================ ==================
Total return(%)..................................................... 12.82(c) 6.40(b) (13.50)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............................ $ 7,311 $3,435 $ 611
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(e).......... 2.20(d) 2.20 2.20(d)
Without expense reimbursement and fees paid indirectly(%)(e)....... 3.68(d) 7.18 20.74(d)
Ratio of net investment income to average net assets(%)(a).......... .81(d) .24 .52(d)
Portfolio turnover rate(%).......................................... 28(d) 14 0
Average commission rate(f).......................................... $ .0010 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE NOVEMBER 1, 1994
MONTHS ENDED YEAR ENDED (COMMENCEMENT)
CLASS B JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------- ------------ ----------------
SELECTED PER SHARE DATA 1996* 1995 1994
------------- ------------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period.................................... $ 9.05 $ 8.64 $ 10.00
------ ------ -------
Income (loss) from investment operations
Net investment loss(a)................................................. -- (.02) --
Net gain (loss) on investment transactions (both realized and
unrealized).......................................................... 1.13 .51 (1.36)
------ ------ -------
Total from investment operations..................................... 1.13 .49 (1.36)
------ ------ -------
Less distributions
From net realized gain................................................. -- .08 --
------ ------ -------
Total distributions.................................................. -- .08 --
------ ------ -------
Net asset value, end of period.......................................... $ 10.18 $ 9.05 $ 8.64
================== ================ ==================
Total return(%)......................................................... 12.49(c) 5.62(b) (13.60)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................ $ 3,574 $ 945 $ 121
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(e).............. 2.95(d) 2.95 2.95(d)
Without expense reimbursement and fees paid indirectly(%)(e)........... 4.43(d) 7.93 21.49(d)
Ratio of net investment income (loss) to average net assets(%)(a)....... .06(d) (.51) (.23)(d)
Portfolio turnover rate(%).............................................. 28(d) 14 0
Average commission rate(f).............................................. $ .0010 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
(COMMENCEMENT)
CLASS C TO JUNE 30,
--------------
SELECTED PER SHARE DATA 1996*
--------------
<S> <C>
Net asset value, beginning of period......................................................................... $ 9.89
------
Income from investment operations
Net investment income(a).................................................................................... --
Net gain on investment transactions (both realized and unrealized).......................................... .30
------
Total from investment operations.......................................................................... .30
------
Net asset value, end of period............................................................................... $10.19
================
Total return(%).............................................................................................. 3.03(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..................................................................... $ 62
Ratio of expenses to average net assets
With expense reimbursement and fees paid indirectly(%)(e)................................................... 2.95(d)
Without expense reimbursement and fees paid indirectly(%)(e)................................................ 4.43(d)
Ratio of net investment income (loss) to average net assets(%)(a)............................................ .06(d)
Portfolio turnover rate(%)................................................................................... 28(d)
Average commission rate(f)................................................................................... $.0010
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not reflect a
sales charge.
(d) Annualized.
(e) Beginning in 1995, total expenses include fees paid indirectly through
an expense offset arrangement.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary
from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission
rate structures may differ.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 102
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy New Century Fund (the Fund) is a series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B and Class C are authorized. Ivy Fund was organized
as a Massachusetts business trust under a Declaration of Trust dated December
21, 1983 and is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
commercial paper and other short-term obligations) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. For valuation
purposes, quotations of foreign securities in foreign currencies are translated
into U.S. dollar equivalents using the foreign exchange quotation in effect.
All other securities are valued at their fair value as determined in good
faith by the Valuation Committee of the Board. As of June 30, 1996, securities
valued in good faith by the Valuation Committee of the Board amounted to $0
(0.00% of net assets) and have been noted as such in the investment portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is 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 -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has 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. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend to Class A shares at the
rate per share of the excess 12b-1 fees of Class B shares over Class A shares.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- 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 investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement with its custodian
whereby a certain percentage of quarterly cumulative credits resulting from cash
balances on deposit with the custodian are used to offset custody fees,
including transaction and out of pocket expenses. For the period, custody fees
were reduced by $8,670 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
If the Fund's total expenses in any fiscal year (excluding interest, taxes,
brokerage commissions, extraordinary expenses and other expenses subject to
approval by state securities administrators) exceed limits applicable under
state securities laws, IMI will bear the excess expenses. Currently, IMI
voluntarily limits the Fund's total operating expenses (excluding taxes, 12b-1
fees, brokerage commissions, interest, litigation and indemnification expenses,
and other extraordinary expenses) to an annual rate of 1.95% of its average net
assets. The voluntary expense limitation may be terminated or revised at any
time. Expenses reimbursed by manager reflected in the Statement of Operations
consists of required and voluntary reimbursements of $28,673 and $22,133,
respectively.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1996, the net amount of underwriting
discount retained by IMDI was $14,575.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such fees and expenses are
reflected as Transfer agent in the Statement of Operations.
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
-------------------- --------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Sold.............................. 410,089 $4,026,170 347,829 $3,107,775
Issued on reinvestment of
distributions.................... -- -- 4,320 38,927
Repurchased....................... (73,788) (723,425) (43,244) (375,366)
------- ---------- ------- ----------
Net increase...................... 336,301 $3,302,745 308,905 $2,771,336
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
-------------------- --------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Sold.............................. 252,657 $2,485,923 95,175 $ 816,806
Issued on reinvestment of
distributions.................... -- -- 798 7,193
Repurchased....................... (5,924) (57,437) (5,547) (49,309)
------- ---------- ------- ----------
Net increase...................... 246,733 $2,428,486 90,426 $ 774,690
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT)
TO JUNE 30, 1996
--------------------
CLASS C SHARES AMOUNT
- ---------------------------------- ------- ----------
<S> <C> <C> <C> <C>
Sold.............................. 6,057 $ 61,137
------- ----------
Net increase...................... 6,057 $ 61,137
======== ============
</TABLE>
INCF-3-896
