<PAGE> 1
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY
EMERGING
GROWTH
FUND
ANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the share-holders. This report is not authorized for
distrib-ution to prospective investors unless preced-ed or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
Throughout the
centuries,
the castle keep has
been a source
of long-range vision
and strategic
advantage.
Dear Shareholder:
Ivy Emerging Growth Fund outperformed its relevant benchmarks in 1995. For
the twelve months ended December 31, 1995 the Fund had a total return of 42.07%
on a net asset value basis. The Fund compares well to comparable indices such
as the Russell 2000, S&P 600, and the NASDAQ Industrials, which had gains of
26.21%, 28.60% and 27.97% respectively; it also compared favorably with the S&P
500, which had a total return of 37.52%. (For the Fund's total return with
sales charge and performance commentary, please refer to the following pages.)
Many of the Fund's technology stocks enjoyed large gains in what Newsweek
called the "Year of the Internet." In addition to "pure plays" on this
phenomenon, related areas such as network computing and data communications
experienced extra demand on top of already high growth rates.
Within the healthcare sector, biotech stocks were notably strong
performers in 1995. Investor interest in this area was reinvigorated as a
number of companies reported favorable clinical results on the road to
commercial development. Physician practice management stocks also enjoyed a
good year, as the ongoing shift to managed care continued to bolster their
fundamentals.
The performance of Ivy Emerging Growth Fund in 1995 was certainly aided by
declining interest rates and a subdued inflation outlook, which allowed modest
expansion in equity valuations. These factors combined with strong earnings
growth by the companies in the Fund's portfolio produce an above-average return
for the year.
The robust fundamentals of Ivy Emerging Growth Fund's portfolio reflect
our emphasis on fertile industry sectors that we believe can support a high
rate of growth. In addition to technology and healthcare, these industries
include specialty retailing, business services and financial services.
An important part of our strategy in managing the Fund is to focus on
companies that traditionally operate in a relatively stable and predictable
business environment. The faster a small company grows, the more strain it must
cope with, and the greater the risk that it will get out of control, stumble,
and disappoint investors. Therefore, we emphasize companies that have good
visibility, and particularly favor those with a base of recurring revenue.
We also stress quality in our stock selection, preferring companies where
we have a high degree of conviction that earnings growth will meet or exceed
expectations. We believe that in emerging growth investing there is more risk
in fundamentals than valuation. Strong earnings growth can bail out the
investor who pays too high a multiple, but growth that doesn't come through
almost guarantees a loss.
The final element of our strategy is to make sure the Fund is very well
diversified. At year end there were nearly 230 stocks in the portfolio. This
minimizes the impact of "company specific" events which so often add to the
volatility of emerging growth portfolios.
For investors who have a long-term perspective and can tolerate
above-average volatility, we believe Ivy Emerging Growth Fund should continue
to be a rewarding opportunity.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management, Inc.
Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE> 2
IVY EMERGING GROWTH FUND PERFORMANCE COMMENTARY
In 1995, Ivy Emerging Growth Fund outperformed its relevant benchmarks including
the S&P 500, S&P 600, Russell 2000 and NASDAQ averages. For the twelve months
ended December 31, 1995, the total return of the Fund was 42.07%. The total
returns for the Russell 2000, S&P 500, S&P 600 and NASDAQ were 26.21%, 37.52%,
28.60% and 27.97% respectively. Within an environment of declining interest
rates and low inflation, technology and biotech stocks were market leaders in
1995. Ivy Emerging Growth Fund had significant weightings in these sectors.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (4/93) OF A $10,000
INVESTMENT
[GRAPH]
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Emerging Growth
Fund will fluctuate and at redemption may be worth more or less than the amount
of the original investment.
The S&P 500, NASDAQ and Russell 2000 indices are unmanaged indices of stocks
which assume reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
CUMULATIVE ONE-YEAR AND
SINCE INCEPTION PERFORMANCE
[GRAPH]
+The chart above reflects performance without the maximum
sales charge of 5.75%. With sales charge the cumulative
performance for one-year and since inception was 33.90% and
101.01%.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
IVY EMERGING GROWTH FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B**
Average Annual
Total Return Average Annual Total Return
---------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
---------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Yr. 33.90% 33.90% 36.03% 41.03% 36.03% 41.03%
Since Inception 29.89% 29.83% 17.18% 18.29% 17.09% 18.22%
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 3
IVY EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS -- 91.8% SHARES VALUE COMMON STOCKS SHARES
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
BUSINESS AND FINANCIAL SERVICES -- 12.3%
Advanta Corporation Class B............... 7,300 $ 265,538
Amerin Corporation(a)..................... 6,800 181,900
BISYS Group, Inc.(a)...................... 10,888 334,806
CFI Proservices Inc.(a)................... 12,000 178,500
CKS Group, Inc.(a)........................ 500 19,375
Capmac Holdings(a)........................ 8,900 223,613
Copart, Inc.(a)........................... 6,900 181,125
Corrections Corp. of America.............. 5,600 207,900
Crop Growers Corp.(a)..................... 20,100 281,400
Daisytek International Corporation(a)..... 3,400 104,550
Desktop Data, Inc.(a)..................... 6,400 156,800
Fair Issac and Company Inc................ 7,800 202,800
Gartner Group, Inc. -- Class A(a)......... 7,600 363,850
Green Tree Financial Corp................. 9,400 247,925
Investment Technology Group, Inc.(a)...... 18,000 166,500
Learning Tree International, Inc.(a)...... 1,100 17,188
Litchfield Financial Corp................. 28,483 370,279
MS Financial, Inc.(a)..................... 20,100 138,188
Medaphis Corp.(a)......................... 5,800 214,600
Meta Group, Inc.(a)....................... 3,300 101,063
Ovid Technologies, Inc.(a)................ 38,500 279,125
Oxford Resources Corp. Class A(a)......... 7,200 162,000
PMT Services, Inc.(a)..................... 15,800 477,950
Prime Management Group, Inc.(a)........... 9,500 21,375
Quickresponse Services Inc.(a)............ 17,000 312,375
Romac International, Inc.(a).............. 9,300 218,550
SPS Transaction Services Corp.(a)......... 7,900 234,038
Thompson PBE, Inc.(a)..................... 13,200 184,800
United Waste Systems Inc.(a).............. 7,600 281,200
U.S. Delivery Systems, Inc.(a)............ 8,300 239,663
Westcott Communications(a)................ 15,400 211,750
-----------
6,580,726
-----------
<CAPTION>
COMMON STOCKS -- 91.8% VALUE
<S> <C>
- -------------------------------------------------------------------
COMPUTER SOFTWARE -- 18.4%
A.D.A.M. Software, Inc.(a)................ 3,400 22,100
Applix, Inc.(a)........................... 14,200 386,950
Atria Software, Inc.(a)................... 2,300 89,988
Business Objects S.A. ADR(a)(c)........... 4,800 232,200
CBT Group PLC ADR(a)...................... 4,000 212,000
Carnegie Group, Inc.(a)................... 22,000 214,500
Davidson and Associates, Inc.(a).......... 5,400 118,125
Dendrite International, Inc.(a)........... 20,700 372,600
Eagle Point Software Corporation(a)....... 10,000 215,000
Expert Software, Inc.(a).................. 10,400 145,600
FTP Software, Inc.(a)..................... 12,700 368,300
FileNet Corp.(a).......................... 6,100 286,700
Firefox Communications, Inc.(a)........... 8,800 206,800
GT Interactive Software Corp.(a).......... 2,200 30,800
HPR Inc.(a)............................... 5,300 159,663
Imnet Systems, Inc.(a).................... 5,300 127,200
Informix Corp.(a)......................... 12,800 384,000
Insignia Solutions, Inc ADR(a)............ 17,300 203,275
Intersolv, Inc.(a)........................ 20,900 269,088
Macromedia Inc.(a)........................ 5,800 303,050
McAfee Associates, Inc.................... 4,050 177,694
MySoftware Company(a)..................... 21,300 271,575
Netmanage Inc.(a)......................... 17,600 409,200
Novadigm, Inc.(a)......................... 7,000 198,625
Open Environment Corporation(a)........... 16,600 228,250
Premenos Technology Corporation(a)........ 9,000 237,375
Project Software & Development, Inc.(a)... 5,250 183,094
Rational Software Corporation(a).......... 11,500 257,313
Remedy Corporation(a)..................... 4,400 260,700
Renaissance Solutions, Inc.(a)............ 10,200 145,350
SPSS, Inc.(a)............................. 11,300 220,350
SQA, Inc.(a).............................. 5,500 105,875
Saville Systems Ireland ADR(a)............ 18,100 257,925
Secure Computing Corporation(a)........... 2,400 $ 134,400
Security Dynamics Technologies, Inc.(a)... 4,800 261,600
Seer Technologies, Inc.(a)................ 11,500 143,750
Sierra On-Line, Inc.(a)................... 6,900 198,375
Softkey International, Inc.(a)............ 6,500 150,313
Software Artisrty, Inc.(a)................ 13,200 198,000
Symantec Corporation(a)................... 8,500 197,625
Systemsoft Corporation(a)................. 20,500 230,625
UUNET Technologies, Inc.(a)............... 3,800 239,400
Veritas Software Corp.(a)................. 14,700 558,600
Viasoft, Inc.(a).......................... 15,600 185,250
-----------
9,799,203
-----------
CONSUMER PRODUCTS & SERVICES -- 5.2%
Blyth Industries, Inc.(a)................. 6,000 177,000
Canadaigua Wine Company, Inc.(a).......... 6,400 208,800
Central European Media
Enterprises Ltd. (a)(c)................. 14,700 301,350
Cuc International, Inc.(a)................ 11,900 406,088
Department 56 Inc.(a)..................... 6,400 244,800
Eagle USA Airfreight, Inc.(a)............. 4,400 115,500
Equity Corporation International(a)....... 3,600 85,500
Extended Stay America, Inc.(a)............ 3,300 90,750
Franklin Electronic Publishers, Inc.(a)... 7,000 206,500
Northland Cranberries, Inc. -- Class A.... 14,400 255,600
Rio Hotel and Casino, Inc.(a)............. 13,500 160,313
Scandinavian Broadcasting System(a)....... 6,600 144,375
Station Casinos Inc.(a)................... 3,500 51,188
Stewart Enterprises Inc. Class A(a)....... 5,300 196,100
TRM Copy Centers Corp.(a)................. 13,400 140,700
-----------
2,784,564
-----------
HEALTHCARE -- 21.1%
American Medical Response(a).............. 9,300 302,250
Anesta Corp.(a)........................... 19,400 179,450
Arbor Health Care Company(a).............. 9,400 164,500
Autoimmune Inc.(a)........................ 18,300 205,875
Biochem Pharma, Inc.(a)................... 7,600 304,950
Cardiometrics, Inc.(a).................... 17,200 131,150
Cephalon, Inc.(a)......................... 4,500 183,375
CompuMed, Inc.(a)......................... 16,000 68,000
Community Health Systems, Inc.(a)......... 7,400 263,625
Dura Pharmaceuticals, Inc.(a)............. 12,200 423,950
Ergo Science Corporation(a)............... 9,900 141,075
Ethical Holdings Ltd -- ADR(a)(c)......... 18,500 166,500
Express Scripts, Inc. -- Class A(a)....... 6,900 351,900
First Commonwealth(a)..................... 9,200 239,200
Geltex Pharmaceuticals, Inc.(a)........... 13,800 169,050
Genzyme Corporation(a).................... 2,500 155,938
Genzyme Corporation --
Tissue Repair(a)........................ 338 5,366
Home Health Corporation of America(a)..... 28,700 315,700
Horizon Mental Health Management,
Inc.(a)................................. 20,100 334,163
ICU Medical, Inc.(a)...................... 14,400 244,800
InStent, Inc.(a).......................... 15,900 238,500
Isolyser Company, Inc.(a)................. 11,200 156,800
Liposome Company Inc.(a).................. 34,200 684,000
Lumisys, Inc.(a).......................... 26,400 297,000
Mecon, Inc.(a)............................ 14,600 231,775
MedCath Incorporated(a)................... 8,900 186,900
Medpartners/Mullikin, Inc.(a)............. 3,300 108,900
Molecular Devices Corporation(a).......... 13,200 138,600
NeoRx Corporation(a)...................... 28,700 182,963
NeoRx Corporation Warrants(a)............. 23,000 37,375
Neuromedical Systems, Inc.(a)............. 5,500 110,688
Norland Medical Systems, Inc.(a).......... 9,000 209,250
North American Biologicals, Inc.(a)....... 13,430 144,373
Omnicare, Inc.(a)......................... 5,900 264,763
</TABLE>
(See Notes to Financial Statements)
<PAGE> 4
IVY EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE COMMON STOCKS SHARES
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a)... 10,900 $ 525,925
Parexel International Corporation(a)...... 1,800 59,850
Penederm Inc.(a).......................... 16,800 191,100
PhyCor, Inc.(a)........................... 3,300 166,856
Physician Reliance Network, Inc.(a)....... 5,500 218,625
Physicians Resource Group, Inc.(a)........ 6,000 119,250
Renal Treatment Centers Inc.(a)........... 13,000 572,000
Rural Metro Corp.(a)...................... 7,300 165,163
Sepracor, Inc.(a)......................... 9,100 167,213
Serologicals Corporation(a)............... 18,800 310,200
Sonus Pharmaceuticals, Inc.(a)............ 20,000 245,000
Spine-Tech, Inc.(a)....................... 9,200 213,900
Steris Corp.(a)........................... 5,600 180,600
Total Renal Care Holdings, Inc.(a)........ 8,000 238,000
Vencor, Inc.(a)........................... 4,500 146,250
Vertex Pharmaceuticals Inc.(a)............ 6,700 177,550
Vivus, Inc.(a)............................ 8,000 250,000
-----------
11,290,186
-----------
MISCELLANEOUS -- 1.2%
Arch Petroleum Inc.(a).................... 67,000 142,375
Railtex Inc.(a)........................... 8,800 184,800
Tom Brown Inc.(a)......................... 14,500 212,063
Wisconsin Central Transportation
Corp.(a)................................ 1,800 118,350
-----------
657,588
-----------
NETWORK EQUIPMENT -- 6.5%
3Com Corporation(a)....................... 7,800 363,675
ACT Networks, Inc.(a)..................... 14,100 223,838
Alantec Corp.(a).......................... 6,600 384,450
Ascend Communications, Inc.(a)............ 4,700 381,875
Boca Research, Inc.(a).................... 8,400 222,600
Cabletron Systems Inc.(a)................. 4,750 384,750
Cascade Communications Corp.(a)........... 2,200 187,000
Fore Systems, Inc(a)...................... 5,800 345,100
Madge N.V.(a)............................. 12,200 545,950
Netstar, Inc.(a).......................... 3,300 60,225
Network Peripherals, Inc.(a).............. 8,300 97,525
Plaintree Systems, Inc.(a)................ 10,800 64,800
VideoServer, Inc.(a)...................... 6,900 217,350
-----------
3,479,138
-----------
RESTAURANTS -- 1.3%
Apple South, Inc.......................... 7,200 154,800
Daka International Inc.(a)................ 11,100 305,250
Dave & Buster's, Inc.(a).................. 13,100 158,838
El Chicos Restaurants Inc.(a)............. 8,700 82,650
-----------
701,538
-----------
RETAIL -- 7.1%
Baby Superstore, Inc...................... 2,800 159,600
Barnes & Noble, Inc.(a)................... 5,400 156,600
Corporate Express, Inc.(a)................ 11,000 328,625
CompUSA, Inc.(a).......................... 6,100 189,863
Creative Computers, Inc.(a)............... 6,100 111,325
Friedman's Inc. Class A(a)................ 12,500 240,625
General Nutrition Companies, Inc.(a)...... 16,400 383,350
Hollywood Entertainment(a)................ 15,800 136,275
Just for Feet, Inc.(a).................... 7,700 275,275
MSC Industrial Direct Co., Inc.(a)........ 300 8,250
Micro Warehouse Inc.(a)................... 5,000 216,250
Movie Gallery, Inc.(a).................... 5,900 $ 179,950
OfficeMax, Inc.(a)........................ 13,800 308,775
Petco Animal Supplies, Inc.(a)............ 3,500 102,375
PetsMart Inc.(a).......................... 9,450 292,950
Sports Authority, Inc.(The)(a)............ 13,100 266,913
Starbucks Corp.(a)........................ 5,200 109,200
Viking Office Products, Inc.(a)........... 1,900 88,350
West Marine Inc.(a)....................... 8,100 253,125
-----------
3,807,676
-----------
SEMICONDUCTERS & EQUIPMENT -- 4.0%
Alliance Semiconductor Corp.(a)........... 4,950 57,544
Altera Corporation(a)..................... 4,400 218,350
Amtel Corporation(a)...................... 4,600 102,925
ANADIGICS, Inc.(a)........................ 3,900 82,875
Benchmarq Microelectronics, Inc.(a)....... 16,500 134,064
Elantec Semiconductor, Inc.(a)............ 11,500 117,875
GaSonics International Corporation(a)..... 9,600 129,600
Integrated Device Technology, Inc.(a)..... 12,600 163,800
Lam Research Corporation(a)............... 5,200 237,900
OnTrak Systems, Inc.(a)................... 400 5,800
Opal, Inc.(a)............................. 8,800 112,200
PRI Automation, Inc.(a)................... 4,800 168,600
Semtech Corporation(a).................... 5,600 107,800
Silicon Valley Group, Inc.(a)............. 7,000 176,750
Tower Semiconductor Ltd.(a)............... 4,300 95,138
Xilinx, Inc.(a)........................... 6,700 204,350
-----------
2,115,571
-----------
TECHNOLOGY -- 6.9%
3D Systems Corporation.................... 13,500 320,625
Boston Technology(a)...................... 8,400 107,100
California Amplifier, Inc.(a)............. 10,700 302,275
California Microwave, Inc.(a)............. 3,600 59,850
Cornerstone Imaging, Inc.(a).............. 16,100 233,450
Discreet Logic, Inc....................... 9,500 237,500
Gemstar International Group Limited(a).... 7,100 201,464
IKOS Systems, Inc.(a)..................... 13,800 153,525
Komag, Inc.(a)............................ 4,100 189,113
NETCOM On-Line Communication Services,
Inc.(a)................................. 7,500 270,000
P-COM, Inc................................ 12,600 252,000
RadiSys Corporation(a).................... 23,400 274,950
Smart Modular Technologies, Inc.(a)....... 5,700 60,563
Snyopsys, Inc.(a)......................... 9,900 376,200
Truevision, Inc.(a)....................... 28,800 142,200
U.S. Robotics, Inc........................ 2,000 175,500
Uniphase Corporation(a)................... 6,900 246,675
Videonics, Inc.(a)........................ 7,200 84,600
-----------
3,687,590
-----------
TELECOMMUNICATIONS -- 7.8%
Arch Communications Group, Inc.(a)........ 10,100 242,400
Cidco, Inc.(a)............................ 8,700 221,850
Digital Microwave Corporation(a).......... 10,800 108,000
Glenayre Technologies, Inc.(a)............ 3,500 217,875
Harmonic Lightwaves, Inc.(a).............. 23,000 264,500
Mobile Telecommunications
Technologies Corp.(a)................... 11,300 241,538
Paging Network, Inc.(a)................... 17,800 433,875
Pairgain Technologies, Inc.(a)............ 9,600 525,600
Spectrian Corporation(a).................. 3,600 80,100
</TABLE>
(See Notes to Financial Statements)
<PAGE> 5
IVY EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Stratacom, Inc.(a)........................ 6,700 $ 492,450
T-Netix, Inc.(a).......................... 33,500 335,000
Transaction Network Services, Inc.(a)..... 20,900 522,500
U.S. Order, Inc.(a)....................... 6,900 154,368
WinStar Communications, Inc.(a)........... 19,000 325,375
-----------
4,165,431
-----------
TOTAL COMMON STOCKS
(COST -- $38,289,297)................... 49,069,211
-----------
PAR
CONVERTIBLE BOND -- 0.7% VALUE
- ------------------------------------------ ----------
Boston Chicken Inc., 0.00%, 06/01/15
(COST -- $270,777)...................... $1,300,000 364,390
-----------
COMMERCIAL PAPER -- 7.4%
G.E.C.C., 6.038%, 01/03/96................ 2,400,000 2,399,207
Prudential Funding Corp.,
5.582%, 01/05/96........................ 1,551,000 1,550,052
-----------
TOTAL COMMERCIAL PAPER
(COST -- $3,949,259).................... 3,949,259
-----------
TOTAL INVESTMENTS -- 99.9%
(COST -- $42,509,333)(B)................ 53,382,860
OTHER ASSETS, LESS LIABILITIES -- 0.1%.... 58,185
-----------
NET ASSETS -- 100%........................ $53,441,045
===========
ADR -- American Depository Receipt
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income
tax purposes.
(c) Foreign security.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $14,003,990
Gross unrealized depreciation..................... (3,130,463)
-----------
Net unrealized appreciation................... $10,873,527
===========
OTHER INFORMATION:
Purchases and sales of securities other than short-term obligations
aggregated $41,984,387 and $29,648,244, respectively, for the year
ended December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $42,509,333).............................................................. $53,382,860
Receivables:
Investments sold.................................................................................................. 49,400
Fund shares sold.................................................................................................. 273,018
Dividends......................................................................................................... 2,425
Deferred organization expenses...................................................................................... 28,479
Other assets........................................................................................................ 5,010
-----------
Total assets...................................................................................................... 53,741,192
-----------
LIABILITIES
Payables:
Investments purchased............................................................................................. 52,500
Management fee.................................................................................................... 36,421
12b-1 service and distribution fees............................................................................... 19,459
Administrative services fee....................................................................................... 4,285
Fund accounting................................................................................................... 5,152
Transfer agent.................................................................................................... 14,986
Due to custodian.................................................................................................... 161,295
Other accrued expenses and liabilities.............................................................................. 6,049
-----------
Total liabilities................................................................................................. 300,147
-----------
NET ASSETS.......................................................................................................... $53,441,045
===========
CLASS A:
Net asset value and redemption price per share
($39,456,365 / 1,635,831 shares outstanding)...................................................................... $ 24.12
===========
Maximum offering price per share ($24.12 x 100 / 94.25)*............................................................ $ 25.59
===========
CLASS B:
Net asset value and offering price per share ($13,984,680 / 579,718 shares outstanding)**........................... $ 24.12
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $42,567,103
Accumulated net realized gain on investments...................................................................... 415
Net unrealized appreciation on investments........................................................................ 10,873,527
-----------
NET ASSETS.......................................................................................................... $53,441,045
===========
</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> 7
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of taxes withheld....................................................................... $ 15,008
Interest............................................................................................... 195,343
-----------
210,351
-----------
EXPENSES
Management fee......................................................................................... $318,186
Transfer agent......................................................................................... 130,012
Administrative services fee............................................................................ 37,434
Custodian fees......................................................................................... 17,985
Blue Sky fees.......................................................................................... 31,848
Auditing and accounting fees........................................................................... 11,470
Shareholder reports.................................................................................... 6,262
Amortization of organization expenses.................................................................. 14,163
Fund accounting........................................................................................ 45,324
Trustees' fees......................................................................................... 3,312
12b-1 service and distribution fees
Class A.............................................................................................. 70,182
Class B.............................................................................................. 93,593
Legal.................................................................................................. 10,960
Other.................................................................................................. 10,813
-----------
Total expenses........................................................................................... 801,544
-----------
Net investment loss...................................................................................... (591,193)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments....................................................................... 4,445,572
Net unrealized appreciation during
the period on investments............................................................................ 8,767,787
-----------
Net gain on investments.............................................................................. 13,213,359
-----------
Net increase in net assets resulting from operations..................................................... $12,622,166
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 8
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment loss................................................................................. $ (591,193) $ (365,502)
Net realized gain (loss) on investments............................................................. 4,445,572 (38,954)
Net unrealized gain during the period on investments................................................ 8,767,787 1,100,881
----------- -----------
Net increase resulting from operations............................................................ 12,622,166 696,425
----------- -----------
CLASS A:
Distributions from
Net realized gain................................................................................... (2,804,408) --
Capital paid-in..................................................................................... -- (125,961)
----------- -----------
Total distributions to Class A shareholders....................................................... (2,804,408) (125,961)
----------- -----------
CLASS B:
Distributions from
Net realized gain................................................................................... (1,010,602) --
----------- -----------
Total distributions to Class B shareholders....................................................... (1,010,602) --
----------- -----------
Fund share transactions (Note 9):
Net increase resulting from Fund share transactions
Class A........................................................................................... 11,258,356 6,937,230
Class B........................................................................................... 6,867,492 3,571,654
----------- -----------
Net increase resulting from Fund share transactions............................................. 18,125,848 10,508,884
----------- -----------
Total increase in net assets.......................................................................... 26,933,004 11,079,348
NET ASSETS
Beginning of period................................................................................. 26,508,041 15,428,693
----------- -----------
End of period....................................................................................... $53,441,045 $26,508,041
=========== ===========
Accumulated undistributed net investment income....................................................... $ -- $ --
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE MARCH 3, 1993
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS A ----------------------- -----------------
SELECTED PER SHARE DATA 1995 1994 1993
------- ------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................................... $ 18.38 $ 17.93 $ 10.00
------- ------- --------
Income from investment operations
Net investment loss......................................................... (.24) (.24)(a) (.07)(a)
Net gain on investments
(both realized and unrealized)............................................ 7.90 .82 8.29
------- ------- --------
Total from investment operations.......................................... 7.66 .58 8.22
------- ------- --------
Less distributions from
Net realized gain........................................................... 1.92 -- .29
Capital paid-in............................................................. -- .13 --
------- ------- --------
Total distributions....................................................... 1.92 .13 .29
------- ------- --------
Net asset value, end of period................................................ $ 24.12 $ 18.38 $ 17.93
======= ======= ====================
Total return(%)............................................................... 42.07(b) 3.29(b) 45.33(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...................................... $39,456 $21,493 $14,212
Ratio of expenses to average daily net assets
With expense reimbursement(%)............................................... -- 2.20 1.93(d)
Without expense reimbursement(%)............................................ 1.95 2.22 2.33(d)
Ratio of net investment loss to average daily net assets(%)................... (1.39) (1.72)(a) (1.30)(a)(d)
Portfolio turnover rate(%).................................................... 86 67 41(d)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE OCTOBER 23, 1993
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS B ----------------------- -----------------
SELECTED PER SHARE DATA 1995 1994 1993
------- ------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................................... $ 18.38 $ 17.93 $ 18.21
------- ------- --------
Income (loss) from investment operations
Net investment loss......................................................... (.35) (.29)(a) (.04)(a)
Net gain on investments (both realized and unrealized)...................... 7.85 .74 .03
------- ------- --------
Total from investment operations.......................................... 7.50 .45 (.01)
------- ------- --------
Less distributions from
Net realized gain........................................................... 1.76 -- .27
------- ------- --------
Total distributions....................................................... 1.76 -- .27
------- ------- --------
Net asset value, end of period................................................ $ 24.12 $ 18.38 $ 17.93
======= ======= ====================
Total return(%)............................................................... 41.03(b) 2.51(b) (.05)(e)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...................................... $13,985 $ 5,015 $ 1,216
Ratio of expenses to average daily net assets
With expense reimbursement(%)............................................... -- 2.95 2.68(d)
Without expense reimbursement(%)............................................ 2.70 2.97 3.08(d)
Ratio of net investment loss to average daily net assets(%)................... (2.14) (2.47)(a) (2.05)(a)(d)
Portfolio turnover rate(%).................................................... 86 67 41(d)
(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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
Ivy Emerging Growth Fund (the Fund) is a series of shares of beneficial
interest of Ivy Fund. The shares of beneficial interest are assigned no par
value and an unlimited number of shares of Class A and Class B 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.
a. Securities 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 value. 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 Board of Trustees (the Board).
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$975,294 as capital gain dividends for its taxable year ended December 31, 1995.
d. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared and paid in December
by the Fund. In addition, distributions to Class A shareholders are declared
daily at the rate per share of the excess of 12b-1 fees of Class B shares over
Class A shares. Distributions are paid at the earlier of redemption or the last
business day of the year.
e. 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.
f. 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 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. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of .85% of its average daily net assets.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $41,326.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. 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 daily net assets. The voluntary expense limitation may be
terminated or revised at any time. There were no required or voluntary expense
reimbursements for the year ended December 31, 1995.
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fee and expenses are reflected as Transfer agent in the Statement
of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate of .25% of its average daily net
assets. Class B shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average daily net asset value of Class B shares.
MIFDI 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.
7. 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.
8. SUBSEQUENT EVENT
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. As a result of this change, the net asset value per share of
Class A and Class B are expected to differ.
9. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------ ------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold....................... 1,087,467 $ 25,161,914 1,005,253 $ 17,838,688
Issued on reinvestment of
distributions............. 110,103 2,622,547 5,630 97,341
Repurchased................ (730,995) (16,526,105) (634,487) (10,998.799)
--------- ------------ --------- ------------
Net increase............... 466,575 $ 11,258,356 376,396 $ 6,937,230
========== ============== ========== ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------ ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold....................... 566,894 $ 12,816,329 268,853 $ 4,678,812
Issued on reinvestment of
distributions............. 37,942 903,781 -- --
Repurchased................ (297,917) (6,852,618) (63,910) (1,107,158)
--------- ------------ --------- ------------
Net increase............... 306,919 $ 6,867,492 204,943 $ 3,571,654
========== ============== ========== ==============
</TABLE>
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Emerging Growth Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
IEGF-2-296
<PAGE> 13
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY
CHINA REGION
FUND
ANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc
Via Mizner Financial Plaza
700 South Federal Hwy
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
Throughout the
centuries
the castle keep has
been a source
of long-range vision
and strategic
advantage
Dear Shareholder:
The crisis in Mexico, which began in December 1994, carried over into
1995, throwing a wet towel on investors' perception of the prospects for most
emerging markets. The China region was no exception. Ivy China Region Fund lost
over 10% of its value in the first month of 1995, but recovered to provide a
total return of 1.59%, on a net asset value basis, for the twelve months ended
December 31, 1995. This compares to the China Shanghai B and China Shenzhen B,
the two Chinese stock markets available for foreign investment, which were down
22.13% and 32.62% respectively for the same period. The Hang Seng Stock Index
(Hong Kong) was up 22.98% in 1995. (For the Fund's total return with sales
charge and performance commentary, please refer to the following pages.)
After record returns in 1993, foreign investors are now significantly
underweighted in Chinese stocks. Our research shows that if Asia-Pacific and
emerging market funds were to increase their exposure to China to 5% and 10%
respectively, this could result in over $10 billion flowing into Chinese
equities. We believe a flow of funds of this magnitude would drive stocks
significantly higher. But prospects for good performance in China should not
depend on foreign money returning. With domestic savings rates approaching 40%,
and the ability for local Chinese to buy the much cheaper foreign shares in the
future, we believe there is strong local support for share prices.
According to our research, the credit crunch in China, which developed as
a result of the government's austerity program, has achieved the goal of
lowering inflation, but it has hit the corporate sector particularly hard.
Inflation reached a high of 25% in the third quarter of 1994 and is now nearing
the government's target of 10%. This tight monetary policy has restricted funds
available for businesses to buy inventory, finance capital spending programs,
and repay working capital loans, particularly for the heavily indebted state
sector. As a result, while China's economy grew about 10% in 1995, it was
largely driven by consumer spending, not corporate profits.
Now that inflation appears to be under control, monetary conditions should
ease in 1996, fostering a rebound in fixed asset investment and corporate
profitability. We expect China's economic growth to accelerate in the second
half of the year and to remain strong throughout 1997. The timing of an
economic rebound is politically important to ensure a smooth transition of Hong
Kong back to China in mid-1997. We believe China's economy may grow at least
10%, in real terms, over the next 12 to 18 months, with corporate profits as
the driving force behind this growth.
Entry into the World Trade Organization (WTO) should provide China with
additional export opportunities for its goods, but should also result in
increased competition from foreign manufacturers. We believe the net impact
should be positive, since China's real competitive advantage, a large pool of
inexpensive labor, is free from import competition. We have selected
investments in the Ivy China Region Fund which reflect our expectation that
China will join the WTO within the next 12 to 18 months.
We believe China may represent the greatest growth story on earth and
would encourage investors with a long-term horizon to take advantage of
opportunities that the market presents.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp.P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management,
Inc.Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE> 14
IVY CHINA REGION FUND PERFORMANCE COMMENTARY
Ivy China Region Fund, which had a total return of 1.59% for the twelve months
ended December 31, 1995, performed well as compared to the two Chinese stock
markets available for foreign investment. The Shanghai B and Shenzhen B were
down 22.13% and 32.62% respectively. With the Hang Seng Stock Index (Hong Kong)
up 22.98% in 1995, the Fund's weighting in Hong Kong, 56%, helped move the Fund
into positive ground.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (10/93) OF A $10,000
INVESTMENT
[CHART]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
IVY CHINA REGION FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B**
Average Annual
Total Return Average Annual Total Return
-------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
---------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
--------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Yr. (4.26)% (4.70)% (4.17)% 0.83% (4.64)% 0.36%
- ----------------------------------------------------------------------------------
Since Inception (8.10)% (8.57)% (7.58)% (6.27)% (8.01)% (6.72)%
- -----------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy China Region
Fund will fluctuate and at redemption may be worth more or less than the amount
of the original investment.
The International Finance Corporation China Region Index and the International
Finance Corporation China Region Index with Hong Kong are unmanaged indices and
assume the reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses. The IFC with Hong Kong represents the market cap weighting
of the IFC China index and includes the Hang Seng index. It is not possible to
invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
- --------------------------------------------------------------------------------
<PAGE> 15
IVY CHINA REGION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS -- 97.8% SHARES VALUE COMMON STOCKS SHARES
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
AMERICAS -- 0.5%
- ------------------------------------------
UNITED STATES -- 0.5%
Amway Asia Pacific Ltd. .................. 2,500 $ 89,063
-----------
ASIA / PACIFIC -- 97.3%
- ------------------------------------------
CHINA -- 11.3%
China Southern Glass Co. -- Class B....... 235,300 82,161
Huaneng Power International, Inc. ADR(a).. 15,000 215,625
Inner Mongolia Erdos Cashmere
Products Co. -- Class B(a).............. 136,000 50,864
Maanshan Iron & Steel Co. ................ 1,144,000 159,783
Qinling Motors Company Ltd. 'H'........... 1,100,000 320,078
Shanghai Dazhong Taxi Company -- Class
B....................................... 200,000 152,800
Shanghai Diesel Engine Co. Ltd. -- Class
B....................................... 440,000 162,800
Shanghai Erfrangji Company Limited --
Class B(a).............................. 825,000 118,800
Shanghai Industrial Sewing Machine
Co. Ltd. -- Class B..................... 600,000 97,200
Shanghai Narcissus Electric Appliances
Industrial Company Ltd. -- Class B(a)... 425,000 72,250
Shanghai Post & Telecom Eq. -- Class
B(a).................................... 193,000 76,814
Shanghai Shangling Electric Appliances
Co. Ltd. -- Class B..................... 130,000 79,560
Shanghai Haixing Shipping Co. 'H'......... 2,625,000 176,528
Shenzhen China Bicycles -- Class B........ 865,800 142,201
Shenzhen Konka Electronics
Group Limited -- Class B................ 200,000 102,165
Yaohua Pilkington Glass Class B........... 160,000 140,800
Zhenhai Refining and Chemical
Company Limited 'H'..................... 450,000 84,384
-----------
2,234,813
-----------
HONG KONG -- 56.2%
C.P. Pokphand............................. 792,000 317,517
Cheung Kong (Holdings) Ltd. .............. 109,000 663,938
China Light & Power Co. Ltd. ............. 65,600 302,019
China Travel International Investment Hong
Kong Ltd. .............................. 212,000 33,997
Citic Pacific Ltd. ....................... 161,000 550,721
Consoldiated Electric Power Asia Ltd. .... 375 681
Esprit Asia Holdings Ltd. ................ 696,000 238,526
Fortei Holdings........................... 398,000 14,927
Fountain Set Holdings..................... 1,060,000 202,884
Giordano Holdings Ltd. ................... 476,000 406,285
Gold Peak Industries...................... 923,000 456,576
Guangdong Investments..................... 799,000 480,485
Hang Seng Bank............................ 27,900 249,864
Hong Kong Land Holdings Ltd. ............. 52,000 96,200
Hong Kong Telecommunications Limited...... 199,600 356,221
Hopewell Holdings......................... 683,945 393,606
HSBC Holdings............................. 36,867 557,832
Jardine International Motor Holdings Co... 136,000 154,775
Jardine Strategic Holdings Ltd. .......... 100,250 306,765
Jardine Strategic Holdings Warrants(a).... 13,250 4,240
Johnson Electric Holdings Ltd. ........... 242,000 431,891
Kumagai Gumi (Hong Kong) Ltd. ............ 300,000 217,265
Li & Fung................................. 615,800 549,501
M.C. Packaging (Hong Kong) Ltd. .......... 648,000 230,456
Manhattan Card Company Ltd. .............. 868,000 370,436
National Mutual Asia Ltd. ................ 440,000 398,319
New World Development Company Ltd. ....... 80,000 348,658
New World Infrastructure Ltd.(a).......... 133 255
Oriental Press Group...................... 540,000 164,113
Peregrine Investment Holdings Ltd. ....... 262,000 338,830
Shangri-La Asia Ltd. ..................... 130,000 158,875
Shun Tak Holdings Ltd. ................... 218,000 153,650
Siu-Fung Ceramics Holdings, Ltd. ......... 1,110,327 155,080
Sun Hung Kai Properties Ltd. ............. 42,800 350,094
Swire Pacific Ltd. Class A................ 59,500 461,688
Techtronic Industries Co.................. 2,888,000 295,055
Tsingtao Brewery Co. Ltd. Series H........ 600,000 138,894
Wharf (Holdings) Ltd. .................... 50,000 166,505
Wo Kee Hong Holdings Ltd. ................ 562,000 87,943
Yue Yuen Industrial Holdings.............. 1,146,000 303,822
-----------
11,109,389
-----------
INDONESIA -- 3.7%
Bank Niaga................................ 60,000 114,804
Hanjaya Mandala Sampoerna................. 22,500 $ 234,201
PT Astra International.................... 28,000 58,168
PT Chareon Pokphand Indonesia............. 48,000 97,616
Semen Gresik.............................. 84,000 235,119
-----------
739,908
-----------
KOREA -- 11.3%
Daewoo Corporation(a)..................... 400 4,641
Fidelity Advisor Korea Fund(a)............ 60,000 637,500
Hyundai Motor Co, Ltd. ................... 2,500 124,428
Korea Electric Power Corporation.......... 6,300 277,647
Korea Fund Inc............................ 15,100 332,200
L.G. Electronics(with 422 rights)......... 8,000 278,440
Pohang Iron & Steel Co. Ltd. ............. 2,000 143,783
Samsung Electronics Co. -- New Common..... 13 2,346
Samsung Electronics Co. --
Non Voting GDS.......................... 506 27,450
Samsung Electronics Co. -- GDS............ 1,050 194,665
Samsung Electronics Co. --
GDS 144A REGD........................... 29 2,639
Samsung Electronics Co. -- Rights(a)...... 184 10,902
Samsung Heavy Industries.................. 509 13,057
Shinhan Bank(a)........................... 8,000 178,697
-----------
2,228,395
-----------
MALAYSIA -- 4.0%
Berjaya Sports Toto Berhad................ 84,000 195,141
Edaran Otomobil Nasional Berhad........... 21,000 157,932
Leader Universal Holdings -- Class A...... 61,666 140,829
London & Pacific Insurance Company........ 29,000 125,606
Malayan Banking Berhad.................... 20,000 168,524
-----------
788,032
-----------
SINGAPORE -- 5.2%
Clipsal Industries Limited................ 70,000 158,200
DBS Land Limited.......................... 45,000 152,067
Fraser & Neave Ltd. ...................... 23,500 299,045
Jurong Shipyard Limited................... 33,000 254,295
Singapore International Airlines.......... 18,000 167,975
-----------
1,031,582
-----------
TAIWAN -- 2.5%
ROC Taiwan Fund(a)........................ 3,600 37,800
Taiwan Fund Inc........................... 22,500 461,250
-----------
499,050
-----------
THAILAND -- 2.6%
Bank of Ayudhya -- Foreign Registered..... 55,000 307,860
Krung Thai Bank Public Company Limited.... 50,000 204,446
-----------
512,306
-----------
VIETNAM -- 0.5%
The Vietnam Fund Limited(a)............... 7,800 94,575
-----------
94,575
-----------
TOTAL INVESTMENTS -- 97.8%
(COST -- $23,084,415)(B)................ 19,327,113
OTHER ASSETS, LESS LIABILITIES -- 2.2%.... 433,055
-----------
NET ASSETS -- 100%........................ $19,760,168
===========
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income tax purposes.
ADR = American Depository Receipt
GDS = Global Depository Share
REGD = Registered
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 1,940,653
Gross unrealized depreciation..................... (5,697,955)
-----------
Net unrealized depreciation................... $(3,757,302)
===========
OTHER INFORMATION:
Purchases and sales of securities other than short-term obligations
aggregated $5,280,655 and $4,928,769, respectively, for the year
ended December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $23,084,415)......... $19,327,113
Cash........................................................... 373,026
Receivables:
Fund shares sold.............................................. 61,144
Dividends and interest........................................ 16,007
Manager for expense reimbursement............................. 14,747
Deferred organization expenses................................. 30,683
Other assets................................................... 4,788
-----------
Total assets.................................................. 19,827,508
-----------
LIABILITIES
Payables:
Fund shares repurchased....................................... 13,364
Management fee................................................ 16,964
12b-1 service and distribution fees........................... 8,755
Administrative services fee................................... 1,696
Fund accounting............................................... 2,663
Transfer agent................................................ 11,039
Other accrued expenses and liabilities......................... 12,859
-----------
Total liabilities............................................. 67,340
-----------
NET ASSETS..................................................... $19,760,168
=============
CLASS A:
Net asset value and redemption price per share
($12,854,796 / 1,497,659 shares outstanding).................. $ 8.58
=============
Maximum offering price per share ($8.58 x 100 / 94.25)*........ $ 9.10
=============
CLASS B:
Net asset value and offering price per share
($6,905,372 / 804,454 shares outstanding)**................... $ 8.58
=============
NET ASSETS CONSIST OF:
Capital paid-in............................................... $24,083,795
Accumulated net realized loss on investments and foreign
currency transactions....................................... (567,707)
Accumulated undistributed net investment income............... 1,382
Net unrealized depreciation on investments.................... (3,757,302)
-----------
NET ASSETS..................................................... $19,760,168
=============
</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.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends, net of withholding tax ($17,023)........... $ 738,383
Interest.............................................. 25,323
---------
763,706
---------
EXPENSES
Management fee........................................ $200,605
Transfer agent........................................ 113,844
Administrative services fee........................... 20,061
Custodian fees........................................ 49,795
Blue Sky fees......................................... 25,748
Auditing and accounting fees.......................... 11,604
Shareholder reports................................... 6,531
Amortization of organization expenses................. 10,213
Fund accounting....................................... 32,653
Trustees' fees........................................ 3,255
12b-1 service and distribution fees
Class A............................................. 32,647
Class B............................................. 70,020
Legal................................................. 12,296
Other................................................. 10,632
---------
599,904
Expenses reimbursed by manager......................... (106,085)
---------
Net expenses.......................................... 493,819
---------
Net investment income.................................. 269,887
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions........................................ (304,802)
Net unrealized appreciation during the period on
investments......................................... 370,010
---------
Net gain on investment transactions................. 65,208
---------
Net increase in net assets resulting from operations... $ 335,095
=========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income...................................... $ 269,887 $ 56,574
Net realized loss on investments and foreign currency
transactions............................................. (304,802) (265,931)
Net unrealized gain (loss) during the period on
investments.............................................. 370,010 (5,134,064)
----------- -----------
Net increase (decrease) resulting from operations........ 335,095 (5,343,421)
----------- -----------
CLASS A:
Distributions from
Net investment income...................................... (209,871) (56,574)
In excess of net investment income......................... -- (38,035)
In excess of net realized gain............................. (20,020) --
----------- -----------
Total distributions to Class A shareholders.............. (229,891) (94,609)
----------- -----------
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 10):
Net increase (decrease) resulting from Fund share
transactions
Class A.................................................. (329,623) 8,369,884
Class B.................................................. (459,143) 5,648,162
----------- -----------
Net increase (decrease) resulting from Fund share
transactions.......................................... (788,766) 14,018,046
----------- -----------
Total increase (decrease) in net assets..................... (755,932) 8,580,016
NET ASSETS
Beginning of period........................................ 20,516,100 11,936,084
----------- -----------
End of period.............................................. $19,760,168 $20,516,100
=========== ===========
Accumulated undistributed net investment income (loss)...... $ 1,382 $ (39,826)
=========== ===========
</TABLE>
<PAGE> 17
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
FOR THE YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS A ----------------------- -----------------
SELECTED PER SHARE VALUE 1995 1994 1993
------- ------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................................... $ 8.61 $ 11.55 $ 10.00
------- ------- ------
Income (loss) from investment operations
Net investment income (loss)(a)............................................... .14 .05 (.01)
Net gain (loss) on investment transactions (both realized and unrealized)..... (.01) (2.91) 1.57
------- ------- ------
Total from investment operations............................................ .13 (2.86) 1.56
------- ------- ------
Less distributions from
Net investment income......................................................... .14 .05 --
In excess of net investment income............................................ -- .03 --
In excess of net realized gain................................................ .02 -- --
Capital paid-in............................................................... -- -- .01
------- ------- ------
Total distributions......................................................... .16 .08 .01
------- ------- ------
Net asset value, end of period................................................ $ 8.58 $ 8.61 $ 11.55
======= ======= ============
Total return(%)............................................................... 1.59(b) (24.88)(b) 15.65(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...................................... $12,855 $13,180 $ 8,371
Ratio of expenses to average daily net assets
With expense reimbursement(%)............................................... 2.20 2.20 1.98(d)
Without expense reimbursement(%)............................................ 2.73 2.76 2.45(d)
Ratio of net investment income (loss) to average daily net assets(%)(a)....... 1.61 .55 (.91)(d)
Portfolio turnover rate(%).................................................... 25 4 0
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
FOR THE YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS B ---------------------- -----------------
SELECTED PER SHARE VALUE 1995 1994 1993
------ ------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................................... $ 8.61 $ 11.55 $ 10.00
------ ------- ------
Income (loss) from investment operations
Net investment income (loss)(a)................................................ .08 (.02) (.02)
Net gain (loss) on investment transactions (both realized and unrealized)...... (.02) (2.92) 1.57
------ ------- ------
Total from investment operations............................................. .06 (2.94) 1.55
------ ------- ------
Less distributions from
Net investment income.......................................................... .08 -- --
In excess of net realized gain................................................. .01 -- --
------ ------- ------
Total distributions.......................................................... .09 -- --
------ ------- ------
Net asset value, end of period................................................. $ 8.58 $ 8.61 $ 11.55
====== ======= ============
Total return(%)................................................................ .83(b) (25.45)(b) 15.50(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....................................... $6,905 $ 7,336 $ 3,565
Ratio of expenses to average daily net assets
With expense reimbursement(%)................................................ 2.95 2.95 2.74(d)
Without expense reimbursement(%)............................................. 3.48 3.51 3.20(d)
Ratio of net investment income (loss) to average daily net assets(%)(a)........ .86 (.20) (1.66)(d)
Portfolio turnover rate(%)..................................................... 25 4 0
(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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
Ivy China Region Fund (the Fund) is a series of shares of beneficial
interest of Ivy Fund. The shares of beneficial interest are assigned no par
value and an unlimited number of shares of Class A and Class B 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.
a. Securities valuation -- Securities for which market quotations are
readily available are valued at market. Short-term obligations are valued at
amortized cost, which approximates market value. 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
Board of Trustees (the Board).
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. 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 gain of each succeeding fiscal year until fully utilized or until the
expiration date, whichever occurs first. The carryforward expires $264,000 in
2002 and $203,000 in 2003.
d. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared and paid in December
by the Fund. In addition, distributions to Class A shareholders are declared
daily at the rate per share of the excess of 12b-1 fees of Class B shares over
Class A shares. Distributions are paid at the earlier of redemption or the last
business day of the year.
e. 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 differ from the characterization of such
distributions determined on a Federal income tax basis.
f. 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.
g. 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 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. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of 1.00% of its average daily net assets.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), a wholly owned subsidiary
of MIMI, is the underwriter
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 year
ended December 31, 1995, the net amount of underwriting discount retained by
MIFDI was $9,919.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. 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 daily 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.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate of .25% of its average daily net
assets. Class B shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average daily net asset value of Class B shares.
MIFDI 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.
7. 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.
8. 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.
9. SUBSEQUENT EVENT
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. As a result of this change, the net asset value per share of
Class A and Class B are expected to differ.
10. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold....................... 1,416,644 $ 11,904,966 1,432,743 $15,882,457
Issued on reinvestment of
distributions............. 23,477 201,191 8,804 75,814
Repurchased................ (1,473,931) (12,435,780) (634,884) (7,588,387)
---------- ------------ --------- -----------
Net increase (decrease).... (33,810) $ (329,623) 806,663 $ 8,369,884
============ ============== ========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold....................... 575,358 $ 5,085,871 886,672 $ 8,984,327
Issued on reinvestment of
distributions............. 7,766 66,561 -- --
Repurchased................ (631,083) (5,611,575) (342,939) (3,336,165)
---------- ------------ --------- -----------
Net increase (decrease).... (47,959) $ (459,143) 543,733 $ 5,648,162
============ ============== ========== =============
</TABLE>
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy China Region Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
ICRF-2-296
<PAGE> 21
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY LATIN AMERICA STRATEGY FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Dear Shareholder:
The rebound in Latin American markets, which began in the first quarter of
1995, continued throughout the year. As a result, Ivy Latin America Strategy
Fund finished the year with above average performance in its peer group. For
the twelve months ended December 31, 1995, the Fund's total return, on a net
asset basis, was down 17.28%. This compares to the average of all Latin
American funds, as tracked by Lipper Analytical Services, Inc., which was down
20.6%, and the Morgan Stanley Capital International Emerging Markets "Free"
Latin American Index, which was down 15.09%, for the same period. (For the
Fund's total return with sales charge and performance commentary, please refer
to the following pages.)
After the devaluation of the Mexican peso in December 1994, the "tequila
effect" took hold and early in 1995 other Latin American markets suffered as
well. Investors feared that what took place in Mexico could happen elsewhere in
the region. We believe that now, Latin markets such as Argentina and Brazil,
represent even greater value than a year ago.
In Argentina the banking system is consolidating, deposits are returning,
interest rates are coming down and there has been a focus on privatizing
government-run businesses.
In Brazil, economic reforms have been passed and a firm privatization
schedule is now in place. Remarkably, inflation continues to come down and
consensus estimates call for a 15% inflation rate in 1996, a far cry from the
2,500% experienced in 1993. We believe that as uncertainties about the
privatization schedule and inflation subside, the stock market should react
favorably.
We remain cautious about Mexico as the full effects of high inflation and
interest rates continue to strangle the economy. Low levels of international
reserves and low internal savings rates still exist. And although its stock
market is reaching new highs, we believe this reflects an overly optimistic
view on the part of investors. Disappointing corporate profits in 1996 should
be reflected in lower stock prices. And our research suggests that another
currency devaluation over the next 12 months would not be unexpected.
Ivy Latin America Strategy Fund is well positioned to benefit from a
continuing recovery in Latin American markets, evidence of which is already
reflected in higher stock prices. The Fund remains overweighted in Brazil (38%)
and Argentina (27%) and underweighted in Mexico (11%). Our research indicates
that valuations in both markets are still compelling as stocks continue to
trade at single digit price/earnings ratios. As uncertainties and investor
concerns continue to dissipate, we believe that Ivy Latin America Strategy Fund
should perform well.
We believe the Mexican crisis was only a temporary setback that should not
lead investors to the conclusion that reform in Latin America has failed. We
believe most of the region remains on a well conceived reform path that reduces
many of the risks historically associated with Latin America, and over the long
term should deliver returns above those offered by the more mature economies.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
- -------------------------- ----------------------------
Michael G. Landry Michael R. Peers
President Chairman
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Mackenzie Ivy Investor Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Roy J. Glauber Michael G. Landry, President 1-800-777-6472 Mackenzie Ivy Funds
Michael G. Landry Keith J. Carlson, Vice President Distribution, Inc.
Michael R. Peers C. William Ferris, AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Michael R. Peers, Chairman Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
<PAGE> 22
IVY LATIN AMERICA STRATEGY FUND
PERFORMANCE COMMENTARY
Latin American markets began 1995 on the same negative note they ended 1994. The
devaluation of the Mexican peso had a stranglehold on these markets and it
wasn't until later in the year that investor sentiment became more positive. Ivy
Latin America Strategy Fund hit bottom on March 9, 1995 when its net asset value
was $4.95; its year-end net asset value was $6.88 an increase of 39% from the
bottom. For the twelve months ended December 31, 1995 the total return of Ivy
Latin America Strategy Fund was down 17.28%. This compares to the average of all
Latin American funds as tracked by Lipper Analytical Services, Inc. which was
down 20.6%, and the Morgan Stanley Capital International (MSCI) Emerging Markets
"Free" Latin American Index, which was down 15.09%. The Fund remains
underweighted in Mexico (11%), which experienced a rally in late 1995, driving
its stock market to historically high levels. The MSCI Emerging Markets "Free"
Latin American Index had a 27% weighting in Mexico in 1995. (Please refer to
letter for comments on Mexico.)
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (11/94) OF A $10,000
INVESTMENT
[CHART]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
IVY LATIN AMERICA STRATEGY FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B**
Average Annual
Total Return Average Annual Total Return
----------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
----------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
-----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Yr. (22.04)% (28.49)% (22.90)% (17.90)% (29.29)% (24.67)%
- -----------------------------------------------------------------------------------
Since Inception (30.65)% (36.91)% (30.06)% (27.47)% (36.10)% (33.79)%
- -----------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Latin America
Strategy Fund will fluctuate and at redemption may be worth more or less than
the amount of the original investment.
The Morgan Stanley Latin America "Free" index is an unmanaged index of stocks
which assumes reinvestment of dividends and, unlike Fund returns, does not
reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
- --------------------------------------------------------------------------------
<PAGE> 23
IVY LATIN AMERICA STRATEGY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 84.0% SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
ARGENTINA -- 27.4%
Acindar Ind Argentina S.A.(a).............. 54,000 $ 38,334
Astra Cia Argentina De Petroleo
(C.A.P.S.A.)............................. 11,800 21,827
Banco Del Sud S.A.(a)...................... 7,100 52,887
Banco Frances Del Rio de la Plata, S.A..... 5,520 48,845
Banco Galicia Y Buenos Aires -- B ADR...... 7,198 37,424
Buenos Aires Embotelladora
(BAESA) ADR.............................. 3,400 70,125
Central Costanera S.A. 'B'................. 15,500 47,733
Cia Interamericana de Automoviles
(Ciadea Renault)......................... 7,467 38,823
Cia Naviera Perez Companc -- B............. 10,360 54,900
Dragados Y Construcciones Argentina -- B... 10,400 34,315
Inversiones Y Representacion (IRSA)........ 18,107 45,623
Juan Minnetti S.A.......................... 8,800 29,035
Quilmes Industrial......................... 1,500 23,400
Sociedad Comercial Del Plata S.A.(a)....... 11,800 31,265
Telecom Argentina.......................... 1,200 57,150
Telefonica de Argentina S.A. ADR........... 1,500 40,875
Transportadora De Gas del Sur -- B......... 27,400 66,023
----------
738,584
----------
BRAZIL -- 37.5%
Banco Bradesco S.A. (with
170,688 rights)(a)....................... 7,300,000 63,841
Banco Nacional S.A.(c)..................... 1,600,000 30,619
Brasmotor S.A.............................. 280,000 55,600
Casa Anglo................................. 650,000 27,419
Cia Cervejaria Brahma Rights............... 91,551 37,678
Companhia Energetica de
Minas Gerais (CEMIG)..................... 865,000 19,134
Companhia Energetica de Sao Paulo (CESP)... 600,000 17,464
Ericsson Telecommunicacoes................. 16,800,000 76,053
Iochpe Maxion S.A. -- ADR(a)............... 3,000 8,438
Iparanga Brasileira de Petroleo............ 4,700,000 39,169
Itabanco................................... 200,000 55,764
Marco Polo S.A. -- B(a).................... 610,000 90,375
OSA S.A.................................... 2,000,000 15,433
Petroleo Brasileiro S.A. (Petrobras)....... 440,000 37,569
Refripar S.A............................... 37,100,000 74,051
Tam Transport Aeros Reg.................... 3,000,000 84,881
Telecomunicacoes Brasileiras
S.A. (Telebras) ADR...................... 3,500 165,812
Uniao de Bancos Brasileiros
(with 957,847 rights).................... 1,900,000 74,284
Usinas Siderurgicas de Minas
Gerais (Usiminas)........................ 49,600,000 40,315
----------
1,013,899
----------
CHILE -- 6.7%
Banco O'Higgins ADR........................ 900 $ 20,700
Banco Osorno Y La Union ADR................ 1,300 18,038
Chilgener S.A. ADR......................... 1,300 32,988
Laboratorio Chile S.A. -- ADR.............. 3,400 42,924
Madeco S.A. ADR............................ 800 21,300
Santa Isabel S.A. ADR(a)................... 1,000 24,000
Vina Concha Y Toro S.A. ADR................ 1,200 21,600
----------
181,550
----------
MEXICO -- 10.6%
Banacci Series 'C' Ordinary................ 4,000 6,688
Banacci Series 'L'......................... 200 293
Cementos de Mexico S.A. 'B'................ 2,000 7,090
Corporacion GEO, S.A. 'B'(a)............... 16,912 48,993
Groupo Elektra, S.A. de C.V. .............. 1,000 4,277
Groupo Mexicano Series 'L' ADR(a).......... 5,000 13,125
Groupo Posadas S.A. -- Series A(a)......... 105,000 40,830
Panamerican Beverages Inc.................. 2,500 80,000
Telefonos de Mexico S.A. Class L -- ADR.... 2,300 73,313
Vitro Sociedad Anonima ADR................. 2,400 11,400
----------
286,009
----------
PERU -- 1.8%
Banco Wiese ADR............................ 3,000 18,750
Tele 2000 S.A. ADR(a)...................... 6,000 28,500
----------
47,250
----------
TOTAL EQUITY SECURITIES -- 84.0%
(COST -- $2,438,050)(B).................. 2,267,292
OTHER ASSETS, LESS LIABILITIES -- 16.0%.... 431,351
----------
NET ASSETS -- 100%......................... $2,698,643
==========
ADR -- American Depository Receipt
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income tax purposes.
(c) Securities valued in good faith by the Valuation Committee of
the Board of Trustees. The cost of these securities at December
31, 1995 aggregated $39,649. See Note 1 of the Notes to the
Financial Statements.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $ 242,048
Gross unrealized depreciation...................... (412,806)
----------
Net unrealized depreciation.................... $ (170,758)
==========
OTHER INFORMATION:
Purchases and sales of securities other than short-term obligations
aggregated $2,331,940 and $579,814, respectively, for the period
ended December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 24
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $2,438,050)................................................................ $2,267,292
Cash................................................................................................................. 284,505
Receivables:
Fund shares sold................................................................................................... 98,768
Dividends.......................................................................................................... 3,464
Manager for expense reimbursement.................................................................................. 9,751
Deferred organization expenses....................................................................................... 47,677
Other assets......................................................................................................... 2,572
----------
Total assets....................................................................................................... 2,714,029
----------
LIABILITIES
Payables:
Management fee..................................................................................................... 2,032
12b-1 service and distribution fees................................................................................ 944
Administrative services fee........................................................................................ 203
Fund accounting.................................................................................................... 1,210
Transfer agent..................................................................................................... 1,227
Other accrued expenses and liabilities............................................................................... 9,770
----------
Total liabilities.................................................................................................. 15,386
----------
NET ASSETS........................................................................................................... $2,698,643
==========
CLASS A:
Net asset value and redemption price per share ($2,014,616 / 292,626 shares outstanding)............................. $ 6.88
==========
Maximum offering price per share ($6.88 x 100 / 94.25)*.............................................................. $ 7.30
==========
CLASS B:
Net asset value and offering price per share ($684,027 / 99,356 shares outstanding)**................................ $ 6.88
==========
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................... $2,910,979
Accumulated net realized loss on investments and foreign currency transactions..................................... (41,578)
Net unrealized depreciation on investments......................................................................... (170,758)
----------
NET ASSETS........................................................................................................... $2,698,643
==========
</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.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of withholding tax ($1,183)................................................................ $ 34,819
---------
EXPENSES
Management fee............................................................................................ $14,343
Transfer agent............................................................................................ 7,376
Administrative services fee............................................................................... 1,434
Custodian fees............................................................................................ 33,356
Blue Sky fee.............................................................................................. 12,402
Auditing and accounting fees.............................................................................. 12,088
Shareholder reports....................................................................................... 4,570
Amortization of organization expenses..................................................................... 6,602
Fund accounting........................................................................................... 15,094
Trustees' fees............................................................................................ 3,131
12b-1 service and distribution fees
Class A................................................................................................. 2,637
Class B................................................................................................. 3,855
Legal..................................................................................................... 17,884
Other..................................................................................................... 922
---------
135,694
Expenses reimbursed by manager............................................................................ (95,380)
Fees paid indirectly...................................................................................... (5,848)
---------
Net expenses.............................................................................................. 34,466
---------
Net investment income....................................................................................... 353
---------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency transactions........................................ (42,053)
Net unrealized depreciation during the period on investments.............................................. (56,614)
---------
Net loss on investment transactions..................................................................... (98,667)
---------
Net decrease in net assets resulting from operations........................................................ $ (98,314)
=========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 25
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
------------ -----------------
1995 1994
------------ -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income....................................................................... $ 353 $ 92
Net realized loss on investments and foreign currency transactions.......................... (42,053) (4,224)
Net unrealized loss during the period on investments........................................ (56,614) (114,144)
------------ -----------------
Net decrease resulting from operations.................................................... (98,314) (118,276)
------------ -----------------
CLASS A:
Distributions from
Net investment income....................................................................... -- (92)
Net realized gain........................................................................... -- (26)
Capital paid-in............................................................................. (7,792) (444)
------------ -----------------
Total distributions to Class A shareholders............................................... (7,792) (562)
------------ -----------------
Fund share transactions (Note 10):
Net increase resulting from Fund share transactions
Class A................................................................................... 1,545,520 668,626
Class B................................................................................... 565,794 143,647
------------ -----------------
Net increase resulting from Fund share transactions..................................... 2,111,314 812,273
------------ -----------------
Total increase in net assets................................................................. 2,005,208 693,435
NET ASSETS
Beginning of period......................................................................... 693,435 --
------------ -----------------
End of period............................................................................... $2,698,643 $ 693,435
================ ====================
Accumulated undistributed net investment income.............................................. $ -- $ --
================ ====================
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS A ------------ -----------------
SELECTED PER SHARE DATA 1995 1994
------------ -----------------
<S> <C> <C>
Net asset value, beginning of period....................................................... $ 8.37 $ 10.00
------------ -------
Loss from investment operations
Net investment income(a)................................................................... .01 --
Net loss on investment transactions (both realized and unrealized)......................... (1.45) (1.63)
------------ -------
Total from investment operations.......................................................... (1.44) (1.63)
------------ -------
Less distributions from
Capital paid-in............................................................................ .05 --
------------ -------
Total distributions....................................................................... .05 --
------------ -------
Net asset value, end of period............................................................. $ 6.88 $ 8.37
================ ====================
Total return(%)............................................................................ (17.28)(c) (16.10)(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................... $ 2,015 $ 571
Ratio of expenses to average daily net assets
With expense reimbursement and fees paid indirectly(%)(e)................................. 2.20 2.20(d)
Without expense reimbursement and fees paid indirectly(%)(e).............................. 9.26 16.22(d)
Ratio of net investment income to average daily net assets(%)(a)........................... .22 .21(d)
Portfolio turnover rate(%)................................................................. 45 82(d)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS B ------------ -----------------
SELECTED PER SHARE DATA 1995 1994
------------ -----------------
<S> <C> <C>
Net asset value, beginning of period....................................................... $ 8.37 $ 10.00
------------ -------
Loss from investment operations
Net investment loss(a)..................................................................... (.02) (.01)
Net loss on investment transactions (both realized and unrealized)......................... (1.47) (1.62)
------------ -------
Total from investment operations.......................................................... (1.49) (1.63)
------------ -------
Net asset value, end of period............................................................. $ 6.88 $ 8.37
================ ====================
Total return(%)............................................................................ (17.90)(c) (16.20)(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................... $ 684 $ 122
Ratio of expenses to average daily net assets
With expense reimbursement and fees paid indirectly(%)(e)................................. 2.95 2.95(d)
Without expense reimbursement and fees paid indirectly(%)(e).............................. 10.01 16.97(d)
Ratio of net investment loss to average daily net assets(%)(a)............................. (.53) (.54)(d)
Portfolio turnover rate(%)................................................................. 45 82(d)
<CAPTION>
(a) Net investment income (loss) is net of expenses reimbursed by manager.
<S> <C>
(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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
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 and Class B 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.
a. Securities valuation -- Securities for which market quotations are
readily available are stated at market value. Short-term obligations and
commercial paper are valued at amortized cost, which approximates market value.
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 of Trustees (the Board).
Securities so valued amounted to $30,619 (1.13% of net assets) and have been
noted in the investment portfolio as of December 31, 1995.
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. 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.
d. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared and paid in December
by the Fund. In addition, distributions to Class A shareholders are declared
daily at the rate per share of the excess of 12b-1 fees of Class B shares over
Class A shares. Distributions are paid at the earlier of redemption or the last
business day of the year.
e. 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 differ from the characterization of such
distributions determined on a Federal income tax basis.
f. 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.
g. 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, 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.
h. 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 $5,848 under this arrangement.
2. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of 1.00% of its average daily net assets.
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discounts retained by MIFDI was $8,435.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. 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 daily 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
$93,340 and $2,040, respectively.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate of .25% of its average daily net
assets. Class B shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average daily net asset value of Class B shares.
MIFDI 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.
7. 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.
8. 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.
9. SUBSEQUENT EVENT
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. As a result of this change, the net asset value per share of
Class A and Class B are expected to differ.
10. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, 1995 1994*
---------------------- -----------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................... 442,664 $ 2,994,237 68,997 $676,064
Issued on reinvestment of
distributions..................... 834 5,772 58 486
Repurchased........................ (219,064) (1,454,489) (863) (7,924)
-------- ----------- ------ --------
Net increase....................... 224,434 $ 1,545,520 68,192 $668,626
========== ============= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, 1995 1994*
---------------------- -----------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................... 86,962 $581,025 14,649 $143,647
Repurchased........................ (2,256) (15,231) -- --
-------- ----------- ------ --------
Net increase....................... 84,706 $565,794 14,649 $143,647
========== ============= ======= ==========
</TABLE>
* For the period November 1, 1994 (Commencement) to December 31, 1994. At
December 31, 1994, MIMI owned 10,000 Class A shares of the Fund.
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Latin America Strategy Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets and the financial highlights for the period November 1,
1994 (commencement) to December 31, 1994 and for the year ended December 31,
1995. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights for the period
November 1, 1994 (commencement) to December 31, 1994 and for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
ILASF-2-296
<PAGE> 29
DECEMBER 31, 1995 (IVY FUNDS LOGO)
IVY GROWTH WITH INCOME FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Dear Shareholder:
During 1995 the domestic financial markets were extremely favorable
for both equity and fixed income investors. Moderate economic growth coupled
with an absence of inflationary pressure paved the way for lower interest
rates. In January of 1996 the Federal Reserve Board once again lowered the
discount rate, marking the third such cut since last summer. At the same time
that rates were declining, the economy remained strong enough for most
companies to report respectable earnings gains. This combination of earnings
growth, declining interest rates, and a favorable inflation outlook created a
positive environment for the US stock market. Against this backdrop, for the
twelve months ended December 31,1995 Ivy Growth with Income Fund posted a total
return of 24.93% on a net asset value basis. (For the Fund's total return with
sales charge and performance commentary, please refer to the following pages.)
Through the course of the year a number of portfolio changes were
instituted. The Fund's weighting in financial services, which represented a
significant portion of the portfolio at the start of the year, was increased as
many of these companies benefited from the downward trend in interest rates. A
number of new stocks were also added in the healthcare and consumer sectors.
Our emphasis here was on high quality companies, which we consider well
positioned to maintain growth of earnings and dividends should the economy slow
further, or even go into a recession. To make room for these new holdings we
eliminated foreign stocks from the portfolio and reduced our exposure to Real
Estate Investment Trusts (REITs) to 11.4%.
Although Ivy Growth with Income Fund did post a strong gain in 1995,
its performance trailed the Standard & Poor's 500 (S&P 500), which had a total
return of 37.52% for the twelve months ended December 31, 1995. This is
partially a reflection of the Fund's investment approach, which seeks capital
growth, but also emphasizes risk control. This means that in a particularly
strong year, such as 1995, it may be difficult for the Fund to match the
returns of the broader market.
An important aspect of our risk control strategy is to carefully
monitor the portfolio's yield, keeping it above that of the S&P 500. Although
not all of the Fund's stocks have particularly high dividend yields, we offset
this by holding a portion of the Fund in REITs, and also by buying convertible
bonds. We believe the extra income will help provide the Fund with a downside
cushion during weak markets. Similarly, we usually maintain the Fund's average
price/earnings ratio in line with or below the overall market. The final aspect
of our strategy is our focus on higher quality companies, particularly those
that have a record of rising dividends and have well-defined prospects for
future growth.
We believe that over the long term, Ivy Growth with Income Fund should
remain an excellent vehicle for conservative investors who seek equity
exposure, combined with a disciplined approach to controlling risk.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Mackenzie Ivy Investor Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Roy J. Glauber Michael G. Landry, President 1-800-777-6472 Mackenzie Ivy Funds
Michael G. Landry Keith J. Carlson, Vice President Distribution, Inc.
Michael R. Peers C. William Ferris, AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Michael R. Peers, Chairman Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
<PAGE> 30
IVY GROWTH WITH INCOME FUND
PERFORMANCE COMMENTARY
Ivy Growth with Income Fund performed well in 1995 with a total return of
24.93%, but trailed the S&P 500 which had a total return of 37.52% for the same
period. This is a reflection of the Fund's investment approach which seeks
capital growth, but also emphasizes risk control. As a result, the Fund may not
track the performance of the broader market in years of particularly strong
performance, such as 1995. However, the Fund should not be as adversely impacted
in periods of prolonged market weakness. In its ten-year history, Ivy Growth
with Income Fund has had only two down years, the worst of which was a decline
of 2.03%.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (4/84) OF A $10,000
INVESTMENT
[CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B*** & C**
Average Annual
Total Return Average Annual Total Return
-----------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
-----------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------
B: B: B: B:
18.94% 23.94% 18.94% 23.94%
C: C: C: C:
1 Yr. 17.75% 17.75% N/A 23.94% N/ 23.94%
- --------------------------------------------------------------------------------
5 Yr. 13.18% 13.16% -- -- -- --
- --------------------------------------------------------------------------------
10 Yr. 12.35% 12.33% -- -- -- --
- --------------------------------------------------------------------------------
B: B: B: B:
7.89% 9.13% 7.8 9.13%
C: C: C: C:
Since Inception 14.53% 14.52% N/A 11.46% N 11.46%
- --------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class C shares are not available for sale.
***Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Growth with
Income Fund will fluctuate and at redemption may be worth more or less than the
amount of the original investment.
The Lipper Average Growth With Income index and the S&P 500 are unmanaged
indices of stocks which assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses. It is not possible to invest in an
index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B and Class C shares bear the expense of a higher distribution fee
it is expected that the level of performance of the Fund's Class B and Class C
shares will be lower than that of the Fund's Class A shares.
- --------------------------------------------------------------------------------
<PAGE> 31
IVY GROWTH WITH INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS -- 61.7% SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
BASIC INDUSTRIES -- 2.4%
Air Products & Chemicals Inc................ 12,000 $ 633,000
Praxair, Inc................................ 30,000 1,008,750
-----------
1,641,750
-----------
BUSINESS SERVICES -- 1.5%
Reynolds & Reynolds Co. Class A............. 27,800 1,080,725
-----------
CAPITAL GOODS -- 0.8%
General Electric Company.................... 7,400 531,875
-----------
CONSUMER PRODUCTS -- 12.8%
Canandaigua Wine Co. Class A(a)............. 13,172 429,736
Kimberly-Clark Corporation.................. 21,216 1,755,624
Mattel, Inc................................. 41,281 1,269,391
Philip Morris Cos., Inc..................... 5,000 452,500
Premark International, Inc.................. 19,400 982,125
Schweitzer-Mauduit International, Inc.(a)... 25,000 578,125
Stanhome, Inc............................... 22,000 640,750
UST, Inc.................................... 29,000 967,875
Vivra, Inc.(a).............................. 70,500 1,771,313
-----------
8,847,439
-----------
CONSUMER SERVICES -- 3.0%
Disney (Walt) Company....................... 10,000 590,000
Service Corp. International................. 18,000 792,000
Sotheby's Holdings, Inc..................... 25,000 356,250
Viacom Inc. Class A(a)...................... 760 34,865
Viacom Inc. Class B(a)...................... 5,973 282,971
-----------
2,056,086
-----------
ENERGY -- 1.3%
Williams Companies, Inc..................... 20,000 877,500
-----------
FINANCIAL SERVICES -- 15.5%
Advanta Corp. Class B....................... 22,000 800,250
AMBAC, Inc.................................. 15,000 703,125
CTL Credit, Inc.(a)......................... 40,000 545,000
Charles Schwab, Corporation................. 20,000 402,500
Federal Home Loan Mortgage Corp............. 5,500 459,250
Federal National Mortgage Association....... 6,600 819,225
Franklin Resources, Inc..................... 9,500 478,563
Green Tree Financial Corp................... 26,200 691,025
MBIA Inc.................................... 21,600 1,614,600
MBNA Corp................................... 29,000 1,069,375
Mercury Finance Company..................... 40,500 536,625
National Commerce Bancorporation............ 20,000 525,000
Olympic Financial Ltd.(a)................... 10,000 162,500
PMI, The Group Inc.......................... 5,500 248,875
Price (T. Rowe) Associates, Inc............. 11,600 571,300
The Travelers Inc........................... 6,500 408,687
United Asset Management Corporation......... 18,500 709,937
-----------
10,745,837
-----------
HEALTHCARE -- 8.5%
Abbott Laboratories......................... 9,100 379,925
Cardinal Health, Inc........................ 12,019 656,538
Columbia/HCA Healthcare Corp................ 17,400 883,050
Johnson & Johnson........................... 5,500 470,937
Lilly (Eli) & Co............................ 13,200 739,200
Merck & Co., Inc............................ 11,800 774,375
Mid Atlantic Medical Services, Inc.(a)...... 24,500 594,125
Mylan Laboratories.......................... 27,000 634,500
United Healthcare Corp...................... 11,500 747,500
-----------
5,880,150
-----------
RETAIL -- 2.4%
Dollar General Corporation.................. 30,000 622,500
Home Depot, Inc............................. 16,500 789,937
Tandy Corp.................................. 6,439 $ 266,414
-----------
1,678,851
-----------
SPECIALTY -- CHEMICAL -- 0.9%
Englehard Corp.............................. 27,750 603,563
-----------
TECHNOLOGY -- 13.1%
Adaptec, Inc.(a)............................ 14,000 574,000
Adobe Systems, Inc.......................... 21,000 1,302,000
Cabletron Systems Inc.(a)................... 9,250 749,250
Cisco Systems, Inc.(a)...................... 1,500 111,937
Compaq Computer Corp.(a).................... 13,000 617,500
Computer Associates International, Inc...... 22,500 1,279,687
DSC Communications Corp.(a)................. 20,000 737,500
Informix Corporation(a)..................... 23,000 690,000
Intel Corp.................................. 20,000 1,135,000
International Business Machines
Corporation............................... 13,500 1,231,875
MEMC Electronic Materials. Inc.(a).......... 10,000 326,250
Micron Technology, Inc...................... 7,000 277,375
-----------
9,032,374
-----------
TELECOMMUNICATIONS -- 2.8%
AT&T Corporation............................ 8,500 550,375
Allen Group Inc. Class A.................... 15,600 349,050
WorldCom, Inc.(a)........................... 30,000 1,057,500
-----------
1,956,925
-----------
TRANSPORTATION -- 2.1%
Illinois Central............................ 25,000 962,500
Union Pacific Corporation................... 7,300 481,800
-----------
1,444,300
-----------
TOTAL COMMON STOCKS
(COST -- $36,979,603)..................... 46,377,375
-----------
PREFERRED STOCKS -- 1.8%
- --------------------------------------------
Liposome Co. Inc............................ 22,000 869,000
Suncoast Savings & Loan
Association (Series A).................... 26,800 375,200
-----------
TOTAL PREFERRED STOCKS
(COST -- $974,500)........................ 1,244,200
-----------
REAL ESTATE INVESTMENT TRUSTS
(REITS) -- 11.4%
- --------------------------------------------
Developers Diversified Realty Corporation... 21,000 627,375
Duke Realty Investments, Inc................ 12,000 376,500
Health Care Property Investors, Inc......... 13,100 460,137
Healthcare Realty Trust, Inc................ 15,100 347,300
Horizon Outlet Centers...................... 26,000 594,750
Merry Land & Investment Company Inc......... 23,000 543,375
National Golf Properties, Inc............... 33,000 754,875
Saul Centers, Inc........................... 38,500 524,563
Southwestern Properties Trust............... 37,000 494,875
Storage Trust Realty........................ 15,000 339,375
Storage USA, Inc............................ 16,000 522,000
Sun Communities, Inc........................ 36,000 949,500
Thornburg Mortgage Corporation.............. 37,000 582,750
Weingarten Realty Investors................. 21,000 798,000
-----------
TOTAL REITS
(COST -- $7,222,580)...................... 7,915,375
-----------
PAR
BONDS -- 16.4% VALUE
- -------------------------------------------- --------
DOMESTIC CORPORATE BONDS -- 0.4%
General Electric Capital, FRN, 10/29/96..... $500,000 264,845
-----------
CONVERTIBLE BONDS -- 16.0%
Boston Chicken, 4.50%, 02/01/04............. 713,000 848,470
</TABLE>
<PAGE> 32
IVY GROWTH WITH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR
BONDS VALUE VALUE
<S> <C> <C>
- --------------------------------------------------------------------
California Microwave, 5.25%, 12/15/03..... $ 536,000 $ 450,240
Elan International Financial,
0.00%, 10/16/12......................... 900,000 476,091
First Financial Man. Corp, 5.00%,
12/1/99................................. 350,000 568,698
General Instrument Conv., 6.00%,
11/01/99................................ 700,000 765,940
Integrated Health Services Inc.,
6.00%, 01/01/03......................... 600,000 594,600
LSI Logic Corp., 5.50%, 03/15/01.......... 260,000 703,607
Lam Research, 6.00%, 05/01/03............. 200,000 374,500
Office Depot, 0.00%, 11/01/08............. 1,170,000 669,825
Omnicare, Inc., 5.75%, 10/01/03........... 125,000 389,610
Pier 1 Imports Inc., 6.875%, 04/01/02..... 385,000 410,025
Quantum Health Resources,
Inc., 4.75%, 10/01/00................... 400,000 284,000
Schuler Homes Inc., 6.50%, 01/15/03....... 800,000 646,000
Sepracor Inc., 7.00%, 12/02/02............ 950,000 996,313
Softkey Internaitonal, Inc., 5.50%,
11/01/00................................ 800,000 587,408
Starbucks Corp., 4.50%, 08/01/03.......... 400,000 540,000
Sterling Software Inc., 5.75%, 02/01/03... 715,000 1,554,439
United Gaming, Inc., 7.50%, 09/15/03...... 400,000 213,000
-----------
11,072,766
-----------
TOTAL BONDS
(COST -- $10,662,396)................... 11,337,611
-----------
COMMERCIAL PAPER -- 3.1%
- ------------------------------------------
General Electric Capital, 5.46%,
01/02/96................................ 1,533,000 1,532,768
Prudential Funding Corp.,
5.51%, 01/05/96......................... 605,000 604,630
-----------
TOTAL COMMERCIAL PAPER
(COST -- $2,137,398).................... 2,137,398
-----------
TOTAL INVESTMENTS -- 99.8%
(COST -- $57,976,477)(B)................ 69,011,959
OTHER ASSETS, LESS LIABILITIES -- 0.2%.... 152,548
-----------
NET ASSETS -- 100.0%...................... $69,164,507
===========
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income
tax purposes.
FRN -- Floating Rate Note; reflects rate as of December 31, 1995.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $13,707,344
Gross unrealized depreciation..................... (2,671,862)
-----------
Net unrealized appreciation................... $11,035,482
===========
OTHER INFORMATION:
Purchases and sales of securities (other than short-term and U.S.
Government and Government Agency obligations) aggregated $32,849,256
and $41,123,047, respectively, and purchases and sales of U.S.
Government and Government Agency obligations aggregated $13,440,453
and $13,394,844, respectively, for the period ended December 31,
1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 33
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $57,976,477).............................................................. $69,011,959
Receivables:
Fund shares sold.................................................................................................. 119,757
Dividends and interest............................................................................................ 265,964
Deferred organization expenses...................................................................................... 74,125
Other assets........................................................................................................ 60,789
-----------
Total assets...................................................................................................... 69,532,594
-----------
LIABILITIES
Payables:
Fund shares repurchased........................................................................................... 82,050
Management fee.................................................................................................... 49,985
12b-1 service and distribution fees............................................................................... 19,186
Administrative services fee....................................................................................... 5,880
Fund accounting................................................................................................... 5,714
Transfer agent.................................................................................................... 29,722
Due to custodian.................................................................................................... 164,405
Other accrued expenses and liabilities.............................................................................. 11,145
-----------
Total liabilities................................................................................................. 368,087
-----------
NET ASSETS.......................................................................................................... $69,164,507
===========
CLASS A:
Net asset value and redemption price per share ($59,054,078 / 5,377,714 shares outstanding)......................... $ 10.98
===========
Maximum offering price per share ($10.98 X 100 / 94.25)*............................................................ $ 11.65
===========
CLASS B:
Net asset value and offering price per share ($8,868,204 / 807,763 shares outstanding)**............................ $ 10.98
===========
CLASS C:
Net asset value and redemption price per share ($1,242,225 / 113,146 shares outstanding)............................ $ 10.98
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $67,192,197
Accumulated net realized loss on investments and foreign currency transactions.................................... (9,063,172)
Net unrealized appreciation on investments........................................................................ 11,035,482
-----------
NET ASSETS.......................................................................................................... $69,164,507
===========
</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> 34
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of withholding tax...................................................................... $ 1,171,858
Interest............................................................................................... 663,208
-----------
1,835,066
-----------
EXPENSES
Management fee......................................................................................... $515,787
Transfer agent......................................................................................... 280,966
Administrative services fee............................................................................ 60,681
Custodian fees......................................................................................... 31,466
Blue Sky fees.......................................................................................... 35,513
Auditing and accounting fees........................................................................... 13,708
Shareholder reports.................................................................................... 12,501
Amortization of organization expenses.................................................................. 18,729
Fund accounting........................................................................................ 60,915
Trustees' fees......................................................................................... 3,633
12b-1 service and distribution fees
Class A.............................................................................................. 105,143
Class B.............................................................................................. 76,355
Class C.............................................................................................. 18,750
Legal.................................................................................................. 10,185
Other.................................................................................................. 20,485
-----------
Total expenses........................................................................................... 1,264,817
-----------
Net investment income.................................................................................... 570,249
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain (loss) on
Investments and foreign currency transactions........................................................ 3,127,845
Forward foreign currency contracts................................................................... (122,482)
Net unrealized appreciation during the period on
Investments.......................................................................................... 10,477,958
Forward foreign currency contracts................................................................... 8,082
-----------
Net gain on investment transactions.................................................................. 13,491,403
-----------
Net increase in net assets resulting from operations..................................................... $14,061,652
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 35
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income............................................................................. $ 570,249 $ 533,901
Net realized gain on investments and foreign currency transactions................................ 3,005,363 917,837
Net unrealized gain (loss) during the period on
Investments..................................................................................... 10,477,958 (2,244,244)
Forward foreign currency contracts.............................................................. 8,082 (8,082)
----------- -----------
Net increase (decrease) resulting from operations............................................... 14,061,652 (800,588)
----------- -----------
CLASS A:
Distributions from
Net investment income............................................................................. (448,998) (460,715)
In excess of net investment income................................................................ -- (27,017)
Net realized gain................................................................................. (1,323,702) (686,288)
----------- -----------
Total distributions to Class A shareholders..................................................... (1,772,700) (1,174,020)
----------- -----------
CLASS B:
Distributions from
Net investment income............................................................................. (6,337) (37,704)
In excess of net investment income................................................................ -- (5,879)
Net realized gain................................................................................. (198,573) (152,551)
----------- -----------
Total distributions to Class B shareholders..................................................... (204,910) (196,134)
----------- -----------
CLASS C:
Distributions from
Net investment income............................................................................. (1,556) (35,482)
In excess of net investment income................................................................ -- (3,043)
Net realized gain................................................................................. (35,765) (78,998)
----------- -----------
Total distributions to Class C shareholders..................................................... (37,321) (117,523)
----------- -----------
Fund share transactions (Note 10):
Net increase resulting from Fund share transactions
Class A......................................................................................... 22,755,447 5,181,861
Class B......................................................................................... 1,580,170 5,139,958
Class C......................................................................................... (2,088,473) (1,904,539)
----------- -----------
Net increase resulting from Fund share transactions........................................... 22,247,144 8,417,280
----------- -----------
Total increase in net assets........................................................................ 34,293,865 6,129,015
NET ASSETS
Beginning of period............................................................................... 34,870,642 28,741,627
----------- -----------
End of period..................................................................................... $69,164,507 $34,870,642
=========== ===========
Accumulated undistributed net investment loss....................................................... $ -- $ (37,333)
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 36
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
CLASS A -------------------------------------------------------------------
SELECTED PER SHARE DATA 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.08 $ 9.70 $ 9.21 $ 9.74 $ 7.79
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income...................................... .11 .17 .08 .07 .09(a)
Net gain (loss) on investment transactions
(both realized and unrealized)........................... 2.13 (.36) 1.30 .18 2.72
------- ------- ------- ------- -------
Total from investment operations......................... 2.24 (.19) 1.38 .25 2.81
------- ------- ------- ------- -------
Less distributions from
Net investment income...................................... .08 .17 .06 .07 .09
In excess of net investment income......................... -- .01 -- -- --
Net realized gain.......................................... .26 .25 .83 .71 .77
------- ------- ------- ------- -------
Total distributions...................................... .34 .43 .89 .78 .86
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 10.98 $ 9.08 $ 9.70 $ 9.21 $ 9.74
======== ======== ======== ======== ========
Total return(%)(b).......................................... 24.93 (2.03) 15.07 2.61 36.33
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $59,054 $26,017 $22,669 $19,045 $17,063
Ratio of expenses to average daily net assets(%)............ 1.96 1.84 2.14 1.94 1.50(c)
Ratio of net investment income to average daily net
assets(%).................................................. 1.06 1.83 .88 .73 1.10(a)
Portfolio turnover rate(%).................................. 81 36 85 163 113
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE OCTOBER 23, 1993
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
CLASS B ------------------- ----------------
SELECTED PER SHARE DATA 1995 1994 1993
------ ------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.08 $ 9.70 $10.43
------ ------ ------
Income (loss) from investment operations
Net investment income...................................... .03 .09 --
Net gain (loss) on investment transactions (both realized
and unrealized).......................................... 2.13 (.36) .05
------ ------ ------
Total from investment operations......................... 2.16 (.27) .05
------ ------ ------
Less distributions from
Net investment income...................................... .01 .09 .01
In excess of net investment income......................... -- .01 --
Net realized gain.......................................... .25 .25 .77
------ ------ ------
Total distributions...................................... .26 .35 .78
------ ------ ------
Net asset value, end of period.............................. $10.98 $ 9.08 $ 9.70
======= ======= =======================
Total return(%)............................................. 23.94(b) (2.88)(b) .61(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $8,868 $5,849 $ 888
Ratio of expenses to average daily net assets(%)............ 2.75 2.70 3.09(e)
Ratio of net investment income (loss) to average daily net
assets(%).................................................. .27 .97 (.07)(e)
Portfolio turnover rate(%).................................. 81 36 85
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE AUGUST 16, 1993
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
CLASS C(F) ------------------- ----------------
SELECTED PER SHARE DATA 1995 1994 1993
------ ------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.08 $ 9.70 $ 9.83
------ ------ ------
Income (loss) from investment operations
Net investment income...................................... .03 .09 --
Net gain (loss) on investment transactions (both realized
and unrealized).......................................... 2.13 (.36) .73
------ ------ ------
Total from investment operations......................... 2.16 (.27) .73
------ ------ ------
Less distributions from
Net investment income...................................... .01 .09 .06
In excess of net investment income......................... -- .01 --
Net realized gain.......................................... .25 .25 .80
------ ------ ------
Total distributions...................................... .26 .35 .86
------ ------ ------
Net asset value, end of period.............................. $10.98 $ 9.08 $ 9.70
======= ======= =======================
Total return(%)............................................. 23.94(b) (2.88)(b) 7.59(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,242 $3,004 $5,185
Ratio of expenses to average daily net assets(%)............ 2.75 2.70 3.09(e)
Ratio of net investment income (loss) to average daily net
assets(%).................................................. .27 .97 (.07)(e)
Portfolio turnover rate(%).................................. 81 36 85
</TABLE>
(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 daily 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 1.61%.
(d) Total return represents aggregate total return and does not reflect a
sales charge.
(e) Annualized.
(f) Class C shares are not available for sale.
(See Notes to Financial Statements)
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
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 and Class B are authorized; 638,129 Class C 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
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.
a. Securities 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 value. Debt
securities (other than commercial paper and 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 Board.
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
Pursuant to Section 852 of the Internal Revenue Code. The Fund designated
$421,775 as capital gain dividends for its taxable year ended December 31, 1995.
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 prior to the Fund's
acquisition of all the net assets on April 1, 1995 (Note 8) and is subject to
certain limitations on its use. The carryforward expires $3,616,000 in 1997,
$3,616,000 in 1999, and $2,036,000 in 2003.
d. Distributions to shareholders -- Distributions are declared daily and
equally to Class A, Class B, and Class C shares from net investment income and
net realized short-term capital gain. In addition, distributions to Class A
shareholders are declared daily at the rate per share of the excess of 12b-1
fees of Class B and Class C shares over Class A shares. Distributions are paid
at the earlier of redemption or the last business day of the quarter. The final
distribution on the last business day of the year will include any remaining
undistributed net investment income and net realized short-term capital gain, as
well as all undistributed net long-term capital gain realized during the year.
e. 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 differ from the characterization of such
distributions determined on a Federal income tax basis.
f. 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
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
g. Deferred organization expenses -- Expenses incurred by the Fund in
connection with its issuing Class B and Class C shares have been deferred and
are being amortized on a straight-line basis over a five-year period.
h. 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, 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. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of .85% of its average daily net assets.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $22,949.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. In addition, IMI may voluntarily reimburse the Fund's expenses. There
were no required or voluntary expense reimbursements for the year ended December
31, 1995.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fees in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
daily net asset value of shares issued after December 31, 1991. Class B shares
and Class C shares are also subject to an ongoing distribution fee at an annual
rate of .75% of the average daily net asset value attributable to Class B shares
and Class C shares. MIFDI 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.
7. 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> 39
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. ACQUISITION OF MACKENZIE NORTH AMERICAN FUND
On April 1, 1995, the Fund acquired the net assets (valued at $27,815,572)
of Mackenzie North American Fund (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.
9. SUBSEQUENT EVENT
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 C
shares over Class A shares. As a result of this change, the net asset value per
share of Class A, Class B and Class C are expected to differ.
10. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, and Class C were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 995,850 $ 9,779,465 937,845 $ 9,106,665
Issued in connection with
the acquisition of
Mackenzie North American
Fund.................... 2,962,768 27,815,572 -- --
Issued on reinvestment of
distributions........... 132,508 1,422,527 118,493 1,077,640
Repurchased.............. (1,580,020) (16,262,117) (526,186) (5,002,444)
---------- ------------ ---------- ------------
Net increase............. 2,511,106 $ 22,755,447 530,152 $ 5,181,861
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 478,516 $ 4,852,229 675,737 $ 6,300,859
Issued on reinvestment of
distributions........... 17,693 190,075 24,079 219,962
Repurchased.............. (332,940) (3,462,134) (146,815) (1,380,863)
---------- ------------ ---------- ------------
Net increase............. 163,269 $ 1,580,170 553,001 $ 5,139,958
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS C* SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued on reinvestment of
distributions........... 3,107 $ 32,805 11,847 $ 105,918
Repurchased.............. (220,936) (2,121,278) (215,292) (2,010,457)
---------- ------------ ---------- ------------
Net decrease............. (217,829) $ (2,088,473) (203,445) $ (1,904,539)
============ ============== ============ ==============
</TABLE>
* Class C shares are not available for sale.
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth with Income Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the year ended December 31, 1991, were audited by other auditors,
whose report, dated January 31, 1992, expressed an unqualified opinion on the
selected per share data and ratios.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements and financial highlights referred to above present fairly,
in all material respects, the financial position of the Fund as of December 31,
1995, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
IGWIF-2-296
<PAGE> 41
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY NEW CENTURY FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Dear Shareholder:
Ivy New Century Fund performed impressively in 1995. For the twelve
months ended December 31, 1995, the Fund's total return, on a net asset value
basis, was 6.40%. This compares very favorably to the Morgan Stanley Capital
International Emerging Markets "Free" Index, the relevant benchmark, which was
down 6.94% and the average emerging markets fund, which declined by 4.60% for
the same time period, according to Lipper Analytical Services, Inc. (For the
Fund's total return with sales charge and performance commentary, please refer
to the following pages.)
While the focus of Ivy New Century Fund is in developing economies, we
prefer to consider this a high-growth nations fund and have positioned the Fund
accordingly. The largest weighting is in non-Japan Asia where we have invested
49% of the Fund's assets. Also, we have placed 26% in Latin America.
Our research tells us that fundamentals in Asia are generally better
than anywhere else. We believe growth prospects are more predictable, the
political environment is more stable, and the work ethic is stronger. Also the
high-growth momentum for economies and companies is well in place. Markets in
this region are still off their highs of two years ago. Meanwhile, corporate
profit growth has been reasonably good during this time, making valuations
extremely attractive. In addition, as Japanese companies are forced to move
offshore for competitive reasons, their low-cost Asian neighbors should continue
to benefit.
The Hong Kong portion of the portfolio (23%) is selling at ten times
prospective earnings. Ivy New Century Fund has a 5% weighting in Korea where
its high-tech industrial base has been gaining market share from the Japanese.
Indonesia is another market that we believe has good long-term growth
potential and is one of the most attractively valued markets in the China
region.
In Latin America, we believe the greatest opportunities for growth can
be found in Brazil and Argentina and have allocated 10% and 7% of the Fund,
respectively, to these countries. Both countries have focused on privatizing
government-run industries, a key ingredient of economic reform.
We have committed only 2% of the portfolio to Mexico as we believe
investors are overly optimistic about its future prospects. We believe
disappointing corporate earnings in 1996 should be reflected in lower stock
prices and there may be further devaluations of the peso to come.
While there are no guarantees, growth among the world's developing
countries is accelerating, so much so that early into the next century these
countries will likely surpass the mature world in their share of economic
output. Whereas our research indicates that mature economies of the world are
likely to produce growth of 2 1/2-3%, many nations in non-Japan Asia, Latin
America and Eastern Europe will likely grow at two and three times that rate
well into the future. We remind investors with a long-term time horizon, that
high economic growth should lead to high stock market returns--at least if
history is any indication.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
- -------------------------- ---------------------------
Michael G. Landry Michael R. Peers
President Chairman
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Mackenzie Ivy Investor Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Roy J. Glauber Michael G. Landry, President 1-800-777-6472 Mackenzie Ivy Funds
Michael G. Landry Keith J. Carlson, Vice President Distribution, Inc.
Michael R. Peers C. William Ferris, AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Michael R. Peers, Chairman Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
<PAGE> 42
IVY NEW CENTURY FUND PERFORMANCE COMMENTARY
Being tarred with same brush as Mexico, negative investor sentiment in early
1995 led to a sell off in many of the world's high-growth nations. But later in
the year, the tide turned and Ivy New Century Fund finished 1995 on a very
positive note. For the twelve months ended December 31, 1995, the total return
of the Fund was 6.40%. This compares favorably to the Morgan Stanley Capital
International Emerging Markets "Free" Index which was down 6.94%. This
outperformance is due primarily to the Fund's significant under weighting in
Mexico where we have committed only 2% of the Fund's assets. Another
contributing factor to the Fund's strong relative performance was its weighting
in non-Japan Asia and in particular Hong Kong.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (11/94) OF A $10,000
INVESTMENT
[CHART]
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy New Century Fund
will fluctuate and at redemption may be worth more or less than the amount of
the original investment.
The Morgan Stanley Emerging Markets "Free" index is an unmanaged index of stocks
which assumes reinvestment of dividends and, unlike Fund returns, does not
reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
ONE-YEAR PERFORMANCE
[CHART]
<TABLE>
- ------------------------------------------------------------------------------------
IVY NEW CENTURY FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B**
Average Annual
Total Return Average Annual Total Return
------------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
------------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Yr. 0.29% (3.34)% 0.62% 5.62% (3.01)% 1.82%
- ------------------------------------------------------------------------------------
Since Inception (11.54)% (15.73)% (11.09)% (7.56)% (15.28)% (11.93)%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 43
IVY NEW CENTURY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 86.3% SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
AFRICA -- 1.2%
- -------------------------------------------
SOUTH AFRICA -- 1.2%
Anglo American Corporation S.A............. 400 $ 24,139
Rembrandt Group LTD........................ 3,000 28,803
----------
52,942
----------
ASIA/PACIFIC -- 48.7%
- -------------------------------------------
CHINA -- 3.5%
Dazhong Taxi(a)............................ 18,000 13,752
Huaneng Power International,
Inc. ADR(a).............................. 1,200 17,250
Inner Mongolia Erdos Cashmere
Products Co. Ltd. -- B(a)................ 64,000 23,935
Qingling Motors Company -- H............... 106,000 30,844
Shanghai Haixing Shipping -- H............. 128,000 8,608
Shenzhen Konka Electronic -- B............. 26,000 13,282
Shanghai Diesel -- B....................... 26,000 9,620
Shanghai Petro Chemical.................... 400 11,400
Shanghai Post & Telecom -- B(a)............ 43,000 17,114
Tsingtao Brewery -- H...................... 30,000 6,945
----------
152,750
----------
HONG KONG -- 22.9%
Cheung Kong................................ 14,000 85,276
Citic Pacific.............................. 23,000 78,674
Esprit Asia Holdings Ltd................... 140,000 47,979
Gold Peak Industries (Holdings) Ltd........ 109,000 53,919
Guangdong Investments...................... 52,000 31,271
HSBC Holdings.............................. 12,441 188,244
Hong Kong Telecommunications Ltd........... 4,200 74,550
Hopewell Holdings.......................... 108,708 62,561
Jardine Strategic.......................... 15,062 46,090
Jardine Strategic Warrants(a).............. 562 180
Johnson Electric Holdings.................. 37,500 66,925
Li & Fung Ltd.............................. 56,000 49,971
M. C. Packaging (HK) Ltd................... 164,000 58,325
National Mutual Asia....................... 62,000 56,127
Peregrine.................................. 49,000 63,369
Yue Yuen Industrial........................ 152,000 40,297
----------
1,003,758
----------
INDIA -- 0.8%
The India Fund, Inc.(a).................... 4,100 36,388
----------
INDONESIA -- 3.5%
Astra International........................ 15,000 31,161
Bank Dagang Nasional Indonesia............. 26,250 21,525
Chareon Pokphand Indonesia................. 4,000 8,135
PT Hanjaya Mandala Sampoerna............... 3,000 31,227
PT Mulia Industrindo....................... 9,500 26,799
Semen Gresik............................... 12,000 33,588
----------
152,435
----------
KOREA -- 4.8%
The Fidelity Advisor Korea Fund(a)......... 2,000 21,250
Hana Bank.................................. 1,400 28,334
Hyundai Motor Company Ltd. GDR............. 1,562 23,430
Korea Electric Power Corporation(a)........ 1,400 37,450
Korea Fund, Inc............................ 1,900 41,800
Pohang Iron & Steel Ltd.................... 800 17,300
Samsung Electronics Co. GDR(a)............. 425 25,180
Samsung Electronics Co. GDR Voting(a)...... 1 91
Samsung Electronics Co. GDR NV............. 84 4,557
Samsung Electronics Co. GDR Rights......... 10 593
Shinhan Bank............................... 500 11,169
----------
211,154
----------
MALAYSIA -- 2.7%
Arab Malaysian Corporation Berhad.......... 5,000 $ 18,112
DCB Holdings Berhad........................ 6,000 17,482
Genting Berhad............................. 1,000 8,347
Land & General Berhad...................... 11,000 23,822
London & Pacific Insurance
Company Berhad........................... 4,000 17,325
Malayan Banking Berhad..................... 2,000 16,852
Technology Resources Industries
Berhad(a)................................ 5,000 14,765
----------
116,705
----------
PAKISTAN -- 0.3%
Pakistan Investment Fund................... 2,900 15,225
----------
PHILIPPINES -- 1.7%
Benpres Holdings Corp. GDR(a).............. 3,500 17,500
Davao Union Cement Corporation -- B........ 81,000 16,676
Metro Pacific Corporation.................. 110,000 20,339
Universal Robina Corporation............... 41,000 20,320
----------
74,835
----------
SINGAPORE -- 4.3%
Clipsal Industries Limited................. 18,000 40,680
DBS Land Limited........................... 16,000 54,069
Jardine Matheson Holdings Ltd.............. 6,700 45,895
Jurong Shipyard Limited.................... 6,000 46,235
----------
186,879
----------
TAIWAN -- 0.8%
Taiwan Fund Inc............................ 1,750 35,875
----------
THAILAND -- 2.7%
Bank of Ayudhya Ltd........................ 7,000 39,182
Krung Thai Bank Public
Company Limited.......................... 7,300 29,849
Robinson Department Store
Public Company Limited................... 12,000 22,390
Thai Capital Fund.......................... 900 14,175
Thai Fund.................................. 600 13,425
----------
119,021
----------
VIETNAM -- 0.7%
Beta Vietnam Fund(a)....................... 1,850 16,188
Beta Vietnam Fund Warrants(a).............. 370 1,388
The Vietnam Fund(a)........................ 1,100 13,337
----------
30,913
----------
EUROPE -- 7.6%
- -------------------------------------------
FRANCE -- 0.5%
Lyonnaise Des Eaux S.A..................... 140 13,496
Schneider S.A.............................. 300 10,268
----------
23,764
----------
GERMANY -- 0.3%
Volkswagen AG.............................. 40 13,377
----------
HUNGARY -- 0.3%
Danubius Hotels(a)......................... 1,600 15,048
----------
NETHERLANDS -- 0.6%
Unilever ADR............................... 300 25,350
----------
POLAND -- 0.5%
Bank Rozwoju Eksportu S.A.................. 1,550 23,575
----------
PORTUGAL -- 1.7%
Banco Commercial Portugues................. 700 9,519
Banco Portugues de Investimentos........... 600 7,172
Filmes Lusomundo S.A....................... 800 7,404
Lusomundo, SGPS, S.A....................... 1,200 12,830
Sonae Industria E Investimentos............ 1,700 36,339
----------
73,264
----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 44
IVY NEW CENTURY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
SPAIN -- 0.7%
Telefonica de Espana ADR................... 700 $ 29,313
----------
SWEDEN -- 0.3%
Atlas Copco AB -- Series 'B' Free.......... 850 12,797
----------
SWITZERLAND -- 1.5%
Holderbank Financiere Glarus AG Bearer..... 48 36,811
Nestle AG Registered....................... 24 26,537
----------
63,348
----------
TURKEY -- 1.2%
Cimentas A.S............................... 28,000 16,552
Otokar Otobus Karoseri(a).................. 50,000 17,241
Turkiye Garanti Bankasi A.S................ 232,000 19,429
----------
53,222
----------
NORTH AMERICA -- 2.8%
- -------------------------------------------
UNITED STATES -- 2.8%
AT&T Corporation........................... 400 25,900
American International Group, Inc.......... 100 9,250
Basic Petroleum International LTD(a)....... 900 22,500
Morgan Stanley Group, Inc.................. 100 8,050
Occidental Petroleum....................... 500 10,688
The Singer Company N.V..................... 900 25,088
Whirlpool Corporation...................... 400 21,300
----------
122,776
----------
SOUTH AND CENTRAL AMERICA -- 26.0%
- -------------------------------------------
ARGENTINA -- 7.2%
Acindar Ind Argentina S.A.(a).............. 30,000 21,297
Banco Del Sud S.A.(a)...................... 2,200 16,388
Banco Frances Del Rio Plata................ 3,795 33,581
Banco Galicia Y Buenos Aires............... 6,372 33,129
Buenos Aires Embotelladora (BAESA) ADR..... 900 18,563
Cia Naviera Perez Compancciones............ 6,124 32,452
CIADEA S.A. ............................... 4,600 23,916
Dragados Y Construcciones Argentina........ 11,300 37,284
Telefonica De Argentina ADS................ 2,200 59,950
Yacimientos Petroliferos Fiscades
S.A. Sponsored ADR....................... 1,700 36,763
----------
313,323
----------
BRAZIL -- 10.0%
Banco Itau S.A. ........................... 136,000 37,920
Banco Nacional S.A.(c)..................... 2,100,000 40,187
Brasmotor S.A. ............................ 180,000 35,743
Casa Anglo Brasileiras S.A. ............... 700,000 29,528
Centrais Electricas Brasileiras
S.A. Electrobras -- B.................... 138,000 37,341
CESP -- CIA Ener Sao Paulo................. 900,000 26,195
Ericsson Telecomunicacoes.................. 7,200,000 32,594
Marcopolo S.A. -- B(a)..................... 200,000 29,631
Panamerican Beverages, Inc. ADR............ 1,200 38,400
Petrobas................................... 310,000 26,469
Tam Transport Aereos....................... 1,000,000 28,294
Telecomunicacoes Brasileiras
S.A. (Telebras) ADR...................... 1,600 75,800
----------
438,102
----------
CHILE -- 6.8%
Administadora de Fondos de Pensiones
Provida S.A. ADR......................... 1,000 $ 27,625
Banco O'Higgins ADR........................ 1,300 29,900
Banco Osorno Y La Union ADR................ 2,000 27,750
Chilectra S.A. ADR(a)...................... 500 24,185
Chilgener S.A. ADR......................... 1,100 27,913
Endesa S.A. ADR............................ 1,200 27,300
Genesis Chile Fund......................... 637 25,480
Laboratorio Chile ADR...................... 2,000 25,250
Medeco, S.A. ADR........................... 1,000 26,625
Santa Isabel S.A. ADR(a)................... 1,000 24,000
Vina Concha Y Toro S.A. ADR................ 1,700 30,600
----------
296,628
----------
MEXICO -- 2.0%
Cementos de Mexico S.A. 'B'................ 3,600 12,762
Grupo Financiero Banamex Accival
S.A. de CV 'B' (Banacci)................. 7,200 12,039
Grupo Financiero Banamex
Accival S.A. de CV 'L'................... 360 527
Grupo Mexicano Series 'L' ADS(a)........... 1,400 3,675
Grupo Posadas S.A. -- 'A'(a)............... 69,000 26,831
Telefonos de Mexico S.A. ADR Class L....... 1,000 31,875
----------
87,709
----------
TOTAL EQUITY SECURITIES -- 86.3%
(COST -- $3,755,288)(B).................. 3,780,476
OTHER ASSETS, LESS LIABILITIES -- 13.7%.... 600,213
----------
NET ASSETS -- 100%......................... $4,380,689
==========
ADR -- American Depository Receipt
ADS -- American Depository Share
GDR -- Global Depository Receipt
NV -- Non-voting
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income tax purposes.
(c) Securities valued in good faith by the Valuation Committee of
the Board of Trustees. The cost of these securities at December
31, 1995 aggregated $42,742. See Note 1 of the Notes to the
Financial Statements.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $ 347,238
Gross unrealized depreciation...................... (322,050)
----------
Net unrealized appreciation.................... $ 25,188
==========
OTHER INFORMATION:
Purchases and sales of securities other than short-term obligations
aggregated $3,157,364 and $245,997, respectively, for the period
ended December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 45
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $3,755,288)................................................................ $3,780,476
Cash................................................................................................................. 494,834
Receivables:
Fund shares sold................................................................................................... 67,343
Dividends.......................................................................................................... 6,472
Manager for expense reimbursement.................................................................................. 8,889
Deferred organization expenses....................................................................................... 37,830
Other assets......................................................................................................... 2,478
----------
Total assets....................................................................................................... 4,398,322
----------
LIABILITIES
Payables:
Management fee..................................................................................................... 3,456
12b-1 service and distribution fees................................................................................ 1,159
Administrative services fee........................................................................................ 345
Fund accounting.................................................................................................... 1,214
Transfer agent..................................................................................................... 1,135
Other accrued expenses and liabilities............................................................................... 10,324
----------
Total liabilities.................................................................................................. 17,633
----------
NET ASSETS........................................................................................................... $4,380,689
==========
CLASS A:
Net asset value and redemption price per share ($3,435,320 / 379,620 shares outstanding)............................. $ 9.05
==========
Maximum offering price per share ($9.05 X 100 / 94.25)*.............................................................. $ 9.60
==========
CLASS B:
Net asset value and offering price per share ($945,369 / 104,469 shares outstanding)**............................... $ 9.05
==========
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................... $4,354,168
Accumulated net realized gain on investments and foreign currency transactions..................................... 1,333
Net unrealized appreciation on investments......................................................................... 25,188
----------
NET ASSETS........................................................................................................... $4,380,689
==========
</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> 46
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of withholding tax ($2,355)................................................................. $ 48,041
--------
EXPENSES
Management fee............................................................................................. $19,712
Transfer agent............................................................................................. 7,918
Administrative services fee................................................................................ 1,971
Custodian fees............................................................................................. 35,696
Blue Sky fee............................................................................................... 12,105
Auditing and accounting fees............................................................................... 12,087
Shareholder reports........................................................................................ 4,476
Amortization of organization expenses...................................................................... 5,770
Fund accounting............................................................................................ 15,112
Trustees' fees............................................................................................. 3,133
12b-1 service and distribution fees
Class A.................................................................................................. 3,888
Class B.................................................................................................. 4,160
Legal...................................................................................................... 17,746
Other...................................................................................................... 915
--------
144,689
Expenses reimbursed by manager............................................................................. (91,226)
Fees paid indirectly....................................................................................... (6,966)
--------
Net expenses............................................................................................... 46,497
--------
Net investment income........................................................................................ 1,544
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions......................................... 36,055
Net unrealized appreciation during the period on investments............................................... 112,073
--------
Net gain on investment transactions...................................................................... 148,128
--------
Net increase in net assets resulting from operations......................................................... $149,672
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 47
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
------------ -----------------
1995 1994
------------ -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income........................................................................ $ 1,544 $ 379
Net realized gain on investments and foreign currency transactions........................... 36,055 3
Net unrealized appreciation (depreciation) during the period on investments.................. 112,073 (86,885)
---------- ---------
Net increase (decrease) resulting from operations.......................................... 149,672 (86,503)
---------- ---------
CLASS A:
Distributions from
Net investment income........................................................................ (1,544) (379)
Net realized gain............................................................................ (28,547) (559)
In excess of net realized gain............................................................... (9,760) --
---------- ---------
Total distributions to Class A shareholders................................................ (39,851) (938)
---------- ---------
CLASS B:
Distributions from
Net realized gain............................................................................ (7,427) --
---------- ---------
Total distributions to Class B shareholders................................................ (7,427) --
---------- ---------
Fund share transactions (Note 9):
Net increase resulting from Fund share transactions
Class A.................................................................................... 2,771,336 685,350
Class B.................................................................................... 774,690 134,360
---------- ---------
Net increase resulting from Fund share transactions...................................... 3,546,026 819,710
---------- ---------
Total increase in net assets................................................................... 3,648,420 732,269
NET ASSETS
Beginning of period.......................................................................... 732,269 --
---------- ---------
End of period................................................................................ $4,380,689 $ 732,269
========== =========
Accumulated undistributed net investment loss.................................................. $ -- $ (556)
========== =========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 48
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS A ------------ -----------------
SELECTED PER SHARE DATA 1995 1994
------------ -----------------
<S> <C> <C>
Net asset value, beginning of period..................................................... $ 8.64 $ 10.00
------ -------
Income (loss) from investment operations
Net investment income(a)................................................................. .01 --
Net gain (loss) on investment transactions (both realized and unrealized)................ .54 (1.36)
------ -------
Total from investment operations....................................................... .55 (1.36)
------ -------
Less distributions from
Net investment income.................................................................... .01 --
Net realized gain........................................................................ .10 --
In excess of net realized gain........................................................... .03 --
------ -------
Total distributions.................................................................... .14 --
------ -------
Net asset value, end of period........................................................... $ 9.05 $ 8.64
====== =======
Total return(%).......................................................................... 6.40(b) (13.50)(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................. $3,435 $ 611
Ratio of expenses to average daily net assets
With expense reimbursement and fees paid indirectly(%)(e).............................. 2.20 2.20(d)
Without expense reimbursement and fees paid indirectly(%)(e)........................... 7.18 20.74(d)
Ratio of net investment income to average daily net assets(%)(a)......................... .24 .52(d)
Portfolio turnover rate(%)............................................................... 14 0(d)
</TABLE>
(See Notes to Financial Statements)
<PAGE> 49
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS B ------------ -----------------
SELECTED PER SHARE DATA 1995 1994
------------ -----------------
<S> <C> <C>
Net asset value, beginning of period..................................................... $ 8.64 $ 10.00
------ -------
Income (loss) from investment operations
Net investment loss(a)................................................................... (.02) --
Net gain (loss) on investment transactions (both realized and unrealized)................ .51 (1.36)
------ -------
Total from investment operations....................................................... .49 (1.36)
------ -------
Less distributions from
Net realized gain........................................................................ .08 --
------ -------
Total distributions.................................................................... .08 --
------ -------
Net asset value, end of period........................................................... $ 9.05 $ 8.64
====== =======
Total return(%).......................................................................... 5.62(b) (13.60)(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................. $ 945 $ 121
Ratio of expenses to average daily net assets
With expense reimbursement and fees paid indirectly(%)(e).............................. 2.95 2.95(d)
Without expense reimbursement and fees paid indirectly(%)(e)........................... 7.93 21.49(d)
Ratio of net investment loss to average daily net assets(%)(a)........................... (.51) (.23)(d)
Portfolio turnover rate(%)............................................................... 14 0(d)
(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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS
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 and Class B 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.
a. Securities valuation -- Securities for which market quotations are
readily available are stated at market value. Short-term obligations and
commercial paper are valued at amortized cost, which approximates market value.
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 of Trustees (the Board).
Securities so valued amounted to $40,187 (.92% of net assets) and have been
noted in the investment portfolio as of December 31, 1995.
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
d. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared and paid in December
by the Fund. In addition, distributions to Class A shareholders are declared
daily at the rate per share of the excess of 12b-1 fees of Class B shares over
Class A shares. Distributions are paid at the earlier of redemption or the last
business day of the year.
e. 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 differ from the characterization of such
distributions determined on a Federal income tax basis.
f. 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.
g. 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 currencies 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.
h. 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 $6,966 under this arrangement.
2. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of 1.00% of its average daily net assets.
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $14,500.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. 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 daily 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
$87,348 and $3,878, respectively.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate of .25% of its average daily net
assets. Class B shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average daily net asset value of Class B shares.
MIFDI 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.
7. 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.
8. SUBSEQUENT EVENT
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. As a result of this change, the net asset value per share for
Class A and Class B are expected to differ.
9. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, 1995 1994*
-------------------- -----------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................. 347,829 $3,107,775 71,371 $691,543
Issued on reinvestment of
distributions....................... 4,320 38,927 57 494
Repurchased.......................... (43,244) (375,366) (713) (6,687)
------- ---------- ------ --------
Net increase......................... 308,905 $2,771,336 70,715 $685,350
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, 1995 1994*
-------------------- -----------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................. 95,175 $ 816,806 14,050 $134,420
Issued on reinvestment of
distributions....................... 798 7,193 -- --
Repurchased.......................... (5,547) (49,309) (7) (60)
------- ---------- ------ --------
Net increase......................... 90,426 $ 774,690 14,043 $134,360
======= ========== ====== ========
</TABLE>
* For the period November 1, 1994 (Commencement) to December 31, 1994. At
December 31, 1994, MIMI owned 10,000 Class A shares of the Fund.
<PAGE> 52
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy New Century Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets and the financial highlights for the period November 1,
1994 (commencement) to December 31, 1994 and for the year ended December 31,
1995. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights for the period
November 1, 1994 (commencement) to December 31, 1994 and for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
INCF-2-296
<PAGE> 53
DECEMBER 31,1995 [IVY FUNDS LOGO]
IVY CANADA FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Dear Shareholder:
Ivy Canada Fund has maintained its focus on the natural resources sector
and offers investors the opportunity to participate in what we believe are
Canada's most important industries and market sectors. In general, resource
companies are benefitting from continued world demand, tighter supply
conditions, an undervalued Canadian dollar, and most importantly, more
profitable commodity prices.
Because of its concentration in natural resources and industrial
commodities, Ivy Canada Fund trailed the Toronto Stock Exchange 300 (TSE 300),
its most relevant benchmark, in 1995. For the twelve months ended December 31,
1995, the Fund's total return, on a net asset value basis, was 6.37% as
compared to the TSE 300, which was up 17.68% for the same period. (For the
Fund's total return with sales charge and performance commentary, please refer
to the following pages.)
Paper and forest products remain the Fund's greatest sector weighting. Our
research indicates that the industry is experiencing solid earnings and cash
flow. Pulp and chip prices have receded recently but we expect prices will firm
once inventories are reduced in the coming months. Newsprint margins, at over
30%, are now at their highest level in fifteen years. Given strong balance
sheets, we believe the large free cash flow generated could lead to share buy
backs, increased dividends, productivity enhancements and more takeovers.
Copper and aluminum prices have softened recently but our research
indicates they remain at very profitable levels. Low inventories for most
metals suggest prices should remain firm. The price of gold recently broke out
of its trading range. We doubled the Fund's gold exposure and will respond to
changes in prices in the context of what we believe is an improved long-term
trend. Notwithstanding our outlook for more muted economic growth, we continue
to see reasonable opportunity and excellent value in the steel sector.
The energy sector has been revived by the recent cold weather. Natural gas
storage is at an extremely low level, leading to better prices and higher
future demand for producers. We believe that oil prices, however, are not
likely to rise even with Iraq coming back to the market. Ivy Canada Fund holds
significant positions in companies that we believe have strong balance sheets,
are demonstrating above average growth, and that are trading below net asset
value and at low cash flow multiples.
In Canada, foreign and domestic investors understandably became
preoccupied with the Quebec Referendum, which created selling pressures, but by
year-end the stock market had rebounded to pre-Referendum levels.
Where declining interest rates and growth in technology provided market
leadership in 1995, we believe going forward the resource and export-oriented
sectors should enjoy a period of better relative performance with a
strengthening in world growth. We believe that the Canadian stock market, and
Canadian resource companies in particular, should be the direct beneficiary of
this growth. This should bode well for Ivy Canada Fund.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
- --------------------------- ---------------------------
Michael G. Landry Michael R. Peers
President Chairman
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Mackenzie Ivy Investor Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Roy J. Glauber Michael G. Landry, President 1-800-777-6472 Mackenzie Ivy Funds
Michael G. Landry Keith J. Carlson, Vice President Distribution, Inc.
Michael R. Peers C. William Ferris, AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Michael R. Peers, Chairman Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
<PAGE> 54
IVY CANADA FUND PERFORMANCE COMMENTARY
For the period ended December 31, 1995, Ivy Canada Fund's total return was 6.37%
as compared to the Toronto Stock Exchange 300 (TSE 300), which had a total
return of 17.68% for the same period. Unlike Ivy Canada Fund, which is over
weighted in resource and commodity stocks, the TSE 300 is weighted more toward
banks, financial services companies and other industries, which were the
beneficiary of declining interest rates in 1995.
PERFORMANCE COMPARISONS OF THE
FUND SINCE INCEPTION (11/87)
OF A $10,000 INVESTMENT
[CHART]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
IVY CANADA FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B**
Average Annual
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
-------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Yr. 0.26% (.08)% 0.74% 5.74% 0.39% 5.39%
- -----------------------------------------------------------------------------------
5 Yr. 3.29% 3.22% -- -- -- --
- -----------------------------------------------------------------------------------
Since Inception 1.18% 0.71% (6.49)% (4.28)% (6.67)% (4.47)%
- -----------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Canada Fund will
fluctuate and at redemption may be worth more or less than the amount of the
original investment.
The Toronto Stock Exchange 300 is an unmanaged index of Canadian stocks which
assumes reinvestment of dividends and, unlike Fund returns, does not reflect any
fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
- --------------------------------------------------------------------------------
<PAGE> 55
IVY CANADA FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS AND WARRANTS -- 86.8% SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
BASIC INDUSTRIES -- 6.6%
Camberly Energy, Ltd.(a).................. 157,600 $ 132,723
Enscor, Inc.(a)........................... 79,999 64,442
Noranda Inc............................... 10,000 205,961
Nova Corporation.......................... 25,000 201,384
Quno Corporation(a)....................... 20,000 424,737
Stelco Inc. Series A Convertible(a)....... 75,000 329,538
-----------
1,358,785
-----------
CAPITAL GOODS -- 2.8%
CHC Helicopter Corporation Class A........ 150,000 576,691
-----------
CONSUMER NON-DURABLES -- 6.8%
Slater Industries Inc. ................... 38,800 369,375
Stone Consolidated Corp.(a)............... 25,000 320,384
Teck Corp. Class B........................ 25,000 487,441
William Resources, Inc.(a)................ 300,000 204,313
-----------
1,381,513
-----------
CONSUMER SERVICES -- 0.9%
Acklands Ltd.(a).......................... 15,000 126,323
Hard Suits, Inc.(a)....................... 62,000 56,754
-----------
183,077
-----------
ENERGY -- 15.1%
Blue Range Resources(a)................... 43,718 384,179
Canadian Conquest Exploration
Co. Ltd.(a)............................. 776,200 608,205
Denbury Resources(a)...................... 101,400 304,449
HCO Ltd. Energy(a)........................ 150,000 175,753
Maxx Petroleum Ltd(a)..................... 25,200 35,061
Olympia Energy, Inc. Class A(a)........... 725,000 414,119
Penn West Petroleum Ltd.(a)............... 70,000 352,422
Petromet Resources Ltd.(a)................ 75,000 216,946
Pointer Exploration(a).................... 100,000 139,138
Torrington Resources Ltd.(a).............. 107,500 301,115
Truax Resources Corp. Class A(a).......... 250,000 164,769
-----------
3,096,156
-----------
ENERGY SERVICES -- 3.1%
Artisan Drilling Ltd...................... 45,600 108,529
Ballistic Energy(a)....................... 125,000 526,345
-----------
634,874
-----------
MINES & METALS -- 18.6%
Aurex Resources Corporation(a)............ 619,800 59,005
Azco Mining, Inc.(a)...................... 50,000 45,403
Chase Resource Corporation(a)............. 175,000 205,046
Dakota Mining Corp.(a).................... 130,000 190,399
Exall Resources Ltd.(a)................... 300,000 101,058
Golden Knight Resources, Inc.(a).......... 100,000 576,691
Inco Ltd.................................. 12,500 413,066
International Curator Resources,
Ltd.(a)................................. 50,000 366,153
Kerr-Addison Mines Ltd.................... 20,000 400,937
Novicourt, Inc.(a)........................ 30,000 109,846
Princeton Mining Corp.(a)................. 389,750 114,166
Princeton Mining Warrants(a).............. 151,800 10,005
Redfern Resources Ltd.(a)................. 150,000 197,723
Stampeder Exploration Ltd.(a)............. 150,000 659,075
Trimin Enterprises, Inc.(a)............... 63,600 186,299
Western Garnet Company Ltd.(a)............ 70,000 174,289
-----------
3,809,161
-----------
PAPER & FOREST -- 13.4%
Ainsworth Lumber Company(a)............... 77,500 411,464
Alliance Forest Products, Inc.(a)......... 30,000 527,260
H.J. Forest Products, Inc.(a)............. 88,400 $ 318,824
Noranda Forest Inc........................ 30,000 194,976
St. Laurent Paperboard Inc.(a)............ 25,000 334,114
Tembec Inc. Class A(a).................... 22,750 181,177
Timberwest Forest Ltd..................... 40,000 417,414
Weldwood of Canada Ltd.................... 4,900 113,928
West Fraser Timber Co. Ltd................ 11,000 249,716
-----------
2,748,873
-----------
PRECIOUS METALS -- 9.0%
Aber Resources, Ltd.(a)................... 20,000 126,323
Goldcorp Inc. Class A..................... 40,000 472,337
Orvana Minerals Corporation(a)............ 125,000 480,576
Platinova A/S(a).......................... 66,700 85,478
Platinova Resources Ltd.(a)............... 152,000 189,228
REA Gold Corporation(a)................... 225,000 494,306
-----------
1,848,248
-----------
TECHNOLOGY -- 9.9%
Electrohome Ltd. Class Y.................. 24,000 190,033
Helix Circuits Inc.(a).................... 300,000 35,152
Offshore Systems International Ltd.(a).... 367,668 686,576
Offshore Systems International
Ltd. Special Warrants(a)................ 150,000 247,153
Semi-Tech Corporation..................... 125,000 869,613
-----------
2,028,527
-----------
TRANSPORTATION -- 0.6%
Canadian Airlines Corporation(a).......... 50,000 122,661
-----------
TOTAL COMMON STOCKS
(COST -- $20,053,664)................... 17,788,566
-----------
SHORT-TERM U.S. GOVERNMENT PAR
OBLIGATIONS -- 12.6% VALUE
- ------------------------------------------ ----------
U.S. Treasury Bill, 5.37%, 02/01/96....... $ 100,000 99,544
U.S. Treasury Bill, 5.37%, 02/01/96....... 1,250,000 1,244,289
U.S. Treasury Bill, 5.39%, 02/15/96....... 200,000 198,670
U.S. Treasury Bill, 5.42%, 02/15/96....... 150,000 148,996
U.S. Treasury Bill, 5.36%, 02/22/96....... 600,000 595,416
U.S. Treasury Bill, 5.32%, 03/07/96....... 250,000 247,589
U.S. Treasury Bill, 4.98%, 03/21/96....... 50,000 49,453
-----------
TOTAL SHORT-TERM U.S. GOVERNMENT
OBLIGATIONS (COST -- $2,583,957)........ 2,583,957
-----------
TOTAL INVESTMENTS -- 99.4%
(COST -- $22,637,621)(B)................ 20,372,523
OTHER ASSETS, LESS LIABILITIES -- 0.6%.... 122,051
-----------
NET ASSETS -- 100%........................ $20,494,574
===========
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income tax purposes.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 2,548,165
Gross unrealized depreciation..................... (4,813,263)
-----------
Net unrealized depreciation................... $(2,265,098)
===========
OTHER INFORMATION:
Purchases and sales of investments (excluding short-term
obligations) aggregated $3,903,789 and $12,407,625, respectively,
for the year ended December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 56
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $22,637,621).............................................................. $20,372,523
Cash................................................................................................................ 164,140
Receivables:
Fund shares sold.................................................................................................. 13,518
Dividends......................................................................................................... 13,988
Manager for expense reimbursement................................................................................. 2,924
Deferred organization expenses...................................................................................... 27,888
Other assets........................................................................................................ 7,557
-----------
Total assets...................................................................................................... 20,602,538
-----------
LIABILITIES
Payables:
Distributions to shareholders..................................................................................... 45,312
Fund shares repurchased........................................................................................... 17,119
Management and advisory fees...................................................................................... 14,563
12b-1 service and distribution fees............................................................................... 6,785
Administrative services fee....................................................................................... 1,713
Fund accounting................................................................................................... 2,613
Transfer agent.................................................................................................... 15,921
Other accrued expenses and liabilities.............................................................................. 3,938
-----------
Total liabilities................................................................................................. 107,964
-----------
NET ASSETS.......................................................................................................... $20,494,574
===========
CLASS A:
Net asset value and redemption price per share ($19,353,039 / 2,101,262 shares outstanding)......................... $ 9.21
===========
Maximum offering price per share ($9.21 x 100 / 94.25)*............................................................. $ 9.77
===========
CLASS B:
Net asset value and offering price per share ($1,141,535 / 123,983 shares outstanding)**............................ $ 9.21
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $22,485,604
Accumulated net realized gain on investments and foreign currency transactions.................................... 459,535
Accumulated undistributed net investment loss..................................................................... (185,467)
Net unrealized depreciation on investments........................................................................ (2,265,098)
-----------
NET ASSETS.......................................................................................................... $20,494,574
===========
</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 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of withholding tax ($19,073)............................................................. $ 111,480
Interest................................................................................................ 37,112
----------
148,592
----------
EXPENSES
Management fee.......................................................................................... $ 96,041
Advisory fee............................................................................................ 67,229
Transfer agent.......................................................................................... 181,036
Administrative services fee............................................................................. 19,208
Custodian fees.......................................................................................... 21,828
Blue Sky fees........................................................................................... 41,797
Auditing and accounting fees............................................................................ 25,020
Shareholder reports..................................................................................... 6,222
Amortization of organization expenses................................................................... 4,760
Fund accounting......................................................................................... 32,399
Trustees' fees.......................................................................................... 4,058
12b-1 service and distribution fees
Class A............................................................................................... 73,233
Class B............................................................................................... 8,964
Legal................................................................................................... 25,150
Other................................................................................................... 18,942
----------
625,887
Expenses reimbursed by manager............................................................................ (63,466)
----------
Net expenses............................................................................................ 562,421
----------
Net investment loss....................................................................................... (413,829)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions...................................... 1,423,512
Net unrealized appreciation during the period on investments............................................ 20,707
----------
Net gain on investment transactions................................................................... 1,444,219
----------
Net increase in net assets resulting from operations...................................................... $1,030,390
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 58
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations:
Net investment loss............................................................................... $ (413,829) $ (290,722)
Net realized gain (loss) on investments and foreign currency transactions......................... 1,423,512 (478,598)
Net unrealized gain (loss) during the period on investments....................................... 20,707 (1,750,459)
------------ ------------
Net increase (decrease) resulting from operations............................................... 1,030,390 (2,519,779)
------------ ------------
CLASS A:
Distributions from
Net realized gain................................................................................. (519,054) --
Capital paid-in................................................................................... -- (89,672)
------------ ------------
Total distributions to Class A shareholders..................................................... (519,054) (89,672)
------------ ------------
CLASS B:
Distributions from
Net realized gain................................................................................. (23,912) --
------------ ------------
Total distributions to Class B shareholders..................................................... (23,912) --
------------ ------------
Fund share transactions (Note 11):
Net increase (decrease) resulting from Fund share transactions
Class A......................................................................................... (4,372,745) (8,714,477)
Class B......................................................................................... 343,265 583,879
------------ ------------
Net increase (decrease) resulting from Fund share transactions................................ (4,029,480) (8,130,598)
------------ ------------
Total decrease in net assets........................................................................ (3,542,056) (10,740,049)
NET ASSETS
Beginning of period............................................................................... 24,036,630 34,776,679
------------ ------------
End of period..................................................................................... $20,494,574 $24,036,630
============== ===============
Accumulated undistributed net investment loss....................................................... $ (185,467) $ (290,722)
============== ===============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 59
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX FOR THE EIGHT FOR THE
YEAR ENDED MONTHS ENDED MONTHS ENDED YEAR ENDED
CLASS A DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30, JUNE 30, OCTOBER 31,
SELECTED PER SHARE ------------ ------------ ----------------------------------- ------------- -----------
DATA 1995 1994 1994 1993 1992 1991 1990
------------ ------------ ------- ------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $ 8.90 $ 9.85 $ 10.04 $ 7.43 $ 8.89 $ 8.55 $ 10.53
------------ ------------ ------- ------- ------- ------------- -----------
Income (loss) from
investment
operations
Net investment
income (loss).... (.19)(a) (.11) (.11) (.01) (.12) (.03) .02
Net gain (loss) on
investment
transactions
(both realized
and
unrealized)...... .75 (.81) .24 3.35 (1.34) .41 (1.98)
------------ ------------ ------- ------- ------- ------------- -----------
Total from
investment
operations..... .56 (.92) .13 3.34 (1.46) .38 (1.96)
------------ ------------ ------- ------- ------- ------------- -----------
Less distributions
from
Net investment
income........... -- -- -- -- -- -- .02
Net realized
gain............. .25 -- .31 .73 -- .04 --
Capital paid-in... -- .03 .01 -- -- -- --
------------ ------------ ------- ------- ------- ------------- -----------
Total
distributions... .25 .03 .32 .73 -- .04 .02
------------ ------------ ------- ------- ------- ------------- -----------
Net asset value,
end of period.... $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43 $ 8.89 $ 8.55
================ ================= ======== ======== ======== ================ ==============
Total return(%)... 6.37(b) (9.38)(c) 1.05(b) 47.10(b) (16.42)(b) 6.59(b)(d) (18.69)(b)
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of
period (in
thousands)....... $ 19,353 $ 23,296 $34,549 $30,971 $11,280 $14,369 $14,268
Ratio of expenses
to average
daily net
assets(%)........ 2.90(e) 2.44(d) 2.05 2.63 2.70 2.78(d) 2.89
Ratio of net
investment income
(loss)
to average daily
net assets(%).... (2.13)(a) (1.85)(d) (1.09) (1.41) (1.39) (.52)(d) .16
Portfolio turnover
rate(%).......... 21 36(d) 62 32 2 4(d) 0
</TABLE>
(See Notes to Financial Statements)
<PAGE> 60
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 1, 1994
FOR THE FOR THE SIX (COMMENCEMENT)
YEAR ENDED MONTHS ENDED TO
DECEMBER 31, DECEMBER 31, JUNE 30,
CLASS B ------------ ------------ ----------------
SELECTED PER SHARE DATA 1995 1994 1994
------------ ------------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period................................. $ 8.90 $ 9.85 $10.16
------ ------ ------
Income (loss) from investment operations
Net investment loss.................................................. (.20)(a) (.09) (.02)
Net (gain) loss on investment transactions (both realized and
unrealized)......................................................... .71 (.86) (.29)
------ ------ ------
Total from investment operations.................................... .51 (.95) (.31)
------ ------ ------
Less distributions from
Net realized gain.................................................... .20 -- --
------ ------ ------
Total distributions................................................. .20 -- --
------ ------ ------
Net asset value, end of period....................................... $ 9.21 $ 8.90 $ 9.85
================ ================= ===================
Total return(%)...................................................... 5.74(b) (9.64)(c) (3.05)(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............................. $1,142 $ 741 $ 227
Ratio of expenses to average daily net assets(%)..................... 3.50(e) 3.03(d) 2.68(d)
Ratio of net investment loss to average daily net assets(%).......... (2.73)(a) (2.44)(d) (1.72)(d)
Portfolio turnover rate.............................................. 21 36(d) 62
(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 daily 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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS
Ivy Canada Fund (the Fund) (formerly Mackenzie Canada Fund d/b/a Ivy Canada
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 and Class B
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.
a. Securities 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 value. Debt
securities (other than commercial paper and 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 Board.
b. Restricted securities -- The Fund may invest in securities which are
restricted as to public sale. Such assets are valued at fair value as determined
in good faith by the Valuation Committee of the Board. The risk of investing in
such securities is generally greater than the risk of investing in securities of
widely held, publicly traded companies. At December 31, 1995, the Fund held
150,000 Offshore Systems International Limited Special Warrants, which were
acquired on October 1, 1995 at a cost of $189,732, with a determined value of
$247,153 (1.2% of net assets). The underlying securities were registered for
public sale on February 9, 1996.
c. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
d. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$34,000 as of June 30, 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 in 2003.
e. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared in June. In
addition, distributions to Class A shareholders are declared daily at the rate
per share of the excess of 12b-1 fees of Class B over Class A shares.
Distributions are paid at the earlier of redemption or the last designated day
of the taxable year. An additional distribution may be declared in December, if
necessary, to comply with requirements imposed by the Tax Reform Act of 1986.
f. 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 differ from the characterization of such
distributions determined on a Federal income tax basis.
g. 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
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
h. 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.
i. 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, 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. MANAGEMENT AND DISTRIBUTION
Effective February 1, 1995, the Fund pays Ivy Management, Inc. (IMI), a
wholly owned subsidiary of Mackenzie Investment Management Inc. (MIMI), a
monthly management fee at the annual rate of .50% of its average daily net
assets. The Fund paid MIMI, the previous manager, $9,423 for January 1995.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $7,824.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
12b-1 fees, interest, taxes, brokerage commissions, extraordinary expenses and
other expenses subject to approval by state securities administrators) to 2.5%
of the first $30 million of the average daily net assets; 2.0% of the next $70
million of the average daily net assets; and 1.5% of the remaining average daily
net assets. In addition, the Manager may voluntarily reimburse a Fund's
expenses. Expenses reimbursed by manager reflected in the Statement of
Operations consist of a required reimbursement.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
daily net asset value. Class A shares are also subject to an ongoing
distribution fee at an annual rate of .15% of the average daily net asset value
of Class A shares. Class B shares are also subject to an ongoing distribution
fee at an annual rate of .75% of the average daily net asset value attributable
to Class B shares. MIFDI 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.
7. INVESTMENT ADVISORY SERVICES
Mackenzie Financial Corporation (MFC) in Toronto, Ontario, Canada is the
Investment Advisor of the Fund. MFC is the parent of MIMI. For its services, MFC
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
receives a monthly fee at the annual rate of .35% of the Fund's average daily
net assets. The fee is collected from the Fund and remitted to MFC by MIMI.
8. 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.
9. 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, adopted 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.
10. SUBSEQUENT EVENT
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. As a result of this change, the net asset value per share of
Class A and Class B are expected to differ.
11. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 926,528 $ 8,132,834 159,996 $ 1,571,015
Issued on reinvestment of
distributions........... 46,215 419,175 7,472 66,504
Repurchased.............. (1,490,048) (12,924,754) (1,058,167) (10,351,996)
---------- ------------ ---------- ------------
Net decrease............. (517,305) $ (4,372,745) (890,699) $ (8,714,477)
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 73,447 $ 630,818 61,464 $ 596,736
Issued on reinvestment of
distributions........... 2,291 20,775 -- --
Repurchased.............. (35,009) (308,328) (1,304) (12,857)
---------- ------------ ---------- ------------
Net increase............. 40,729 $ 343,265 60,160 $ 583,879
============ ============== ============ ==============
</TABLE>
<PAGE> 64
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Canada Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for the six month period ended December 31, 1994 and
for the year ended December 31, 1995, and the financial highlights for each of
the periods indicated. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for the six month period ended December 31,
1994 and for the year ended December 31, 1995, and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
ICF-2-296
<PAGE> 65
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY GROWTH FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Dear Shareholder:
During 1995 the domestic financial markets were extremely favorable
for both equity and fixed income investors. Moderate economic growth, coupled
with an absence of inflationary pressure, paved the way for lower interest
rates. In January of 1996 the Federal Reserve Board once again lowered the
discount rate, marking the third such cut since last summer. At the same time
that rates were declining, the economy remained strong enough for most
companies to report respectable earnings growth. This combination of declining
interest rates, a favorable inflation outlook, and earnings growth created a
positive environment for the US stock market. Against this backdrop, for the
twelve months ended December 31, 1995, Ivy Growth Fund posted a total return of
27.33% on a net asset value basis. Although Ivy Growth Fund did show a strong
gain in 1995, its performance trailed the Standard & Poor's 500 (S&P 500)
Index, which had a total return of 37.52% for the twelve months ended December
31, 1995. (For the Fund's total return with sales charge and performance
commentary, please refer to the following pages.)
Believing that growth of the US economy will be moderate and that the
Federal Reserve Board will lower interest rates even further, the manager of
Ivy Growth Fund focused on companies that are more economically sensitive than
were most of the market leaders. In 1995, these stocks did not participate in
the market rally as significantly as did some other sectors. However, given
the 0.25% cut in interest rates by the Federal Reserve Board in January 1996
and anticipated additional cuts, we believe these stocks should perform well in
1996.
Technology stocks were market leaders in 1995, and contributed to the
Fund's positive performance. Internet stocks and related areas such as network
computing and data communications experienced extra demand on top of already
high growth rates. Within the health care sector, biotech stocks were notably
strong performers in 1995.
To take advantage of opportunities that we believe exist outside the
US, we have allocated a portion of the Fund accordingly. Our research tells us
that selective European economies should do well in the future, particularly
given the outlook for lower interest rates and a stronger US dollar. We have
also invested in the high growth nations of Asia.
We continue to have a positive outlook for US equity markets.
Corporate profits and cash flows, on balance, have been better than expected
and the interest rate environment is supportive of stocks.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
- -------------------------------- ------------------------------
Michael G. Landry Michael R. Peers
President Chairman
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Mackenzie Ivy Investor Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Stanley Channick P.O. Box 3022
Frank W. DeFriece, Jr. OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Roy J. Glauber Michael G. Landry, President 1-800-777-6472 Mackenzie Ivy Funds
Michael G. Landry Keith J. Carlson, Vice President Distribution, Inc.
Michael R. Peers C. William Ferris, AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal Secretary/Treasurer Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Michael R. Peers, Chairman Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
<PAGE> 66
IVY GROWTH FUND PERFORMANCE COMMENTARY
Ivy Growth Fund performed well in 1995 with a total return of 27.33% on a net
asset value basis. For the same period the Standard and Poor's 500 index was up
37.52%. The outperformance of the S&P 500 is indicative of the difference in
investment strategies employed by the Fund versus the make up of the S&P 500
index. Ivy Growth Fund seeks to take advantage of investment opportunities
outside the U.S. In general, these markets trailed the US market in 1995. The
S&P 500 primarily includes large capitalization domestic stocks.
10-YEAR PERFORMANCE COMPARISONS OF THE
FUND OF A $10,000 INVESTMENT
[CHART]
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Growth Fund will
fluctuate and at redemption may be worth more or less than the amount of the
original investment.
The Lipper Average Growth Fund represents the performance of the average growth
fund as measured by Lipper Analytical Services, Inc. The S&P 500 is an unmanaged
index of stocks which assumes reinvestment of dividends and, unlike Fund
returns, does not reflect any fees or expenses. It is not possible to invest in
an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
FIFTEEN YEAR
CUMULATIVE PERFORMANCE
[CHART]
The chart above reflects performance without the maximum
sales charge of 5.75%. With sales charge the cumulative
fifteen year performance was 633.76%.
<TABLE>
IVY GROWTH FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B**
Average Annual
Total Return Average Annual Total Return
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
<S> <C> <C> <C> <C> <C> <C>
1 Yr. 20.01% 20.01% 21.13% 26.13% 21.13% 26.13%
5 Yr. 12.46% 12.40% -- -- -- --
10 Yr. 11.09% 11.06% -- -- -- --
Since Inception 10.57% 10.56% 9.12% 10.34% 9.01% 10.24%
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 67
IVY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS -- 97.1% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
BASIC INDUSTRIES -- 8.6%
AKZO Nobel(c)............................ 12,000 $ 1,387,602
Barrick Gold Corporation................. 27,500 725,313
BASF AG(c)............................... 3,800 846,564
Bayer AG(c).............................. 2,300 607,015
Bethlehem Steel Corporation(a)........... 75,000 1,040,625
Cemex S.A.(c)............................ 118,750 420,974
Cypress-Amax Minerals Inc................ 40,000 1,045,000
Dow Chemical Company..................... 10,000 703,750
Du Pont(E.I.) De Numours & Company....... 25,000 1,746,875
Fletcher Challenge Ltd.(c)............... 839,286 1,844,809
Harsco Corporation....................... 50,000 2,906,250
Holderbank Financiere Glaris AG(a)(c).... 760 582,842
Inco Ltd. ADR(c)......................... 30,000 993,750
Inland Steel Industries, Inc............. 10,000 250,000
Lubrizol Corporation..................... 20,000 557,500
Lyondell Petrochemical Company........... 22,800 518,700
Phelps Dodge Corp........................ 40,000 2,485,000
RTZ Corporation(Registered)(a)(c)........ 100,000 1,454,070
Semen Gresik -- For Reg(c)............... 110,000 307,894
Trelleborg AB B Free Shares(c)........... 139,300 1,499,480
USG Corporation(a)....................... 9,000 270,000
Union Carbide Corp. Holding Co........... 25,000 937,500
Weirton Steel Corporation(a)............. 60,000 240,000
Weyerhaeuser Co.......................... 40,000 1,725,000
------------
25,096,513
------------
BUSINESS SERVICES -- 0.8%
Corporate Express, Inc.(a)............... 13,000 388,375
Dendrite International, Inc(a)........... 20,600 370,800
Gartner Group, Inc(a).................... 7,500 359,063
Medaphis Corp.(a)........................ 12,000 444,000
Quick Response Services, Inc(a).......... 19,000 349,125
Wescott Communications(a)................ 40,000 550,000
------------
2,461,363
------------
CAPITAL GOODS -- 8.9%
AGCO Corporation......................... 45,000 2,295,000
American Standard Companies, Inc(a)...... 50,000 1,400,000
BW/IP Holding, Inc. ..................... 60,000 990,000
Caterpillar Inc. ........................ 35,000 2,056,250
Cincinnati Milacron, Inc. ............... 122,500 3,215,625
Fluor Corp. ............................. 20,000 1,320,000
Foamex International, Inc.(a)............ 180,000 1,327,500
Foster Wheeler Corporation............... 70,000 2,940,000
Ingersoll-Rand Company................... 10,000 350,000
Johnson Controls, Inc. .................. 50,000 3,437,500
Jurong Shipyard Limited(c)............... 70,000 539,413
Schneider, S.A.(c)....................... 24,000 821,427
Tecumseh Products Company................ 25,000 1,293,750
Tenneco, Inc............................. 81,800 4,059,325
------------
26,045,790
------------
CONGLOMERATES -- 2.9%
Benpres Holdings Corporation(a)(c)....... 57,000 285,000
Cheung Kong(c)........................... 333,000 2,028,361
Fidelity Advisor Korea Fund(a)........... 80,000 850,000
Guangdong Investments(c)................. 1,600,000 962,173
Hanson PLC ADR(c)........................ 65,000 991,250
Jardine Matheson Holdings Ltd.(c)........ 75,200 515,120
Jardine Strategic Holdings Ltd.(c)....... 171,562 524,980
Jardine Strategic Holding
Warrants(a)(c)......................... 19,062 6,100
Metro Pacific Corporation(a)(c).......... 1,500,000 277,354
Pacific Dunlop Ltd.(c)................... 215,000 503,367
Swire Pacific Ltd. Class A(c)............ 184,000 1,427,740
------------
8,371,445
------------
CONSUMER DURABLES -- 4.7%
Brunswick Corp. ......................... 100,000 $ 2,287,500
Electrolux AB(c)......................... 12,500 512,814
General Motors Corp. .................... 50,000 2,606,250
Goodyear Tire & Rubber Company........... 40,000 1,800,000
PT Astra International(a)(c)............. 142,000 294,992
Peugeot Citroen(c)....................... 6,200 818,892
Singer Company NV(The)................... 60,000 1,672,500
Standard-Pacific Corp. .................. 321,500 2,009,375
Volkswagen A.G.(c)....................... 5,300 1,772,395
------------
13,774,718
------------
CONSUMER NON-DURABLES -- 8.3%
Buenos Aires Embotelladora S.A.(c)....... 26,400 544,500
Cadbury Schweppes PLC(c)................. 150,000 1,238,524
Canadaigua Wine Company, Inc. Class
A(a)................................... 15,000 489,375
Grand Metropolitan PLC ADR(c)............ 26,776 769,810
Hasbro, Inc.............................. 50,000 1,550,000
Hunter Douglas NV(a)(c).................. 6,400 296,660
Mattel, Inc.............................. 50,000 1,537,500
Nabisco Holdings Corporation Class A..... 90,000 2,925,000
Nestle S.A. -- Registered(c)............. 2,013 2,225,813
PepsiCo, Inc............................. 60,000 3,345,000
Premark International, Inc. ............. 50,000 2,531,250
S.M.H. AG -- Bearer(c)................... 2,000 1,195,841
Tsingtao Brewery Series H(c)............. 1,176,000 272,233
Unilever N.V. -- ADR(c).................. 14,100 1,984,575
Warnaco Group, Inc. Class A.............. 135,000 3,375,000
------------
24,281,081
------------
CONSUMER SERVICES -- 12.1%
American Stores Co. ..................... 80,000 2,140,000
Bell & Howell Holdings Company(a)........ 15,600 436,800
Boston Chicken, Inc.(a).................. 34,000 1,092,250
Callaway Golf Company.................... 75,000 1,696,875
Carnival Corp. Class A................... 111,000 2,677,875
Cuc International Inc.(a)................ 22,500 767,813
Department 56, Inc.(a)................... 20,500 784,125
Eckerd Corporation(a).................... 50,000 2,212,500
Federated Department Stores, Inc.(a)..... 60,000 1,650,000
Filmes Lusomundo S.A.
Preferred Shares(c).................... 26,200 242,473
Galeries Lafayette(c).................... 860 209,945
General Nutrition Companies, Inc.(a)..... 43,200 1,009,800
Harte-Hanks Communications............... 90,000 1,766,250
Helicopter Line Ltd(The)(c).............. 421,000 908,253
Hollywood Entertainment
Corporation(a)......................... 19,500 168,188
K-Mart Corporation(a).................... 100,000 712,500
Micro Warehouse Inc.(a).................. 19,200 830,400
News Corporation Ltd(c).................. 400,000 1,870,020
OfficeMax, Inc(a)........................ 23,550 526,931
Paging Network Inc.(a)................... 40,000 975,000
Rio Hotel and Casino, Inc.(a)............ 50,000 593,750
Robinson Department Store
Public Company Limited(c).............. 147,100 274,461
Royal Caribbean Cruises Ltd.............. 60,000 1,320,000
Scandinavian Broadcasting
System S.A.(a)......................... 11,000 240,625
Sports Authority, Inc(c)................. 25,000 509,375
Starbucks Corporation(a)................. 30,000 630,000
Station Casinos, Inc.(a)................. 25,000 365,625
Stewart Enterprises Inc Class A.......... 14,000 518,000
TRM Copy Centers Corporation(a).......... 69,000 724,500
Tandy Corp............................... 65,000 2,689,375
Toys "R" Us, Inc.(a)..................... 65,000 1,413,750
</TABLE>
(See Notes to Financial Statements)
<PAGE> 68
IVY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------------
U.S. Industries, Inc(a)(c)............... 3,200 $ 58,800
Viacom Inc. Class A(a)................... 45,000 2,131,875
Viking Office Products, Inc.(a).......... 5,000 232,500
Wal-Mart Stores, Inc..................... 50,000 1,118,750
------------
35,499,384
------------
ENERGY -- 6.3%
Amerada Hess Corp........................ 40,000 2,120,000
Ashland Inc.............................. 45,000 1,580,625
Grasso Corp. Warrants Class B(a)......... 507,086 31,693
Helmerich & Payne, Inc. ................. 53,500 1,591,625
Kaneb Services, Inc.(a).................. 125,000 296,875
Kerr-McGee Corp.......................... 15,000 950,625
Norsk Hydro A.S. ADR(c).................. 37,500 1,570,313
Parker & Parsley Petroleum Co. .......... 65,000 1,430,000
Schlumberger Ltd......................... 65,000 4,501,250
Societe Nationale Elf Aquitaine(c)....... 20,000 1,475,362
Total Compagnie Francaise des
Petroles(c)............................ 41,155 1,399,270
Union Pacific Resources Group............ 30,000 757,500
YPF Sociedad Anonima(c).................. 30,000 648,750
------------
18,353,888
------------
FINANCIAL SERVICES -- 16.7%
ABN Amro Bank(c)......................... 17,400 792,451
Advanta Corporation Class B.............. 24,000 873,000
AMBAC, Inc. ............................. 35,000 1,640,625
American International Group Inc......... 42,000 3,885,000
Arab Malaysian Corporation Berhad(c)..... 89,000 322,400
Banc One Corp............................ 44,000 1,661,000
Bank of Ireland(c)....................... 108,000 788,554
Banque Nationale De Paris(c)............. 33,000 1,490,431
BHC Financial, Inc....................... 75,000 1,350,000
Capital Real Estate Corp................. 14,000 428,750
Comerica Inc............................. 75,000 3,009,375
Credit Acceptance Corporation(a)......... 7,200 149,400
Crop Growers Corporation(a).............. 35,000 490,000
CS Holding AG(c)......................... 12,500 1,280,871
DBS Land Limited(a)(c)................... 157,000 530,548
DCB Holdings Berhad(c)................... 103,000 300,114
Donaldson, Lufkin & Jenrette, Inc(a)..... 50,000 1,562,500
Equitable Companies, Inc................. 75,000 1,800,000
Exel Limited............................. 43,000 2,623,000
Federal Home Loan Mortgage Corp.......... 35,000 2,922,500
Federal National Mortgage Association.... 25,000 3,103,125
Great Western Financial.................. 35,000 892,500
Green Tree Financial Corp. .............. 51,400 1,355,675
HSBC Holdings PLC(c)..................... 115,997 1,755,144
Internationale Nederlanden Groep NV(c)... 11,131 743,421
Krung Thai Bank Public
Company Ltd.(a)(c)..................... 75,000 306,669
Land & General Bhd(a)(c)................. 150,000 324,842
MBIA Inc................................. 25,000 1,868,750
NationsBank Corporation.................. 41,300 2,875,513
PennCorp Financial, Inc.................. 66,200 1,944,625
Peregrine Investment Holdings(c)......... 828,000 1,070,805
Providian Corp........................... 46,000 1,868,750
Risk Capital Holdings, Inc.(a)........... 35,000 818,125
SPS Transaction Services, Inc.(a)........ 22,400 663,600
Transport Holdings, Inc.(a).............. 100 4,075
Travelers, Inc........................... 20,000 1,257,500
------------
48,753,638
------------
HEALTHCARE -- 7.9%
American Medical Response, Inc.(a)....... 25,100 815,750
Arbor Health Care Company(a)............. 24,200 423,500
Astra AB B Free Shares(c)................ 40,000 1,583,795
Autoimmune, Inc(a)....................... 15,000 168,750
Baxter International Inc................. 50,000 $ 2,087,500
Biochem Pharma, Inc(a)................... 12,000 481,500
Columbia/HCA Healthcare Corp............. 60,000 3,045,000
Community Health Systems, Inc.(a)........ 15,000 534,375
Dura Pharmaceuticals, Inc.(a)............ 39,000 1,355,250
Elan Corp., PLC ADR(a)(c)................ 21,000 1,021,125
Genzyme Corp. -- General Division(a)..... 18,000 1,122,750
Genzyme Corp. -- Tissue Repair(a)........ 3,105 49,292
Glaxo Holdings PLC ADR(c)................ 26,000 734,500
Humana, Inc(a)........................... 75,000 2,053,125
Integrated Health Services, Inc.......... 100,000 2,500,000
Liposome Company, Inc.(a)................ 75,000 1,500,000
Omnicare, Inc............................ 17,600 789,800
Orthodontic Centers of America, Inc(a)... 19,000 916,750
PhyCor, Inc.(a).......................... 11,525 582,733
Sepracor, Inc(a)......................... 25,000 459,375
Steris Corp.(a).......................... 6,000 193,500
Trinity Biotech PLC ADR
Warrants A(a)(c)....................... 60,000 112,500
Trinity Biotech PLC ADR
Warrants B(a)(c)....................... 30,000 39,375
Vivra, Inc.(a)........................... 19,500 489,938
------------
23,060,183
------------
INDUSTRIAL -- 3.5%
General Electric Company................. 80,000 5,750,000
Lyonnaise Des Eaux -- Dumez(c)........... 9,200 886,894
Sensormatic Electronics Corporation...... 115,000 1,998,125
United Waste Systems Inc(a).............. 20,000 740,000
Waste Management International
PLC(a)(c).............................. 96,400 1,036,300
------------
10,411,319
------------
TECHNOLOGY -- 11.1%
3Com Corporation(a)...................... 17,950 836,919
Altera Corporation(a).................... 5,000 248,125
Ascend Communications, Inc(a)............ 4,500 365,625
Broadway & Seymour, Inc(a)............... 10,000 162,500
Cabletron Systems, Inc(a)................ 30,000 2,430,000
Cascade Communications, Corp.(a)......... 4,500 382,500
Cidco, Inc(a)............................ 8,000 204,000
Compaq Computer Corporation(a)........... 15,000 712,500
Cornerstone Imaging Inc(a)............... 16,500 239,250
FileNet Corporation(a)................... 17,000 799,000
FTP Software, Inc.(a).................... 17,000 493,000
Glenayre Technologies, Inc(a)............ 5,000 311,250
Hewlett-Packard Company.................. 25,000 2,093,750
Informix Corporation(a).................. 48,200 1,446,000
Intel Corp............................... 50,000 2,837,500
Integrated Device Technology, Inc.(a).... 29,600 384,800
International Business Machines Corp..... 30,000 2,737,500
Intersolv(a)............................. 14,000 180,250
Lam Research Corporation(a).............. 5,000 228,750
Madge, NV(a)............................. 29,000 1,297,750
Microsoft Corporation(a)................. 20,000 1,757,500
Motorola, Inc. .......................... 30,000 1,710,000
Netmanage, Inc.(a)....................... 43,800 1,018,350
Open Environment Corporation(a).......... 15,000 206,250
Oracle Systems Corp.(a).................. 25,200 1,067,850
Pairgain Technologies, Inc(a)............ 25,500 1,396,125
Progress Software Corp.(a)............... 15,000 562,500
Spectrian Corporation(a)................. 10,000 222,500
Stratacom, Inc(a)........................ 15,500 1,139,250
Symantec Corporation(a).................. 13,000 302,250
Synopsys, Inc(a)......................... 13,000 494,000
T-Netix Corporation(a)................... 30,000 300,000
Texas Instruments, Inc................... 20,000 1,035,000
Transaction Network Services, Inc.(a).... 42,500 1,062,500
</TABLE>
(See Notes to Financial Statements)
<PAGE> 69
IVY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
U.S. Robotics, Inc....................... 9,000 $ 789,750
Veritas Software Corporation(a).......... 12,000 456,000
VideoServer, Inc(a)...................... 8,000 252,000
Xilinx, Inc.(a).......................... 7,000 213,500
------------
32,376,294
------------
TELEPHONE & ELECTRIC -- 4.3%
Empresa Nacional de
Electricidad -- ADR(c)................. 21,900 1,253,775
Telecomunicacoes Brasileiras
S.A.Telebras(c)........................ 35,300 1,672,338
Telefonica de Argentina -- ADS(c)........ 36,400 991,900
Telefonica de Espana S.A. -- ADR(c)...... 39,200 1,641,500
Telefonos De Mexico, S.A.
de C.V. -- ADR(c)...................... 35,000 1,115,625
Vodafone Group PLC -- ADR(c)............. 90,000 3,172,500
WorldCom, Inc(a)......................... 80,000 2,820,000
------------
12,667,638
------------
TRANSPORTATION -- 1.0%
Brambles Industries Limited(c)........... 138,000 1,538,530
Offshore Logistics, Inc.(a).............. 62,577 790,035
Shanghai Haixing Shipping Company(c)..... 2,950,000 198,383
Wisconsin Central Transportation
Corporation(a)......................... 5,000 328,750
------------
2,855,698
------------
TOTAL COMMON STOCKS
(COST -- $232,312,512)................. 284,008,952
------------
PAR
COMMERCIAL PAPER -- 3.8% VALUE
- ----------------------------------------- ----------
General Electric Capital, 5.96%,
01/03/96............................... $7,957,000 7,954,370
Prudential Funding, 5.51%, 01/05/96...... 3,156,000 3,154,071
------------
TOTAL COMMERCIAL PAPER
(COST -- $11,108,441).................. 11,108,441
------------
TOTAL INVESTMENTS -- 100.9%
(COST -- $243,420,953)(B).............. 295,117,393
OTHER ASSETS, LESS
LIABILITIES -- (0.9%).................. (2,493,977)
------------
NET ASSETS -- 100%....................... $292,623,416
============
ADR -- American Depository Receipt
ADS -- American Depository Share
NV -- Non-voting
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income
tax purposes.
(c) Foreign security.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 65,281,377
Gross unrealized depreciation.................... (13,584,937)
------------
Net unrealized appreciation.................. $ 51,696,440
============
OTHER INFORMATION:
Purchases and sales of securities other than short-term obligations
aggregated $107,842,687 and $137,821,856, respectively, for the year
ended December 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
FORWARD CONTRACTS
(CURRENCY/ PRINCIPAL VALUE OF UNREALIZED
EXPIRATION/COMMITMENT) AMOUNT OBLIGATION DEPRECIATION
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Deutsche Marks/
March 96/Sell.......... 3,186,390 US $ 3,203,900 $ (17,510)
French Francs/
March 96/Sell.......... 6,905,294 US 7,026,647 (121,353)
Netherland Guilders/
March 96/Sell.......... 5,544,125 US 5,580,921 (36,796)
Swiss Francs/
March 96/Sell.......... 5,217,847 US 5,217,847 (62,463)
------------- --------------
Total forward foreign
currency contracts
sold................... $21,029,315 $ (238,122)
============= ===============
</TABLE>
Transactions in written put and call options during the year ended December 31,
1995 were:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1994.......... -- $ --
Contracts written....................... 400 273,791
Contracts closed........................ (400) (273,791 )
--------- ---------
Outstanding at December 31, 1995.......... -- $ --
=========== ==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 70
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $243,420,953)........................................................... $295,117,393
Receivables:
Fund shares sold................................................................................................. 105,719
Dividends and interest........................................................................................... 414,992
Deferred organization expenses.................................................................................... 127,739
Other assets...................................................................................................... 69,653
------------
Total assets..................................................................................................... 295,835,496
------------
LIABILITIES
Payables:
Open forward foreign currency contracts.......................................................................... 238,122
Investments purchased............................................................................................ 967,109
Fund shares repurchased.......................................................................................... 14,922
Management fee................................................................................................... 207,521
12b-1 service and distribution fees.............................................................................. 14,522
Administrative services fee...................................................................................... 24,414
Fund accounting.................................................................................................. 8,625
Transfer agent................................................................................................... 100,491
Due to custodian.................................................................................................. 1,616,215
Other accrued expenses and liabilities............................................................................ 20,139
------------
Total liabilities................................................................................................ 3,212,080
------------
NET ASSETS........................................................................................................ $292,623,416
===========
CLASS A:
Net asset value and redemption price per share ($289,954,224 / 17,310,761 shares outstanding)..................... $ 16.75
===========
Maximum offering price per share ($16.75 x 100 / 94.25)*.......................................................... $ 17.77
===========
CLASS B:
Net asset value and offering price per share ($2,669,192 / 159,356 shares outstanding)**.......................... $ 16.75
===========
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................. $241,253,772
Accumulated net realized loss on investments and foreign currency transactions................................... (114,013)
Accumulated undistributed net investment income.................................................................. 25,339
Net unrealized appreciation (depreciation) on
Investments.................................................................................................... 51,696,440
Forward foreign currency contracts............................................................................. (238,122)
------------
NET ASSETS........................................................................................................ $292,623,416
===========
</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> 71
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of withholding tax................................................................... $ 4,326,377
Interest............................................................................................ 778,306
-----------
5,104,683
-----------
EXPENSES
Management fee...................................................................................... $2,278,390
Transfer agent fee.................................................................................. 1,104,622
Administrative services fee......................................................................... 268,046
Custodian fees...................................................................................... 85,974
Blue Sky fees....................................................................................... 42,565
Auditing and accounting fees........................................................................ 63,423
Shareholder reports................................................................................. 31,194
Amortization of organization expenses............................................................... 37,652
Fund accounting..................................................................................... 103,945
Trustees' fees...................................................................................... 4,667
12b-1 service and distribution fees
Class A........................................................................................... 115,730
Class B........................................................................................... 20,164
Legal fees.......................................................................................... 19,896
Other............................................................................................... 104,108
-----------
4,280,376
Expenses reimbursed by manager....................................................................... (11,680)
-----------
Net expenses........................................................................................ 4,268,696
-----------
Net investment income................................................................................ 835,987
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) on
Investments....................................................................................... 15,442,096
Put and call options.............................................................................. (345,250)
Forward foreign currency contracts................................................................ (370,468)
Net unrealized appreciation (depreciation) during the period on
Investments....................................................................................... 49,271,083
Forward foreign currency contracts................................................................ (149,842)
-----------
Net gain on investment transactions............................................................... 63,847,619
-----------
Net increase in net assets resulting from operations................................................. $64,683,606
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income........................................................................ $ 835,987 $ 807,045
Net realized gain (loss) on
Investments and foreign currency transactions.............................................. 15,071,628 11,845,586
Put and call options....................................................................... (345,250) --
Net unrealized appreciation (depreciation) during the period on
Investments................................................................................ 49,271,083 (19,924,462)
Forward foreign currency contracts......................................................... (149,842) (88,280)
------------ ------------
Net increase (decrease) resulting from operations.......................................... 64,683,606 (7,360,111)
------------ ------------
CLASS A:
Distributions from
Net investment income........................................................................ (393,729) (807,045)
Net realized gain............................................................................ (14,615,580) (11,779,194)
In excess of net realized gain............................................................... (521,353) (43,751)
------------ ------------
Total distributions to Class A shareholders................................................ (15,530,662) (12,629,990)
------------ ------------
CLASS B:
Distributions from
Net realized gain............................................................................ (110,798) (66,392)
In excess of net realized gain............................................................... (9,479) (16,053)
------------ ------------
Total distributions to Class B shareholders................................................ (120,277) (82,445)
------------ ------------
Fund share transactions (Note 10):
Net increase (decrease) resulting from
Fund share transactions
Class A.................................................................................... 9,822,759 (17,126,549)
Class B.................................................................................... 922,346 1,447,070
------------ ------------
Net increase (decrease) resulting from Fund share transactions........................... 10,745,105 (15,679,479)
------------ ------------
Total increase (decrease) in net assets....................................................... 59,777,772 (35,752,025)
NET ASSETS
Beginning of period........................................................................ 232,845,644 268,597,669
------------ ------------
End of period.............................................................................. $292,623,416 $232,845,644
=========== ===========
Accumulated undistributed net investment income............................................... $ 25,339 $ 36,618
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 72
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
CLASS A ------------------------------------------------------------
SELECTED PER SHARE DATA 1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............................... $ 13.91 $ 15.14 $ 14.98 $ 16.91 $ 14.41
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income............................................ .05(a) .05(a) .10(a) .17(a) .27
Net gain (loss) on investment transactions
(both realized and unrealized)................................. 3.73 (.49) 1.74 .70 4.12
-------- -------- -------- -------- --------
Total from investment operations............................... 3.78 (.44) 1.84 .87 4.39
-------- -------- -------- -------- --------
Less distributions from
Net investment income............................................ .02 .05 .10 .15 .27
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..................................... $ 16.75 $ 13.91 $ 15.14 $ 14.98 $ 16.91
======== ======== ======== ======== ========
Total return(%)(b)................................................. 27.33 (2.97) 12.29 5.21 30.76
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................... $289,954 $231,446 $268,533 $226,068 $231,706
Ratio of expenses to average daily net assets
With expense reimbursement(%).................................... 1.59 1.38 1.33 1.32 --
Without expense reimbursement(%)................................. 1.60 1.49 1.43 1.40 1.29
Ratio of net investment income to average daily net assets(%)...... .32(a) .32(a) .64(a) .98(a) 1.60
Portfolio turnover rate(%)......................................... 41 39 77(c) 138 79
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
FOR THE (COMMENCEMENT)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
CLASS B ------------------- ----------------
SELECTED PER SHARE DATA 1995 1994 1993
------ ------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period................................................. $13.91 $15.14 $16.42
------ ------ ------
Income (loss) from investment operations
Net investment loss(a)............................................................. (.08) (.04) --
Net gain (loss) on investment transactions (both realized and unrealized).......... 3.71 (.54) .37
------ ------ ------
Total from investment operations................................................. 3.63 (.58) .37
------ ------ ------
Less distributions from
Net investment income.............................................................. -- -- .07
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....................................................... $16.75 $13.91 $15.14
====== ====== ================
Total return(%)...................................................................... 26.13(b) (3.90)(b) 2.34(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............................................. $2,669 $1,399 $ 65
Ratio of expenses to average daily net assets
With expense reimbursement(%)...................................................... 2.55 2.34 2.31(e)
Without expense reimbursement(%)................................................... 2.56 2.45 2.44(e)
Ratio of net investment loss to average daily net assets(%)(a)....................... (.64) (.64) (.33)(e)
Portfolio turnover rate(%)........................................................... 41 39 77(c)
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) 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.
(d) Total return represents aggregate total return and does not reflect a sales charge.
(e) Annualized.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS
Ivy Growth Fund (the Fund) is a series of shares of beneficial interest of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A and Class B 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.
a. Securities 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 value. 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 Board of Trustees (the Board).
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Options -- The Fund may write (sell) exchange-listed and
over-the-counter call and put options on indices. When the Fund writes a call,
it gives the purchaser of the call option the right to buy the underlying
security or currency at the price specified in the option (the "exercise price")
at any time during the option period, generally ranging up to nine months. When
the Fund writes a put option, it gives the purchaser of the put option the right
to sell the underlying security or currency to the Fund at 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 or currency to the option
holder or purchase the underlying security or currency from the option holder at
the exercise price. Certain options, including 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. By writing a put option, the Fund, in exchange for the net premium
received, accepts the risk of a decline in the market value of the underlying
security or currency below the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call or put 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, call and put
options on 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.
d. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income or excise taxes. Therefore, no provision has been
recorded for Federal income and excise taxes.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$7,220,668 as capital gain dividends for its taxable year ended December 31,
1995.
e. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared and paid in December
by the Fund. In addition, distributions to Class A shareholders are declared
daily at the rate per share of the excess of 12b-1 fees of Class B shares over
Class A shares. Distributions are paid at the earlier of redemption or the last
business day of the year.
f. Foreign currency translations -- Foreign currency transactions from
foreign investment activity are translated into U.S. dollars on the following
basis: (i) 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
<PAGE> 74
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 differ from the characterization of such
distributions determined on a Federal income tax basis.
g. 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.
h. 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.
i. 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. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of .85% of its average daily net assets.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $23,327.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. IMI agreed to limit the Fund's total fund operating expenses (excluding
taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.35% of the Fund's average daily net assets through January 31, 1995. Effective
February 1, 1995 the voluntary expense limitation was terminated. Expenses
reimbursed by manager reflected in the Statement of Operations consists of a
voluntary reimbursement.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
daily net asset value of shares issued after December 31, 1991. Class B shares
are also subject to an ongoing distribution fee at an annual rate of .75% of the
average daily net asset value attributable to Class B shares. MIFDI 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.
7. 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.
8. 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.
9. SUBSEQUENT EVENT
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. As a result of this change, the net asset value per share of
Class A and Class B are expected to differ.
10. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,293,661 $ 20,326,652 1,323,910 $ 19,936,311
Issued in connection with
the acquisition of
Mackenzie American
Fund.................... 1,556,917 22,817,867 -- --
Issued on reinvestment of
distributions........... 854,211 14,217,886 833,591 11,531,667
Repurchased.............. (3,036,434) (47,539,646) (3,247,273) (48,594,527)
---------- ------------ ---------- ------------
Net increase (decrease).. 668,355 $ 9,822,759 (1,089,772) ($17,126,549)
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 274,170 $ 4,147,548 194,721 $ 2,883,525
Issued in connection with
the acquisition of
Mackenzie American
Fund.................... 1,854 27,172 -- --
Issued on reinvestment of
distributions........... 7,166 119,052 4,303 59,514
Repurchased.............. (224,460) (3,371,426) (102,695) (1,495,969)
---------- ------------ ---------- ------------
Net increase............. 58,730 $ 922,346 96,329 $ 1,447,070
============ ============== ============ ==============
</TABLE>
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the year ended December 31, 1991, were audited by other auditors,
whose report, dated January 31, 1992, expressed an unqualified opinion on the
selected per share data and ratios.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements and financial highlights referred to above present fairly,
in all material respects, the financial position of the Fund as of December 31,
1995, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
IGF-2-296
<PAGE> 77
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY
INTERNATIONAL
FUND
ANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
Throughout the
centuries,
the castle keep has
been a source
of long-range vision
and strategic
advantage.
Dear Shareholder:
Consistency remains the underlying theme of Ivy International Fund. The
investment landscape has not changed significantly; global inflation remains
low and economic growth is slowing in the US and Europe. Within this
environment, Ivy International Fund again outperformed its most relevant
benchmark, the Morgan Stanley Capital International Europe, Australasia, Far
East (EAFE) index. For the twelve months ended December 31, 1995, the Fund's
total return, on a net asset value basis, was 12.65%. EAFE returned 11.28% for
the same period. (For the Fund's total return with sales charge, and
performance commentary, please refer to the following pages.)
We believe a slowing economy in Europe will speed further interest rate
cuts, which would be positive for Ivy International Fund's interest-rate
sensitive stocks. And, at long last, it appears the US dollar is strengthening
against most European currencies and the Japanese yen. The strengthening of the
dollar remains one of our key investment themes and we have positioned the Fund
to benefit from this trend.
Our research indicates that the economies of Asia are continuing to
expand. The Fund has committed 24% of its assets to the Far East. The greatest
weighting is in Japan (7%). Ivy International Fund also has a 6% allocation in
Hong Kong. Lower interest rates in the US provided a favorable environment for
asset appreciation in Hong Kong. This is because the Hong Kong dollar is pegged
to the US dollar and monetary policy in the US essentially dictates monetary
policy in Hong Kong.
Prolonged negative investor sentiment regarding emerging markets lingered
in the first half of 1995. But later in the year, we saw evidence that the tide
had turned as investors began returning to these markets. And this momentum has
carried forward to 1996. High-growth nations, such as Argentina and Brazil,
have had a particularly good start to the new year. Our research suggests that
both countries have embraced economic reform and offer excellent long-term
growth potential. They have made great strides in lowering inflation and
privatizing government-run enterprises--two key ingredients for economic growth.
We have added to our holdings in both these countries.
We believe that Ivy International Fund is positioned to benefit from lower
interest rates in Europe, a strengthening US dollar and a resurgence of stock
markets in emerging economies. Our research suggests that these investment
themes have already begun to unfold,and so we encourage investors to take
advantage of the window of opportunity that we believe now exists.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhil
Stanley Channick
Frank W. DeFriece, Jr
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management, Inc.
Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE> 78
IVY INTERNATIONAL FUND PERFORMANCE COMMENTARY
In 1995 Ivy International Fund outperformed its most relevant benchmark, the
Morgan Stanley Capital International Europe Australasia, Far East (EAFE) index.
The total return of the Fund, without sales charge, was 12.65% versus 11.28% for
EAFE. The difference in performance is attributable to a difference in country
weightings between the Fund and EAFE.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (4/86) OF A $10,000
INVESTMENT
[CHART]
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy International
Fund will fluctuate and at redemption may be worth more or less than the amount
of the original investment.
The Morgan Stanley Capital International Europe, Australasia, Far East (EAFE)
index is an unmanaged index of stocks which assumes reinvestment of dividends
and, unlike Fund returns, does not reflect any fees or expenses. It is not
possible to invest in an index. The Lipper Average International Index
represents the performance of the average international fund as measured by
Lipper Analytical Services, Inc.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A and Class I shares.
THREE- AND FIVE-YEAR
CUMULATIVE PERFORMANCE+
[CHART]
(Through 12/31/95)
+The chart above reflects performance without the
maximum sales charge of 5.75%. With sales charges the
three-year and five-year performance was 63.69% and
91.54% respectively.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------
IVY INTERNATIONAL FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B** Class I
Average Annual
Total Return Average Annual Total Return
----------------------------------------------------------------
w/ w/o w/ w/o w/ w/o
Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------
1 Yr. 6.17% 6.17% 6.62% 11.62% 6.62% 11.62% 12.85% 12.85%
- ----------------------------------------------------------------------------------------------
5 Yr. 13.88% 13.86% -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------
Since Inception 14.42% 14.41% 8.57% 10.21% 8.57% 10.21% 10.41% 10.41%
- ----------------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 79
IVY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS -- 89.6% SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------
AFRICA -- 6.1%
- ------------------------------------
SOUTH AFRICA -- 6.1%
Anglo American Corporation of South
Africa Ltd. ADR................... 150,000 $ 9,037,500
Gencor Limited ADR.................. 1,800,000 6,131,250
Malbak GDS -- NPV (Reg S)ADR........ 480,000 3,300,000
Malbak Limited ORD ADR 144A......... 526,760 3,650,447
Pepkor Limited ADR 144A REGD........ 315,000 3,931,200
South African Breweries
Limited ADR....................... 223,609 8,133,777
------------
28,052,924
------------
SOUTH AMERICA -- 5.0%
- ------------------------------------
ARGENTINA -- 2.5%
Telecom de Argentina S.A. Class
B(a).............................. 625,000 2,949,558
Telefonica de Argentina S.A. Class
B................................. 1,250,000 3,374,494
YPF ADR Class D..................... 350,000 7,568,750
------------
13,892,802
------------
BRAZIL -- 2.5%
Petrobras Registered NV............. 100,000,000 8,538,505
Telebras Registered NV.............. 120,000,000 5,778,075
------------
14,316,580
------------
ASIA/PACIFIC -- 23.8%
- ------------------------------------
AUSTRALIA -- 3.5%
Ampolex Limited(a).................. 720,000 1,573,314
CRA Limited......................... 322,500 4,731,649
News Corp. Ltd. ADR................. 380,000 8,122,500
Pasminco Limited.................... 550,000 674,501
Western Mining Corporation
Holdings.......................... 400,000 2,559,757
Western Mining Holdings ADR......... 82,812 2,163,464
------------
19,825,185
------------
HONG KONG -- 5.8%
Cheung Kong (Holdings) Ltd. ........ 1,250,000 7,613,967
China Light & Power................. 1,500,000 6,905,917
Hong Kong Telecommunications
Ltd. ............................. 4,743,200 8,465,071
Swire Pacific Class A............... 1,000,000 7,759,457
Television Broadcasting Ltd. ....... 321,000 1,143,686
Tsingtao Brewery Company Ltd.,
Series H.......................... 3,850,000 891,238
------------
32,779,336
------------
SOUTH KOREA -- 0.5%
Hyundai Motor Company
ADR 144A REGD..................... 200,000 3,000,000
------------
MALAYSIA -- 3.4%
Malayan Banking Berhad.............. 600,000 5,055,715
Sime Darby Berhad................... 3,000,000 7,973,383
Telekom Malaysia Berhad............. 800,000 6,236,957
------------
19,266,055
------------
JAPAN -- 7.3%
Bridgestone Corp. .................. 450,000 7,147,700
Canon Inc. ......................... 400,000 7,244,552
Fuji Photo Film ORD................. 270,000 7,792,736
Matsushita Electric Industrial
Co. .............................. 450,000 7,322,034
Nintendo Corp Ltd. ................. 20,000 1,520,581
Sega Enterprises.................... 18,000 993,705
Sony Corp. ......................... 150,000 8,992,736
------------
41,014,044
------------
RUSSIA -- 0.0%
Mosenergo ADR 144A(a)............... 10,000 $ 78,750
------------
SINGAPORE -- 3.3%
Jardine Matheson Holdings Ltd. ..... 471,355 3,228,782
Jurong Shipyard Limited............. 400,000 3,082,361
Keppel Corporation Ltd. ............ 750,000 6,680,806
United Overseas Bank
Foreign Registered................ 607,920 5,844,971
------------
18,836,920
------------
EUROPE -- 54.7%
- ------------------------------------
DENMARK -- 1.7%
Novo Nordisk AS -- Class "B"........ 70,000 9,579,113
------------
FRANCE -- 11.2%
BIC................................. 60,000 6,109,180
Banque Nationale de Paris........... 150,000 6,774,688
Canal Plus.......................... 30,920 5,803,427
Compagnie Financiere de Paribas..... 96,147 5,278,158
Credit National..................... 41,203 3,032,730
Eurotunnel S.A.(a).................. 3,000,000 4,078,920
Lyonnaise des Eaux-Dumez............ 71,071 6,851,355
Michelin Class B (Registered)....... 200,000 7,986,097
Rhone Poulenc S.A. ................. 250,000 5,361,889
Roussel Uclaf....................... 35,000 5,939,481
TOTAL Compagnie Francaise des
Petroles(a)....................... 89,522 6,049,278
------------
63,265,203
------------
NETHERLANDS -- 5.1%
Heineken NV......................... 41,562 7,372,078
Hunter Douglas NV................... 68,425 3,171,712
Internationale Nederlanden
Groep NV CVA...................... 99,446 6,641,836
Nedlloyd............................ 200,000 4,535,628
Royal Dutch Petroleum ADR(a)........ 50,000 7,056,250
------------
28,777,504
------------
NORWAY -- 2.7%
Kvaerner Industrier Series A........ 150,000 5,308,376
Norsk Hydro Sponsored ADR........... 140,000 5,862,500
Saga Petroleum Series A Free........ 300,000 4,004,980
------------
15,175,856
------------
SPAIN -- 2.4%
Banco Intercontinental.............. 80,000 7,769,013
BCO Bilboa Vizcaya Registered....... 100,000 3,596,460
Telefonica de Espana S.A............ 150,000 2,073,931
------------
13,439,404
------------
SWEDEN -- 7.5%
AGA AB Series "B" Free.............. 500,000 6,812,430
Astra AB "A" Free(a)................ 100,000 3,989,600
Electrolux.......................... 200,000 8,205,026
Ericsson L.M. Telephone
Series "B" Free................... 308,000 6,028,060
Kinnevik AB "B" Free................ 175,000 5,466,881
Trelleborg AB "B" Free.............. 300,000 3,229,318
Volvo AB "B" Free................... 400,000 8,189,971
------------
41,921,286
------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 80
IVY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
SWITZERLAND -- 11.7%
Ciba-Geigy Registered.............. 8,744 $ 7,690,780
CS Holding Bearer.................. 77,035 7,893,751
Electowatt Bearer.................. 25,000 9,142,114
Nestle AG Registered............... 9,000 9,951,473
SCHW Ruckversicher Registered...... 6,655 7,739,177
SGS Holdings Bearer................ 5,000 9,922,010
Sulzer AG Registered............... 10,775 6,162,478
Swiss Bank Corporation Bearer...... 17,000 6,938,475
Von Roll AG Registered(a).......... 11,200 223,224
------------
65,663,482
------------
<CAPTION>
COMMON STOCKS
<S> <C>
- ----------------------------------------------------------------------------
SWITZERLAND -- 11.7%
Ciba-Geigy Registered..............
CS Holding Bearer..................
Electowatt Bearer..................
Nestle AG Registered...............
SCHW Ruckversicher Registered......
SGS Holdings Bearer................
Sulzer AG Registered...............
Swiss Bank Corporation Bearer......
Von Roll AG Registered(a)..........
UNITED KINGDOM -- 12.4%
Barclay's Bank ORD................. 422,628 4,851,905
Barclay's Bank 144A REGD........... 32,365 371,561
British Gas plc.................... 2,000,000 7,891,753
British Petroleum ORD.............. 728,347 6,093,037
British Petroleum 144A REGD........ 28,655 239,715
British Telecommunications plc..... 1,000,000 5,499,371
Cadbury Schweppes plc ADR.......... 237,889 7,909,809
Forte ORD plc...................... 1,800,000 9,241,739
Guinness plc....................... 1,000,000 7,355,797
Royal Bank Scotland Group ORD...... 739,596 7,299,712
RTZ Corporation (Registered)....... 502,019 6,732,895
Smithkline Beecham PLC ADR......... 120,000 6,660,000
------------
70,147,294
------------
TOTAL COMMON STOCKS
(COST -- $412,172,409)........... 505,162,988
------------
PAR
CONVERTIBLE BONDS -- 2.4% VALUE
- ----------------------------------- ------------
BCP Bank & Trust, 8.75%,
05/21/02(c)...................... 6,000,000 8,124,752
JSC Oil Company (Lukoil),
0.00%, 04/06/96(a)............... $ 2,360,000 1,970,600
Liberty Life, 6.50%, 09/30/04...... 2,500,000 3,312,500
------------
TOTAL CONVERTIBLE BONDS
(COST -- $12,933,997)............ 13,407,852
------------
<CAPTION>
PAR
COMMERCIAL PAPER -- 7.4% VALUE VALUE
<S> <C> <C>
- --------------------------------------------------------------------
American Express,
5.61%, 01/02/96.................. $ 18,725,000 $ 18,754,178
General Electric Capital,
5.91%, 01/04/96.................. 10,305,000 10,311,763
Prudential Funding, 5.65%,
01/03/96......................... 12,525,000 12,530,902
------------
TOTAL COMMERCIAL PAPER
(COST -- $41,596,843)............ 41,596,843
------------
TOTAL INVESTMENTS -- 99.4%
(COST -- $466,703,249)(B)........ 560,167,683
OTHER ASSETS, LESS LIABILITIES --
0.6%............................. 3,491,937
------------
NET ASSETS -- 100%................. $563,659,620
============
ADR -- American Depository Receipt
NV -- Non-voting
ORD -- Ordinary
REGD -- Registered
(a) Non-income producing security.
(b) Cost is approximately the same for Federal income
tax purposes.
(c) Par Value is European Currency Unit denominated.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation................ $117,706,871
Gross unrealized depreciation................ (24,242,437)
------------
Net unrealized appreciation.............. $ 93,464,434
============
OTHER INFORMATION:
Purchases and sales of securities other than short-term obligations
aggregated $251,145,377 and $20,980,059, respectively, for the year
ended December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 81
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $466,703,249)............................................................ $560,167,683
Cash............................................................................................................... 1,418,240
Receivables:
Fund shares sold................................................................................................. 1,759,267
Dividends and interest........................................................................................... 1,105,266
Deferred organization expenses..................................................................................... 65,148
Other assets....................................................................................................... 23,927
------------
Total assets..................................................................................................... 564,539,531
------------
LIABILITIES
Payables:
Distributions to shareholders.................................................................................... 13,803
Fund shares repurchased.......................................................................................... 53,076
Management fee................................................................................................... 452,754
12b-1 service and distribution fees.............................................................................. 84,971
Administrative services fee...................................................................................... 50,954
Fund accounting.................................................................................................. 7,501
Transfer agent................................................................................................... 74,473
Other accrued expenses and liabilities............................................................................. 142,379
------------
Total liabilities................................................................................................ 879,911
------------
NET ASSETS......................................................................................................... $563,659,620
============
CLASS A:
Net asset value and redemption price per share ($475,989,436 / 15,519,433 shares outstanding)...................... $ 30.67
============
Maximum offering price per share ($30.67 x 100 / 94.25)*........................................................... $ 32.54
============
CLASS B:
Net asset value and offering price per share ($74,650,460 / 2,433,772 shares outstanding)**........................ $ 30.67
============
CLASS I:
Net asset value, offering price, and redemption price per share ($13,019,724 / 424,505 shares outstanding)......... $ 30.67
============
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................. $470,231,185
Accumulated net realized loss on investments and foreign currency transactions................................... (41,822)
Accumulated undistributed net investment income.................................................................. 5,823
Net unrealized appreciation on investments....................................................................... 93,464,434
------------
NET ASSETS......................................................................................................... $563,659,620
============
</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 YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of withholding tax ($326,643)......................................................... $ 6,955,702
Interest............................................................................................. 2,910,827
-----------
9,866,529
-----------
EXPENSES
Management fee....................................................................................... $3,948,456
Transfer agent....................................................................................... 590,068
Administrative services fee.......................................................................... 387,795
Custodian fees....................................................................................... 446,898
Blue Sky fees........................................................................................ 44,404
Auditing and accounting fees......................................................................... 47,153
Shareholder reports.................................................................................. 23,659
Amortization of organization expenses................................................................ 21,161
Fund accounting...................................................................................... 91,612
Trustees' fees....................................................................................... 3,913
12b-1 service and distribution fees
Class A............................................................................................ 281,215
Class B............................................................................................ 474,670
Legal................................................................................................ 12,937
Other................................................................................................ 62,938
-----------
Total expenses......................................................................................... 6,436,879
-----------
Net investment income.................................................................................. 3,429,650
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency transactions................................... 1,769,828
Net unrealized appreciation during the period on investments......................................... 44,011,142
-----------
Net gain on investment transactions................................................................ 45,780,970
-----------
Net increase in net assets resulting from operations................................................... $49,210,620
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 83
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income............................................................................. $ 3,429,650 $ 509,018
Net realized gain on investments and foreign currency transactions................................ 1,769,828 9,797,620
Net unrealized appreciation (depreciation) during the period on investments....................... 44,011,142 (3,477,115)
------------ ------------
Net increase resulting from operations.......................................................... 49,210,620 6,829,523
------------ ------------
CLASS A:
Distributions from
Net investment income............................................................................. (3,301,120) (504,421)
Net realized gain................................................................................. (1,495,008) (8,685,612)
In excess of net realized gain.................................................................... (423,723) --
Capital paid-in................................................................................... -- (104,268)
------------ ------------
Total distributions to Class A shareholders..................................................... (5,219,851) (9,294,301)
------------ ------------
CLASS B:
Distributions from
Net investment income............................................................................. (26,475) --
Net realized gain................................................................................. (233,428) (953,027)
In excess of net realized gain.................................................................... (69,587) --
Capital paid-in................................................................................... -- (25,414)
------------ ------------
Total distributions to Class B shareholders..................................................... (329,490) (978,441)
------------ ------------
CLASS I:
Distributions from
Net investment income............................................................................. (102,055) (4,597)
Net realized gain................................................................................. (41,392) (158,981)
In excess of net realized gain.................................................................... (12,102) --
Capital paid-in................................................................................... -- (7,498)
------------ ------------
Total distributions to Class I shareholders..................................................... (155,549) (171,076)
------------ ------------
Fund share transactions (Note 9):
Net increase resulting from Fund share transactions
Class A......................................................................................... 208,491,878 59,544,072
Class B......................................................................................... 39,727,936 28,162,385
Class I......................................................................................... 7,284,014 5,172,157
------------ ------------
Net increase resulting from Fund share transactions........................................... 255,503,828 92,878,614
------------ ------------
Total increase in net assets........................................................................ 299,009,558 89,264,319
NET ASSETS
Beginning of period............................................................................... 264,650,062 175,385,743
------------ ------------
End of period..................................................................................... $563,659,620 $264,650,062
============ ============
Accumulated undistributed net investment income..................................................... $ 5,823 $ --
============ ============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 84
FINANCIAL HIGHLIGHTS(A)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
CLASS A --------------------------------------
SELECTED PER SHARE DATA 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period..................................................... $ 27.60 $ 27.71 $ 18.88
-------- -------- --------
Income (loss) from investment operations
Net investment income................................................................... .25 .07 .12
Net gain (loss) on investment transactions (both realized and unrealized)............... 3.22 1.01 9.01
-------- -------- --------
Total from investment operations...................................................... 3.47 1.08 9.13
-------- -------- --------
Less distributions from
Net investment income................................................................... .25 .07 .08
Net realized gain....................................................................... .12 1.11 .22
In excess of net realized gain.......................................................... .03 -- --
Capital paid-in......................................................................... -- .01 --
-------- -------- --------
Total distributions................................................................... .40 1.19 .30
-------- -------- --------
Net asset value, end of period........................................................... $ 30.67 $ 27.60 $ 27.71
========== ========== ==========
Total return(%)(c)....................................................................... 12.65 3.92 48.37
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................. $475,989 $229,586 $172,539
Ratio of expenses to average daily net assets(%)......................................... 1.52 1.58 1.61
Ratio of net investment income to average daily net assets(%)............................ .97 .30 .56
Portfolio turnover rate(%)............................................................... 6 7 19
<CAPTION>
CLASS A
SELECTED PER SHARE DATA 1992 1991
-------- -------
<S> <C> <C> <C>
Net asset value, beginning of period..................................................... $ 19.37 $ 16.98
-------- -------
Income (loss) from investment operations
Net investment income................................................................... .27(b) .26
Net gain (loss) on investment transactions (both realized and unrealized)............... (.26) 2.61
-------- -------
Total from investment operations...................................................... .01 2.87
-------- -------
Less distributions from
Net investment income................................................................... .27 .26
Net realized gain....................................................................... .23 .22
In excess of net realized gain.......................................................... -- --
Capital paid-in......................................................................... -- --
-------- -------
Total distributions................................................................... .50 .48
-------- -------
Net asset value, end of period........................................................... $ 18.88 $ 19.37
========== ========
Total return(%)(c)....................................................................... .07 16.93
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................. $109,637 $97,486
Ratio of expenses to average daily net assets(%)......................................... 1.71(d) 1.64
Ratio of net investment income to average daily net assets(%)............................ 1.36(b) 1.50
Portfolio turnover rate(%)............................................................... 20 27
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
FOR THE YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS B --------------------- -----------------
SELECTED PER SHARE DATA 1995 1994 1993
------- ------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.............................................. $ 27.60 $ 27.71 $ 25.86
------- ------- ------
Income from investment operations
Net investment income (loss)..................................................... .01 (.10) (.01)
Net gain on investment transactions (both realized and unrealized)............... 3.20 .91 2.12
------- ------- ------
Total from investment operations............................................... 3.21 .81 2.11
------- ------- ------
Less distributions from
Net investment income............................................................ .01 -- .04
Net realized gain................................................................ .10 .90 .22
In excess of net realized gain................................................... .03 -- --
Capital paid-in.................................................................. -- .02 --
------- ------- ------
Total distributions............................................................ .14 .92 .26
------- ------- ------
Net asset value, end of period.................................................... $ 30.67 $ 27.60 $ 27.71
======== ======== ============
Total return(%)................................................................... 11.62(c) 2.96(c) 7.65(e)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......................................... $74,650 $30,143 $ 2,846
Ratio of expenses to average daily net assets(%).................................. 2.44 2.50 2.59(f)
Ratio of net investment income (loss) to average daily net assets(%).............. .05 (.62) (.42)(f)
Portfolio turnover rate(%)........................................................ 6 7 19
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE OCTOBER 6, 1994
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
CLASS I ------------ -----------------
SELECTED PER SHARE DATA 1995 1994
------------ -----------------
<S> <C> <C>
Net asset value, beginning of period..................................................... $ 27.60 $ 29.06
------------ ------
Income (loss) from investment operations
Net investment income................................................................... .30 .03
Net gain (loss) on investment transactions (both realized and unrealized)............... 3.22 (.49)
------------ ------
Total from investment operations...................................................... 3.52 (.46)
------------ ------
Less distributions from
Net investment income................................................................... .30 .03
Net realized gain....................................................................... .12 .92
In excess of net realized gain.......................................................... .03 --
Capital paid-in......................................................................... -- .05
------------ ------
Total distributions................................................................... .45 1.00
------------ ------
Net asset value, end of period........................................................... $ 30.67 $ 27.60
================ =================
Total return(%).......................................................................... 12.85(c) (1.64)(e)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................................. $ 13,020 $ 4,921
Ratio of expenses to average daily net assets(%)......................................... 1.35 1.41(f)
Ratio of net investment income to average daily net assets(%)............................ 1.14 .47(f)
Portfolio turnover rate(%)............................................................... 6 7
(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) The ratio of expenses to average daily 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 1.80%.
(e) Total return represents aggregate total return and does not reflect a sales charge.
(f) Annualized.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS
Ivy International Fund (the Fund) is a series of shares of beneficial
interest 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
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.
a. Securities 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 value. Debt
securities (other than commercial paper and 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 Board.
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$1,330,112 as capital gain dividends for its taxable year ended December 31,
1995.
d. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared and paid in December
by the Fund. In addition, distributions to Class A shareholders are declared
daily at the rate per share of the excess of 12b-1 fees of Class B over Class A
shares; and distributions to Class I shareholders are declared daily at the rate
per share of the excess of Class B share expenses over Class I shares.
Distributions are paid at the earlier of redemption or the last business day of
the quarter.
e. 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 differ from the characterization of such
distributions determined on a Federal income tax basis.
f. 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.
g. Deferred organization expenses -- Expenses incurred by the Fund in
connection with its issuing Class B and Class I shares have been deferred and
are being amortized on a straight-line basis over a five-year period.
h. 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
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of 1.00% of its average daily net assets.
Effective April 1, 1993, Northern Cross Investments Limited is the
subadviser of the Fund. IMI, not the Fund, is obligated to compensate the
subadviser.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $144,220.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. In addition, IMI may voluntarily reimburse the Fund's expenses. There
were no required or voluntary expense reimbursements for the year ended December
31, 1995.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets for Class A and Class B, and .01% of its average
daily net assets for Class I. Such fee is reflected as Administrative services
fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account for Class A and
Class B, and $10.25 per open account for Class I and $4.36 per account that is
closed. In addition, the Fund pays certain out-of-pocket expenses. Such fees and
expenses are reflected as Transfer agent in the Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
daily net asset value of Class A and Class B shares issued after December 31,
1991. Class B shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average daily net asset value attributable to Class B
shares. MIFDI 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. Class I shares are not subject
to service or distribution fees.
7. 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.
8. SUBSEQUENT EVENT
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 and Class I shares at the rate per share of the excess 12b-1 fees of
Class B shares over Class A shares and Class I shares. As a result of this
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
change, the net asset value per share of Class A, Class B and Class I are
expected to differ.
9. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class I were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 9,867,336 $284,977,224 5,810,090 $145,899,680
Issued on reinvestment of
distributions........... 158,854 4,677,883 310,093 8,522,293
Repurchased.............. (2,826,332) (81,163,229) (4,026,247) (94,877,901)
---------- ------------ ---------- ------------
Net increase............. 7,199,858 $208,491,878 2,093,936 $ 59,544,072
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,620,201 $ 47,706,315 1,135,641 $ 32,130,853
Issued on reinvestment of
distributions........... 9,355 286,570 33,568 921,389
Repurchased.............. (288,093) (8,264,949) (179,606) (4,889,857)
---------- ------------ ---------- ------------
Net increase............. 1,341,463 $ 39,727,936 989,603 $ 28,162,385
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994*
------------------------- -------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 254,153 $ 7,521,113 172,058 $ 5,000,000
Issued on reinvestment of
distributions........... 3,993 119,081 6,274 172,157
Repurchased.............. (11,973) (356,180) -- --
---------- ------------ ---------- ------------
Net increase............. 246,173 $ 7,284,014 178,332 $ 5,172,157
============ ============== ============ ==============
</TABLE>
* For the period October 6, 1994 (commencement of sale of Class I shares) to
December 31, 1994.
<PAGE> 88
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy International Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the year ended December 31, 1991, were audited by other auditors,
whose report, dated January 31, 1992, expressed an unqualified opinion on the
selected per share data and ratios.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements and financial highlights referred to above present fairly,
in all material respects, the financial position of the Fund as of December 31,
1995, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
IIF-2-296
<PAGE> 89
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY
GLOBAL
FUND
ANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Dear Shareholder:
Today in business it is most apparent that flow of capital ignores
national borders, and the same theory should apply to investing. Identifying
the true engines of growth is now more important than ever.
For the twelve months ended December 31, 1995, the total return of Ivy
Global Fund was 12.08% on a net asset value basis. Historically, stock market
returns have been directly related to economic growth. With this in mind, we
maintained our investment strategies, particularly as they related to
high-growth nations, and used periods of market weakness to add to existing
positions. In late 1995, we began to see evidence that investor sentiment
toward high-growth nations had become more favorable, a trend which has
continued into 1996. Shareholders who remained invested in Ivy Global Fund
throughout 1995 were rewarded for their continued confidence. The Morgan
Stanley Capital International World Index (MSCI), with a greater focus on
mature economies, was up 20.71% for the same period. (For the Fund's total
return with sales charge, and performance commentary, please refer to the
following page.)
With approximately 21% of the portfolio invested in France, the
Netherlands, Sweden and Switzerland, Ivy Global Fund is overweighted in
continental Europe. We believe lower interest rates and a stronger US dollar
are the keys to European markets moving higher. This should happen as concerns
continue to rise about growth slowing.
While some politicians favor the European Monetary Union (EMU), many
important business leaders, and the general public, are far less enthusiastic.
Our forecast is that the EMU will fail in its present form and that the
priority of central banks will shift to economically sensitive actions. Ivy
Global Fund is positioned in European cyclical and interest rate sensitive
stocks, which should outperform other sectors as interest rates fall and the
economy picks up. Also, the Fund holds many European multinationals with
substantially US dollar-denominated revenues. These companies should perform
well as the dollar strengthens.
Thirty-six percent of Ivy Global Fund is invested in non-Japan Asia
Pacific. Research indicates Far Eastern economies are growing 6% plus, and
current stock prices, when compared with their potential growth, are very
compelling. To lessen the chance of missing anyoverall major market upswings,
we have added more diversification to the Far East portion of the portfolio. We
believe Korea and th e Philippines provide the best values at this time. We
continue to avoid Japan, where economic growth prospects are decent, but stocks
are substantially overvalued and Japanese locals continue to be sellers.
Eight percent of the Fund is invested in Latin America, with the largest
allocations in Brazil, Argentina and Chile. Our research verifies that economic
reforms are continuing in Brazil--albeit slowly--and the potential for corporate
profit growth is high. Argentina should come out of its recession and see
relatively strong growth starting in the second half of 1996.
Our research confirms that our major investment themes--a strengthening US
dollar, lower interest rates in Europe and a resurgence in stock markets of
high-growth nations--have already begun to unfold. Therefore, we encourage
investors with a long-term horizon to take advantage of the window of
opportunity that we believe now exists.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management, Inc.
Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE> 90
IVY GLOBAL FUND PERFORMANCE COMMENTARY
For the twelve months ended December 31, 1995 the total return of Ivy Global
Fund was 12.08% as compared to the MSCI, which was up 20.71% for the same
period. The Fund trailed the MSCI largely because of our commitment to investing
on the global efficient frontier, which means you optimize risk and return
(based on historical data) by investing approximately 25% of a global portfolio
in high-growth nations. Emerging economies came under selling pressure early in
1995, as a result of the lingering effects of the Mexican peso devaluation of
the year before. The MSCI has a greater focus on mature economies.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (4/91) OF A $10,000
INVESTMENT
[CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------
IVY GLOBAL FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge
Average Annual Class B**
Total Return Average Annual Total Return
---------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
---------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
------------------------------
1 Yr. 5.64% 5.37% 6.25% 11.25% 5.97% 10.97%
- ------------------------------------------------------------------
Since Inception 8.05% 7.02% 3.00% 5.22% 2.84% 5.05%
- ------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The principal value of the Ivy Global Fund will fluctuate and at
redemption may be worth more or less than the amount of the original investment.
The MSCI is an unmanaged index of stocks which assumes reinvestment of dividends
and, unlike Fund returns, does not reflect any fees or expenses. It is not
possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
- --------------------------------------------------------------------------------
<PAGE> 91
IVY GLOBAL FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON AND PREFERRED STOCKS,
WARRANTS AND RIGHTS -- 97.1% SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------
AFRICA -- 1.7%
- ------------------------------------------
SOUTH AFRICA -- 1.7%
Anglo American Corporation of
South Africa Ltd. ADR................... 3,400 $ 205,184
Rembrandt Group Ltd. ..................... 25,300 242,902
-----------
448,086
-----------
EUROPE -- 33.2%
- ------------------------------------------
AUSTRIA -- 0.7%
OMV AG.................................... 2,000 173,429
-----------
FRANCE -- 9.4%
Banque Nationale De Paris................. 5,100 230,339
Compagnie Generale des Establissements
Michelin Class B........................ 3,000 119,791
Credit Lyonnais Cert D'Invest(a).......... 4,450 213,811
Credit National(a)........................ 2,000 147,209
Elf Gabon................................. 850 149,284
Galeries Lafayette........................ 720 175,768
Lyonnaise Des Eaux -- Dumez............... 2,500 241,004
Peugeot................................... 1,000 132,078
Rhone-Poulence S.A........................ 5,100 109,383
Schneider S.A............................. 6,600 225,892
Societe Generale.......................... 2,200 272,132
Societe Nationale Elf Aquitaine........... 2,400 177,044
Total Compagnie Francaise des
Petroles ADR............................ 7,601 258,434
-----------
2,452,169
-----------
GERMANY -- 0.6%
Volkswagen AG............................. 500 167,207
-----------
IRELAND -- 0.8%
Irish Investment Fund, Inc................ 18,000 211,500
-----------
ITALY -- 0.7%
Banca Popolare Di Brescia................. 33,250 186,941
-----------
NETHERLANDS -- 3.6%
ABN Amro Bank NV.......................... 3,180 144,826
Akzo NV................................... 1,100 127,197
Akzo NV ADR............................... 900 52,200
Hunter Douglas NV......................... 3,900 180,777
Internationale Nederlanden Groep NV....... 2,124 141,858
Royal Dutch Petroleum ADR................. 1,100 155,238
Unilever NV............................... 1,000 140,750
-----------
942,846
-----------
NORWAY -- 1.9%
Norsk Hydro Sponsored ADR................. 5,400 226,125
UNI Storebrand Fria AS(a)................. 46,700 258,230
-----------
484,355
-----------
PORTUGAL -- 2.0%
Filmes Lusomundo S.A. Preferred Shares.... 13,000 120,311
Portugal Fund............................. 19,000 211,375
Sonae Industria E Investimentos........... 9,100 194,522
-----------
526,208
-----------
SPAIN -- 2.4%
Banco Bilbao Vizcaya ADR.................. 1,900 67,925
Banco Santander S.A. ADR(a)............... 1,300 64,025
Empresa Nacional de Electricidad ADR...... 3,900 223,275
Telefonica de Espana S.A.................. 6,300 263,813
-----------
619,038
-----------
SWEDEN -- 5.2%
Astra AB "B" Free Shares.................. 6,400 $ 253,407
Atlas Copco AB Series "B" Free Shares..... 12,500 188,189
Electrolux................................ 6,600 270,765
S.K.F. AB Series "B"...................... 9,400 179,728
Sandvik AB -- "B" Shares.................. 13,500 236,779
Trelleborg AB "B" Free Shares............. 21,700 233,587
-----------
1,362,455
-----------
SWITZERLAND -- 3.1%
Holderbank Financiere Glaris AG........... 190 145,711
Nestle AG Registered...................... 176 194,607
S.M.H. AG-PC -- Registered................ 300 179,375
Swiss Bank Corportation Bearer............ 375 153,055
Union Bank of Switzerland Bearer.......... 125 135,399
-----------
808,147
-----------
UNITED KINGDOM -- 2.8%
Barclays PLC ADR.......................... 1,500 67,875
Cadbury Schweppes PLC ADR................. 25,000 206,420
Hanson PLC ADR............................ 8,200 125,050
National Westminster Bank PLC ADR......... 2,400 145,800
RTZ Corporation PLC ADR................... 3,089 177,618
-----------
722,763
-----------
ASIA/PACIFIC -- 36.1%
- ------------------------------------------
AUSTRALIA -- 3.3%
Ampolex Limited(a)........................ 85,000 185,738
Brambles Industries Ltd. ................. 24,000 267,570
CRA Ltd. ................................. 12,040 176,648
Pacific Dunlop Limited.................... 38,100 89,200
Santos Limited............................ 52,000 151,891
-----------
871,047
-----------
CHINA -- 1.1%
Maanshan Iron & Steel Co. Ltd. ........... 512,000 71,511
Shanghai Diesel Class B................... 100,000 37,000
Shanghai Haixing Shipping Co. 'H'......... 550,000 36,987
Shenzhen Konka Electronics
Group Ltd. Class B...................... 200,000 102,166
Tsingtao Brewery Company Ltd.............. 210,000 48,613
-----------
296,277
-----------
HONG KONG -- 8.5%
Citic Pacific Ltd. ....................... 90,000 307,856
Cheung Kong(Holdings) Ltd. ............... 49,000 298,468
China Light & Power Co., Ltd. ............ 47,200 217,306
Esprit Asia Holdings Ltd. ................ 534,000 183,007
Hong Kong Telecommunications Ltd. ........ 106,000 189,176
Hopewell Holdings Ltd. ................... 156,833 90,255
HSBC Holdings............................. 13,539 204,858
National Mutual Asia Ltd. ................ 360,000 325,897
Peregrine Investment Holdings Limited..... 140,000 181,054
Swire Pacific Ltd. ....................... 29,500 228,904
-----------
2,226,781
-----------
INDONESIA -- 2.3%
Semen Gresik -- Foreign Registered........ 66,000 184,737
PT Astra International.................... 77,500 160,999
PT Chereon Pokphand Indonesia............. 59,000 119,987
PT Mulia Industrindo...................... 46,000 129,762
-----------
595,485
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 92
IVY GLOBAL FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON AND PREFERRED STOCKS,
WARRANTS AND RIGHTS SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
KOREA -- 4.7%
Fidelity Advisor Korea Fund(a)........... 58,000 $ 616,250
Hyundai Motor Company Ltd. .............. 1,500 74,657
Hyundai Motor GDR(a)..................... 5,000 75,000
Korea Electric Power Corporation......... 6,400 282,054
Korea Fund Inc........................... 1,000 22,000
Pohang Iron & Steel Company Ltd. ........ 500 35,945
Samsung Electronics Company GDS(a)....... 1,500 88,875
Samsung Electronics Company
Rights(a).............................. 428 24,424
Samsung Heavy Industries................. 337 8,645
------------
1,227,850
------------
MALAYSIA -- 3.6%
Arab Malaysian Corporation............... 59,000 213,726
DCB Holdings Berhad...................... 60,000 174,824
Land & General Berhad.................... 83,000 179,746
London & Pacific Insurance
Company Berhad......................... 42,000 181,910
Technology Resources Industries
Berhad(a).............................. 63,000 186,046
------------
936,252
------------
NEW ZEALAND -- 2.8%
Fletcher Challenge Ltd. ................. 98,202 215,855
Helicopter Line Ltd. .................... 102,300 220,699
Lion Nathan Ltd. ........................ 121,000 288,728
------------
725,282
------------
PHILIPPINES -- 1.8%
Benpres Holdings Corporation GDR(a)...... 24,100 120,500
Davao Union Cement Corporation........... 57,600 11,857
Metro Pacific Corporation................ 960,000 177,507
Universal Robina Corporation............. 310,000 153,641
------------
463,505
------------
SINGAPORE -- 4.6%
Clipsal Industries Ltd. ................. 118,000 266,680
DBS Land Limited......................... 71,000 239,929
Fraser & Neave Ltd. ..................... 8,500 108,165
Jardine Strategic Holdings Ltd. ......... 91,187 279,032
Jardine Strategic Warrants 05/02/98(a)... 4,687 1,500
Jurong Shipyards Ltd. ................... 39,000 300,530
------------
1,195,836
------------
THAILAND -- 2.8%
Bank Of Ayudhya Public
Company Limited........................ 43,000 240,691
Krung Thai Bank Public
Company Limited........................ 30,000 122,667
Robinson Department Store
Public Company Limited................. 82,000 152,997
Thai Fund................................ 10,000 223,750
------------
740,105
------------
VIETNAM -- 0.6%
The Vietnam Fund Limited(a).............. 12,200 147,925
------------
NORTH AMERICA -- 17.7%
- -----------------------------------------
CANADA -- 2.6%
Alcan Aluminium Ltd. .................... 5,431 168,361
Brascan, Ltd. ........................... 9,600 168,723
Inco Limited............................. 5,824 192,455
Power Financial Corp..................... 6,500 159,460
------------
688,999
------------
UNITED STATES -- 15.1%
AT&T Corporation......................... 3,300 $ 213,675
Air Express International Corp........... 8,800 202,400
Aluminum Company of America.............. 4,400 232,100
Basic Petroleum International
Ltd. .(a).............................. 10,600 265,000
Caremark International Inc............... 4,725 85,641
Carnival Corporation..................... 6,800 164,050
Chrysler Corporation..................... 5,000 276,250
Columbia/HCA Healthcare Corp. ........... 1,984 100,688
Ford Motor Company....................... 8,000 232,000
General Electric Company................. 3,500 251,563
General Motors Corp. .................... 5,000 260,625
Kerr-McGee Corporation................... 3,800 240,825
Occidental Petroleum Corporation......... 7,500 160,313
Phelps Dodge Corp. ...................... 3,100 192,587
Royal Caribbean Cruises Ltd. ............ 7,500 165,000
The India Fund Incorporated(a)........... 30,000 266,250
The Singer Company NV.................... 8,800 245,300
Union Carbide Corporation Holding Co. ... 3,800 142,500
Whirlpool Corporation.................... 4,500 239,625
------------
3,936,392
------------
LATIN AMERICA -- 8.4%
- -----------------------------------------
ARGENTINA -- 1.9%
Buenos Aires Embotelladora (BAESA)....... 5,300 109,312
Telefonica De Argentina S.A.............. 9,700 264,325
Yacimientos Petroliferos
Fiscades S.A. ADR...................... 5,200 112,450
------------
486,087
------------
BRAZIL -- 3.5%
Brasmotor S.A. -- Preferred.............. 240,000 47,657
Petroleo Brasileiro S.A. -- Preferred.... 1,700,000 145,155
Telecomunicacoes Brasileiras S.A. ADR.... 15,300 724,837
------------
917,649
------------
CHILE -- 2.3%
Genesis Chile Fund....................... 14,700 588,000
------------
MEXICO -- 0.7%
Telefonos de Mexico ADR -- Class L....... 5,500 175,313
------------
TOTAL COMMON AND PREFERRED STOCKS,
WARRANTS AND RIGHTS
(COST -- $23,183,175).................. 25,323,929
------------
PAR
CONVERTIBLE BONDS -- 0.4% VALUE
- ----------------------------------------- ----------
Banco Commercial De Portugal, 8.75%,
05/21/02 (Cost -- $102,720)(c)......... $ 80,000 108,330
------------
COMMERCIAL PAPER -- 2.7%
- -----------------------------------------
Prudential Funding, 6.05%, 01/02/96
(Cost -- $699,893)..................... 700,000 699,893
------------
TOTAL INVESTMENTS -- 100.2%
(COST -- $23,985,788)(B)............... 26,132,152
OTHER ASSETS, LESS
LIABILITIES -- (0.2%).................. (56,944)
------------
NET ASSETS -- 100%....................... $ 26,075,208
============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 93
IVY GLOBAL FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
GDS -- Global Depository Share
NV -- Non-voting
(a) Non-Income producing security.
(b) Cost is approximately the same for Federal income tax purposes.
(c) Below investment grade.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 3,836,852
Gross unrealized depreciation..................... (1,690,488)
-----------
Net unrealized appreciation................... $ 2,146,364
===========
OTHER INFORMATION:
Purchases and sales of securities other than short-term obligations
aggregated $13,413,748 and $12,533,398, respectively, for the year
ended December 31, 1995.
Forward foreign currency exchange contracts at December 31, 1995
were:
FORWARD CONTRACTS
(CURRENCY/ PRINCIPAL VALUE OF UNREALIZED
EXPIRATION/COMMITMENT) AMOUNT OBLIGATION DEPRECIATION
- --------------------------------------------------------------------------------
Deutch Marks/March 96/Sell........ 163,947 US $ (164,848) $ (901)
French Francs/March 96/Sell....... 2,432,317 US (2,475,062) (42,745)
Netherland Guilders/
March 96/Sell.................... 853,280 US (858,944) (5,664)
Swiss Francs/March 96/Sell........ 794,321 US (803,945) (9,624)
------------- --------------
Total forward foreign currency
contracts sold................... $(4,302,799) $(58,934)
=============== =================
</TABLE>
(See Notes to Financial Statements)
<PAGE> 94
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $23,985,788).............................................................. $26,132,152
Receivables:
Fund shares sold.................................................................................................. 179,762
Dividends and interest............................................................................................ 47,662
Manager for expense reimbursement................................................................................. 11,440
Deferred organization expenses...................................................................................... 40,743
Other assets........................................................................................................ 6,623
-----------
Total assets...................................................................................................... 26,418,382
-----------
LIABILITIES
Payables:
Distributions to shareholders..................................................................................... 59,253
Investments purchased............................................................................................. 97,497
Open forward foreign currency contracts........................................................................... 58,934
Fund shares repurchased........................................................................................... 20,750
Management fee.................................................................................................... 21,964
12b-1 service and distribution fees............................................................................... 8,123
Administrative services fee....................................................................................... 2,171
Fund accounting................................................................................................... 2,800
Transfer agent.................................................................................................... 8,320
Due to custodian.................................................................................................... 55,886
Other accrued expenses and liabilities.............................................................................. 7,476
-----------
Total liabilities................................................................................................. 343,174
-----------
NET ASSETS.......................................................................................................... $26,075,208
===========
CLASS A:
Net asset value and redemption price per share ($21,264,229 / 1,776,808 shares outstanding)......................... $ 11.97
===========
Maximum offering price per share ($11.97 x 100 / 94.25)*............................................................ $ 12.70
===========
CLASS B:
Net asset value and offering price per share ($4,810,979 / 402,023 shares outstanding)**............................ $ 11.97
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $23,921,114
Accumulated net realized gain on investments and foreign currency transactions.................................... 13,394
Accumulated undistributed net investment income................................................................... 53,270
Net unrealized appreciation (depreciation) on
Investments..................................................................................................... 2,146,364
Forward foreign currency contracts.............................................................................. (58,934)
-----------
NET ASSETS.......................................................................................................... $26,075,208
===========
</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> 95
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of withholding tax ($14,255)................ $ 659,633
Interest................................................... 39,237
----------
698,870
----------
EXPENSES
Management fee............................................. $239,963
Transfer agent............................................. 88,419
Administrative services fee................................ 23,996
Custodian fees............................................. 20,092
Blue Sky fees.............................................. 42,043
Auditing and accounting fees............................... 24,474
Shareholder reports........................................ 6,161
Amortization of organization expenses...................... 11,186
Fund accounting............................................ 32,982
Trustees' fees............................................. 4,019
12b-1 service and distribution fees
Class A.................................................. 50,833
Class B.................................................. 36,632
Legal...................................................... 24,374
Other...................................................... 12,448
----------
617,622
Expenses reimbursed by manager.............................. (62,242)
----------
Net expenses............................................... 555,380
----------
Net investment income....................................... 143,490
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments and foreign currency transactions............ 1,155,024
Forward foreign currency contracts....................... (156,378)
Net unrealized appreciation (depreciation) during the
period on
Investments.............................................. 1,649,554
Forward foreign currency contracts....................... (41,767)
----------
Net gain on investment transactions...................... 2,606,433
----------
Net increase in net assets resulting from operations........ $2,749,923
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)............................... $ 143,490 $ (12,126 )
Net realized gain on investments and foreign currency
transactions............................................. 998,646 140,468
Net unrealized gain (loss) during the period on
Investments.............................................. 1,649,554 (586,821 )
Forward foreign currency contracts sold.................. (41,767 ) (17,167 )
------------ ------------
Net increase (decrease) resulting from operations........ 2,749,923 (475,646 )
------------ ------------
CLASS A:
Distributions from
Net investment income...................................... (71,425 ) --
In excess of net investment income......................... -- (1,795 )
Net realized gain.......................................... (827,783 ) (144,920 )
In excess of net realized gain............................. (120,215 ) --
Capital paid-in............................................ -- (167,238 )
------------ ------------
Total distributions to Class A shareholders.............. (1,019,423 ) (313,953 )
------------ ------------
CLASS B:
Distributions from
Net realized gain.......................................... (170,863 ) (20,883 )
In excess of net realized gain............................. (24,814 ) --
Capital paid-in............................................ -- (13,789 )
------------ ------------
Total distributions to Class B shareholders.............. (195,677 ) (34,672 )
------------ ------------
Fund share transactions (Note 10):
Net increase resulting from Fund share transactions
Class A.................................................. 591,261 2,588,855
Class B.................................................. 1,665,995 2,749,327
------------ ------------
Net increase resulting from Fund share transactions.... 2,257,256 5,338,182
------------ ------------
Total increase in net assets................................ 3,792,079 4,513,911
NET ASSETS
Beginning of period........................................ 22,283,129 17,769,218
------------ ------------
End of period.............................................. $26,075,208 $22,283,129
================ =================
Accumulated undistributed net investment income............. $ 53,270 $ --
================ =================
</TABLE>
(See Notes to Financial Statements)
<PAGE> 96
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FOR THE SIX MONTHS APRIL 18, 1991
YEAR ENDED ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30, JUNE 30,
CLASS A ------------ ------------ ---------------------------------- -----------------
SELECTED PER SHARE DATA 1995 1994 1994 1993 1992 1991
------------ ------------ ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 11.23 $ 11.52 $ 10.62 $ 10.55 $ 9.40 $ 10.00
-------- -------- ------- ------- ------ --------
Income (loss) from investment
operations
Net investment income(a)......... .09 -- -- .03 .06 .02
Net gain (loss) on investment
transactions (both realized
and unrealized)................ 1.25 (.10) 1.79 .44 1.79 (.61)
-------- -------- ------- ------- ------ --------
Total from investment
operations................... 1.34 (.10) 1.79 .47 1.85 (.59)
-------- -------- ------- ------- ------ --------
Less distributions from
Net investment income............ .04 -- .01 .03 .06 .01
Net realized gain................ .49 .09 .88 .37 .62 --
In excess of net realized gain... .07 -- -- -- -- --
Capital paid-in.................. -- .10 -- -- .02 --
-------- -------- ------- ------- ------ --------
Total distributions............ .60 .19 .89 .40 .70 .01
-------- -------- ------- ------- ------ --------
Net asset value, end of period..... $ 11.97 $ 11.23 $ 11.52 $ 10.62 $10.55 $ 9.40
======== ======== ======= ======= ====== ========
Total return(%).................... 12.08(b) (1.00)(c) 16.71(b) 4.54(b) 19.91(b) (24.65)(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period
(in thousands)................... $ 21,264 $ 19,327 $17,393 $12,391 $8,780 $ 1,667
Ratio of expenses to average
daily net assets
With expense reimbursement(%).... 2.20 2.20(d) 2.20 1.95 2.02 2.50(d)
Without expense
reimbursement(%)............... 2.46 2.34(d) 2.42 2.76 2.97 11.70(d)
Ratio of net investment income
(loss) to average daily net
assets(%)(a)..................... .71 (.06)(d) .01 .38 .82 .81(d)
Portfolio turnover rate(%)......... 53 23(d) 85 67 59 24(d)
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FOR THE SIX MONTHS APRIL 1, 1994
YEAR ENDED ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31, JUNE 30,
CLASS B ------------ ------------ -----------------
SELECTED PER SHARE DATA 1995 1994 1994
------------ ------------ -----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................................ $11.23 $11.52 $ 12.12
------ ------ -------
Income (loss) from investment operations
Net investment loss(a).................................................... -- (.03) (.01)
Net gain (loss) on investment transactions (both realized and
unrealized)............................................................. 1.25 (.12) (.04)
----- ----- -------
Total from investment operations........................................ 1.25 (.15) (.05)
----- ----- -------
Less distributions from
Net realized gain......................................................... .45 .08 .55
In excess of net realized gain............................................ .06 -- --
Capital paid-in........................................................... -- .06 --
----- ----- -----
Total distributions..................................................... .51 .14 .55
----- ----- ------
Net asset value, end of period.............................................. $11.97 $11.23 $ 11.52
===== ===== =======
Total return(%)............................................................. 11.25(b) (1.37)(c) .38(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................................... $4,811 $2,956 $ 376
Ratio of expenses to average daily net assets
With expense reimbursement(%)............................................. 2.95 2.95(d) 2.95(d)
Without expense reimbursement(%).......................................... 3.21 3.09(d) 3.17(d)
Ratio of net investment loss to average daily net assets(%)(a).............. (.04) (.81)(d) (.74)(d)
Portfolio turnover rate(%).................................................. 53 23(d) 85
(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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS
Ivy Global Fund (the Fund) (formerly Mackenzie Global Fund d/b/a Ivy Global
Fund), is a series of shares of beneficial interest of Ivy Fund. The shares of
beneficial interest are assigned no par value and an unlimited number of shares
of Class A and Class B 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.
a. Securities 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 value. Debt
securities (other than commercial paper and 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 Board.
b. Securities transactions and investment income -- Securities 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 securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$791,840 as capital gain dividends for its taxable year ended December 31, 1995.
d. Distributions to shareholders -- Distributions from net investment
income and net realized capital gains, if any, are declared annually. In
addition, distributions to Class A shareholders are declared daily at the rate
per share of the excess of 12b-1 fees of Class B over Class A shares.
Distributions are paid at the earlier of redemption or the last designated day
of the annual period.
e. 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 (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 and
foreign currency transactions. 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 differ from the characterization of such
distributions determined on a Federal income tax basis.
f. 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.
g. Deferred organization expenses -- Expenses incurred by the Fund in
connection with its issuing Class B shares have been deferred and are being
amortized on a straight-line basis over a five year period.
h. 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, for-
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ward 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. MANAGEMENT AND DISTRIBUTION
Effective February 1, 1995, the Fund pays Ivy Management, Inc. (IMI), a
wholly owned subsidiary of Mackenzie Investment Management Inc. (MIMI), a
monthly management fee at the annual rate of 1.00% of its of its first $500
million of average daily net assets and .75% of its average daily net assets in
excess of $500 million. The Fund paid MIMI, the previous manager, $18,418 for
January 1995.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $23,153.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, the Manager will bear the excess expenses. The most
restrictive state expense limitation provision limits a fund's annual expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses and
other expenses subject to approval by state securities administrators) to 2.5%
of the first $30 million of the average daily net assets; 2.0% of the next $70
million of the average daily net assets; and 1.5% of the remaining average daily
net assets. Currently, the Manager 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 daily 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.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,250 when net assets are $10 million and under; $2,500 when net assets
are over $10 million to $40 million; $5,000 when net assets are over $40 million
to $75 million; and $6,500 when net assets are over $75 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
daily net asset value. Class B shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average daily net asset value
attributable to Class B shares. MIFDI 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.
7. 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.
8. 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 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)
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
9. SUBSEQUENT EVENT
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. As a result of this change, the net asset value per share of
Class A and Class B are expected to differ.
10. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Sold....................... 2,228,655 $ 24,282,852 364,458 $ 4,428,780
Issued on reinvestment of
distributions............. 74,044 885,461 26,328 294,027
Repurchased................ (2,247,642) (24,577,052) (179,221) (2,133,952)
---------- ------------ -------- -----------
Net increase............... 55,057 $ 591,261 211,565 $ 2,588,855
============ ============== ========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- ---------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold........................ 424,399 $ 4,741,733 229,361 $2,737,854
Issued on reinvestment of
distributions.............. 14,695 175,609 3,171 34,223
Repurchased................. (300,410) (3,251,347) (1,858) (22,750)
---------- ----------- ------- ----------
Net increase................ 138,684 $ 1,665,995 230,674 $2,749,327
============ ============= ======== ============
</TABLE>
<PAGE> 100
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for the six month period ended December 31, 1994 and
for the year ended December 31, 1995, and the financial highlights for each of
the periods indicated. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for the six month period ended December 31,
1994 and for the year ended December 31, 1995, and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
IGLF-2-296
<PAGE> 101
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY BOND FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Dear Shareholder:
During 1995, financial markets were particularly favorable for fixed
income investors. Moderate economic growth coupled with an absence of
inflationary pressure paved the way for lower interest rates. In January 1996,
the Federal Reserve Board once again lowered the discount rate, marking the
third such cut since last summer. At the same time that rates were declining,
the economy remained strong enough for most companies to report respectable
corporate earnings. This combination of corporate earnings, low inflation and
declining interest rates created a favorable environment for bonds.
Against this backdrop, Ivy Bond Fund performed well. For the twelve months
ended December 31, 1995, the Fund turned in a total return of 17.41% on a net
asset value basis. This compares to the general corporate bond fund average as
tracked by Morningstar Inc. of 16.27%. (For the Fund's total return with sales
charge, and performance commentary, please refer to the following pages.)
The investment policies of Ivy Bond Fund provide its manager with the
flexibility to invest in fixed income securities with the best yield and return
opportunities. With the conviction that interest rates would remain low, and
inflation not being a concern, the Fund's allocation to BBB-rated bonds was
increased. These bonds generally yield about 1.5% higher than U.S. government
bonds.
Corporate credit upgrades (versus downgrades), by Moody's Investors
Services, has been trending higher. This supports our focus on bonds that are
going or are expected to undergo,
IVY BOND FUND IS ACTIVELY
MANAGED IN AN EFFORT TO PROVIDE
SHAREHOLDERS WITH THE GREATEST
BALANCE OF RETURN AND YIELD.
a credit rating upgrade. These out-of-favor bonds provide higher income
and the potential for capital appreciation. The Fund must still invest 65% of
its assets within the four highest rating categories by Standard and Poor's, or
the equivalent rating by Moody's. This helps to offset the possibility of
additional volatility as a result of investment in bonds with improving credit.
A portion of the Fund remains invested in U.S. dollar-denominated foreign
bonds. These holdings provide added diversification and very high relative
yields.
We believe that the current interest rate environment, low inflationary
pressures and prospects for economic growth, world over, create opportunities
in the credit markets. As always, we will continue to actively manage Ivy Bond
Fund in an effort to provide the greatest balance of return and yield.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan SwanLegal Counsel
Dechert Price & Rhoads
Boston, MA
Officers
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
CUSTODIAN
Brown Brothers Harriman & Co
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management,
Inc.Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE> 102
IVY BOND FUND PERFORMANCE COMMENTARY
Ivy Bond Fund performed well in 1995 with a total return of 17.41% on a net
asset value basis. This compares favorably to the Morningstar general corporate
bond fund average, comprised of fixed income securities of various quality
ratings, which was up 16.27% for the same period. The difference in performance
is attributable to the difference in bond quality weightings of the Fund versus
the Morningstar average.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (9/85) OF A $10,000
INVESTMENT
[CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
IVY BOND FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge
Average Annual Class B**
Total Return Average Annual Total Return
---------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
---------------------------------------------------=
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
-------------------- --------------
1 Yr. 11.83% 11.83% 11.54% 16.54% 11.54% 16.54%
- ------------------------------------------------------------------
5 Yr. 8.91% 8.88% -- -- -- --
- ------------------------------------------------------------------
10 Yr. 8.93% 2.21% -- -- -- --
- ------------------------------------------------------------------
Since Inception 8.79% 0.79% 5.60% 7.77% 5.60% 7.77%
- ------------------------------------------------------------------- --------------
</TABLE>
*Class A performance figures include the maximum sales charge of 4.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The principal value of the Ivy Bond Fund will fluctuate and at
redemption may be worth more or less than the amount of the original investment.
The Morningstar Corporate Bond-General Fund index is an unmanaged index of
fixed-income securities, primarily corporate bonds of various quality ratings.
The index assumes reinvestment of dividends and, unlike Fund returns, does not
reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
<PAGE> 103
IVY BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR
CORPORATE BONDS -- 74.6% VALUE VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
ACME Metals Inc., 13.50%, 08/01/04(a).... $1,000,000 $ 801,250
AMR Corp. Del., 9.00%, 08/01/12.......... 2,000,000 2,248,600
Affinity Group Inc., 11.50%,
10/15/03(a)............................ 1,000,000 1,015,000
American President Co. Ltd.,
8.00%, 01/15/24........................ 1,000,000 1,048,240
Associated Estates Realty Corp.,
8.375%, 04/15/00....................... 1,000,000 1,054,290
Berkeley Fed Bank & Trust,
12.00%, 06/15/05(a).................... 1,000,000 1,030,000
CCP Insurance Inc., 10.50%,
12/15/04(a)............................ 1,500,000 1,655,790
Cigna Corp., 8.30%, 01/15/23............. 1,000,000 1,104,270
Cigna Corp., 7.65%, 03/01/23............. 1,000,000 1,028,700
Comcast Corp., 9.375%, 05/15/05(a)....... 1,000,000 1,045,000
Delphi Financial Group Inc.,
8.00%, 10/01/03........................ 2,500,000 2,483,250
Delta Air Lines, 9.20%, 09/23/14......... 1,000,000 1,064,065
Delta Air Lines, 9.59%, 01/12/17......... 1,500,000 1,774,920
Developers Diversified Realty Corp.,
7.28%, 11/24/05........................ 1,000,000 1,002,500
Dual Drilling Co., 9.875%, 01/15/04(a)... 250,000 235,625
Duke Realty Investments,
7.375%, 09/22/05....................... 1,000,000 1,027,920
Duty Free International Inc.,
7.00%, 01/15/04........................ 2,000,000 1,961,280
Essex Group, 10.00%, 05/01/03(a)......... 2,000,000 1,970,000
FHP International Corp.,
7.00%, 09/15/03........................ 2,000,000 1,998,120
Fairfax Financial Holdings Ltd.,
7.75%, 12/15/03........................ 1,000,000 1,034,600
Giant Industries Inc.,
9.75%, 11/15/03(a)..................... 400,000 404,500
Grand Union Co., 12.00%, 09/01/04(a)..... 1,500,000 1,293,750
Great Atlantic & Pacific Tea Inc.,
7.70%, 01/15/04........................ 1,000,000 1,010,510
HMC Acquisition Properties Inc.,
9.00%, 12/15/07(a)..................... 1,000,000 1,010,000
Integon Corp., 9.50%, 10/15/01........... 500,000 544,300
K Mart Corp., 8.25%, 01/01/22............ 1,000,000 700,000
K Mart Corp., 7.95%, 02/01/23............ 500,000 350,000
K Mart Corp., 12.50%, 03/01/05........... 1,500,000 1,335,000
Kaiser Aluminum & Chemical,
9.875%, 02/15/02(a).................... 3,000,000 3,082,500
Leucadia Natl Corp., 8.25%, 06/15/05..... 2,000,000 2,131,820
Long Island Lighting Co.,
8.625%, 04/15/04....................... 2,000,000 2,040,420
Maxus Energy Corp, 9.375%,
11/01/03(a)............................ 1,500,000 1,473,750
Mobile Media Corp., 9.375%,
11/01/07(a)............................ 500,000 512,500
Mothers Work Inc., 12.625%,
08/01/05(a)............................ 1,000,000 980,000
NAC Re Corp, 7.15%, 11/15/05............. 790,000 808,304
Overseas Shipholding Group Inc.,
8.00%, 12/01/03........................ 2,000,000 2,150,780
Overseas Shipholding Group Inc.,
8.75%, 12/01/13........................ 2,000,000 2,086,540
PDV America Inc., 7.25%, 08/01/98........ 2,000,000 1,958,180
PDV America Inc., 7.875%, 08/01/03....... 1,000,000 962,270
Paine Webber Group, 7.75%, 09/01/02...... 1,500,000 1,593,810
Parker & Parsley, 8.75%, 04/15/05........ 1,500,000 1,677,780
Parker & Parsley, 8.25%, 08/15/07........ 1,000,000 1,083,850
Pegasus Media & Communications, 12.50%,
07/01/05(a)............................ 2,000,000 1,990,000
RJR Nabisco Inc., 8.75%, 07/15/07........ 3,600,000 3,685,788
RJR Nabisco Inc., 9.25%, 08/15/13........ $2,000,000 $ 2,079,120
SFX Broadcasting, 11.375%,
10/01/00(a)............................ 1,000,000 1,060,000
Salomon Brothers, 6.75%, 08/15/03........ 1,000,000 981,800
Salomon Brothers, 6.875%, 12/15/03....... 1,000,000 988,220
Tele-Commununications, Inc.,
9.25%, 01/15/23........................ 2,000,000 2,191,380
Tele-Commununications, Inc.,
7.25%, 08/01/05........................ 1,000,000 1,019,080
Time Warner Inc., 9.15%, 02/01/23........ 2,000,000 2,276,900
Time Warner Inc., 7.975%, 08/15/04....... 375,000 397,361
Time Warner Inc., 8.11%, 08/15/06........ 750,000 801,548
Time Warner Inc., 8.18%, 08/15/07........ 750,000 804,502
Time Warner Inc., FRN, 08/15/00.......... 625,000 628,125
Time Warner Inc., 9.125%, 01/15/13....... 500,000 564,795
Triton Energy, 0.00%, 11/01/97(a)........ 1,100,000 948,750
Triton Energy, Re-set Note, 12/15/00(a).. 500,000 470,000
Turner Broadcasting System,
8.40%, 02/01/24(a)..................... 1,000,000 999,670
USX Marathon Group, 8.50%, 03/01/23...... 1,000,000 1,096,230
USX Marathon Group, 9.375%, 05/15/22..... 1,000,000 1,187,420
United Air Lines, 9.75%, 08/15/21........ 2,500,000 2,994,450
Viacom Inc., 7.625%, 01/15/16(a)......... 1,000,000 1,004,190
Weirton Steel Corp., 11.50%,
03/01/98(a)............................ 600,000 618,000
Woolworth, 8.50%, 01/15/22............... 500,000 527,055
------------
TOTAL CORPORATE BONDS
(COST -- $80,315,201).................. 85,088,368
------------
U.S. GOVERNMENT OBLIGATIONS -- 1.8%
- -----------------------------------------
Federal National Mortgage Association.,
10.00%, 07/15/96....................... 1,000,000 992,500
U.S. Treasury Note, 6.50%, 05/15/05...... 1,000,000 1,065,080
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST -- $2,021,650)................... 2,057,580
------------
U.S. DOLLAR DENOMINATED
FOREIGN BONDS -- 20.3%
- -----------------------------------------
Banco de Nordeste Brasil 144A REGD,
9.00%, 11/12/96(a)..................... 1,400,000 1,366,750
Banco Ganadero S.A., 9.75%, 08/26/99(a).. 1,000,000 1,012,500
Bancomex Trust, 8.00%, 08/05/2003(a)..... 1,000,000 778,750
Banpais S.A., 7.25%, 01/28/97(a)......... 200,000 186,000
Banpais 144A REGD, 7.25%,
01/28/97(a)............................ 500,000 465,000
Brazilian IDU Trust, FRN,
6.0625%, 01/01/01(a)................... 960,000 813,600
Cominco Ltd., 8.03%, 5/26/03............. 2,600,000 2,829,632
Comunicacion Celular S.A.,
FRN, 11/15/03(a)....................... 2,000,000 1,130,000
General Electric Capital Corp.,
FRN, 03/10/97.......................... 1,000,000 566,780
General Electric Capital Corp.,
FRN, 10/29/96.......................... 1,000,000 529,690
Grupo Mex de Desarrollo, 8.25%, 02/17/01
144A................................... 1,000,000 400,000
Grupo Mex de Desarrollo, 8.25%,
02/17/01(a)............................ 250,000 100,000
Grupo Industrial Durango 144A REGD, FRN,
11/18/96(a)............................ 500,000 475,000
Grupo Simec S.A. de CV 144A REGD, 8.875%,
12/15/98(a)............................ 1,500,000 828,750
Guangdong Enterprises,
8.75%, 12/15/03(a)..................... 2,000,000 1,763,620
Inco Ltd., 9.60%, 06/15/22............... 2,000,000 2,344,100
Industrias Unidas, 8.50%, 01/27/99(a).... 1,000,000 740,000
</TABLE>
(See Notes to Financial Statements)
<PAGE> 104
IVY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S. DOLLAR DENOMINATED PAR
FOREIGN BONDS VALUE VALUE
<S> <C> <C>
- ------------------------------------------------------------------------
Iochpe-Maxion S.A.,
12.275%, 11/08/02(a)................... $ 900,000 $ 765,000
Metalurgica Gerdau S.A.,
10.25%, 11/23/01(a).................... 1,000,000 945,000
National Bank of Hungary,
8.875%, 11/01/13(a).................... 1,000,000 850,000
RHG Finance Corp., 8.875%, 10/01/05...... 1,000,000 1,053,220
Republic of Argentina,
8.25%, 08/02/00(a)..................... 1,000,000 935,000
Singer Co. NV, 7.00%, 04/01/03........... 1,500,000 1,446,195
Companhia Suzano Papel 144A REGD, 10.25%,
10/06/01(a)............................ 900,000 850,500
------------
TOTAL U.S. DOLLAR DENOMINATED FOREIGN
BONDS (COST -- $25,442,016)............ 23,175,087
------------
COMMON STOCKS -- 0.1% SHARES
- ----------------------------------------- ----------
Pegasus Media Class B
(Cost -- $25,000)...................... 200 50,000
------------
PAR
SHORT-TERM OBLIGATIONS -- 1.1% VALUE
- ----------------------------------------- ----------
Federal Home Loan Mortgage Corp., 5.579%,
01/02/96 (Cost -- $1,274,805).......... $1,275,000 1,274,805
------------
TOTAL INVESTMENTS -- 97.9%
(COST -- $109,078,672)*................ 111,645,840
OTHER ASSETS, LESS LIABILITIES -- 2.1%... 2,377,572
------------
NET ASSETS -- 100%....................... $114,023,412
============
*Cost is approximately the same for Federal income tax purposes.
(a) Below investment grade security.
FRN = Floating Rate Note
REGD = Registered
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 6,301,922
Gross unrealized depreciation.................... (3,734,754)
------------
Net unrealized appreciation.................. $ 2,567,168
============
OTHER INFORMATION
Purchases and sales of securities other than short-term U.S.
Government securities and short term obligations aggregated
$102,532,198 and $112,557,296, respectively, for the period ended
December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 105
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $109,078,672)............................................................ $111,645,840
Receivables:
Fund shares sold................................................................................................. 35,009
Interest......................................................................................................... 2,604,476
Deferred organization expenses..................................................................................... 60,638
Other assets....................................................................................................... 16,386
------------
Total assets..................................................................................................... 114,362,349
------------
LIABILITIES
Payables:
Distributions to shareholders.................................................................................... 5,853
Fund shares repurchased.......................................................................................... 159,887
Management fee................................................................................................... 71,859
12b-1 service and distribution fees.............................................................................. 27,206
Administrative services fee...................................................................................... 9,581
Fund accounting.................................................................................................. 8,400
Transfer agent................................................................................................... 18,518
Due to custodian................................................................................................... 30,056
Other accrued expenses and liabilities............................................................................. 7,577
------------
Total liabilities................................................................................................ 338,937
------------
NET ASSETS......................................................................................................... $114,023,412
============
CLASS A:
Net asset value and redemption price per share ($108,839,893 / 11,124,202 shares outstanding)...................... $ 9.78
============
Maximum offering price per share ($9.78 x 100 / 95.25)*............................................................ $ 10.27
============
CLASS B:
Net asset value and offering price per share ($5,183,519 / 529,796 shares outstanding)**........................... $ 9.78
============
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................. $118,697,394
Accumulated net realized loss.................................................................................... (7,241,150)
Net unrealized appreciation on investments....................................................................... 2,567,168
------------
NET ASSETS......................................................................................................... $114,023,412
============
</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> 106
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................................................... $ 9,772,593
-----------
EXPENSES
Management fee......................................................................................... $848,778
Transfer agent......................................................................................... 198,311
Administrative services fee............................................................................ 113,170
Custodian fees......................................................................................... 17,297
Blue Sky fees.......................................................................................... 45,933
Auditing and accounting fees........................................................................... 47,214
Shareholder reports.................................................................................... 8,479
Amortization of organization expenses.................................................................. 15,454
Fund accounting........................................................................................ 102,160
Trustees' fees......................................................................................... 3,226
12b-1 service and distribution fees
Class A.............................................................................................. 273,837
Class B.............................................................................................. 36,359
Legal.................................................................................................. 32,308
Other.................................................................................................. 31,604
-----------
1,774,130
Expenses reimbursed by manager........................................................................... (2,615)
-----------
Net expenses........................................................................................... 1,771,515
-----------
Net investment income.................................................................................... 8,001,078
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments....................................................................... (2,940,340)
Net unrealized appreciation during the period on investments........................................... 13,121,035
-----------
Net gain on investments.............................................................................. 10,180,695
-----------
Net increase in net assets resulting from operations..................................................... $18,181,773
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 107
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income............................................................................. $ 8,001,078 $ 4,103,279
Net realized loss on investments.................................................................. (2,940,340) (426,050 )
Net unrealized gain (loss) during the period on investments....................................... 13,121,035 (3,134,854 )
------------ ------------
Net increase resulting from operations.......................................................... 18,181,773 542,375
------------ ------------
CLASS A:
Distributions from
Net investment income............................................................................. (7,254,790) (3,984,415 )
In excess of net realized gain.................................................................... -- (1,134,267 )
Capital paid-in................................................................................... (1,327,021) --
------------ ------------
Total distributions to Class A shareholders..................................................... (8,581,811) (5,118,682 )
------------ ------------
CLASS B:
Distributions from
Net investment income............................................................................. (213,541) (48,403 )
In excess of net realized gain.................................................................... -- (24,587 )
Capital paid-in................................................................................... (47,497) --
------------ ------------
Total distributions to Class B shareholders..................................................... (261,038) (72,990 )
------------ ------------
Fund share transactions (Note 10):
Net decrease resulting from Fund share transactions
Class A......................................................................................... (10,437,361) (5,275,914 )
Class B......................................................................................... 2,470,240 1,742,753
------------ ------------
Net decrease resulting from Fund share transactions........................................... (7,967,121) (3,533,161 )
------------ ------------
Total increase (decrease) in net assets............................................................. 1,371,803 (8,182,458 )
NET ASSETS
Beginning of period............................................................................... 112,651,609 120,834,067
------------ ------------
End of period..................................................................................... $114,023,412 $112,651,609
============ ===============
Accumulated undistributed net investment income..................................................... $ -- $ 9,511
============ ===============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 108
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
CLASS A ------------ ------------- ----------------------------------------------------------
SELECTED PER SHARE DATA 1995 1994 1994 1993 1992 1991
------------ ------------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 9.01 $ 9.38 $ 10.34 $ 9.95 $ 9.61 $ 9.84
------------ ------------- -------- -------- -------- -------
Income from investment
operations
Net investment income......... .67(a) .33(a) .63 .55 .63(a) .62(a)
Net gain (loss) on investments
(both realized and
unrealized)................. .84 (.29) (.60) 1.00 .73 .10
------------ ------------- -------- -------- -------- -------
Total from investment
operations................ 1.51 .04 .03 1.55 1.36 .72
------------ ------------- -------- -------- -------- -------
Less distributions from
Net investment income......... .63 .32 .61 .64 .63 .62
Net realized gain............. -- -- .38 .52 .25 .13
In excess of net realized
gain........................ -- .09 -- -- -- --
Capital paid-in............... .11 -- -- -- .14 .20
------------ ------------- -------- -------- -------- -------
Total distributions......... .74 .41 .99 1.16 1.02 .95
------------ ------------- -------- -------- -------- -------
Net asset value, end of
period........................ $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95 $ 9.61
============== =============== ======== ======== ======== =======
Total return(%)................. 17.41(b) .43(c) 0.00(b) 16.29(b) 14.77(b) 7.58(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)................ $108,840 $ 110,232 $120,073 $132,721 $102,328 $92,687
Ratio of expenses to average
daily net assets
With expense
reimbursement(%)............ 1.54 1.50(d) -- -- 1.50 1.50
Without expense
reimbursement(%)............ 1.54 1.52(d) 1.45 1.49 1.55 1.65
Ratio of net investment income
to average daily net
assets(%)..................... 7.09(a) 6.92(a)(d) 6.19 6.42 6.92(a) 6.77(a)
Portfolio turnover rate(%)...... 93 44(d) 78 134 129 118
</TABLE>
(See Notes to Financial Statements)
<PAGE> 109
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE FOR THE SIX APRIL 1, 1994
YEAR ENDED MONTHS ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31, JUNE 30,
CLASS B ------------ ------------ -----------------
SELECTED PER SHARE DATA 1995 1994 1994
------------ ------------ -----------------
<S> <C> <C> <C>
Net asset value, beginning of period............................... $ 9.01 $ 9.38 $ 9.82
------ ------ ------
Income (loss) from investment operations
Net investment income............................................ .60(a) .30(a) .10
Net gain (loss) on investments (both realized and unrealized).... .84 (.29) (.32)
------ ------ ------
Total from investment operations............................... 1.44 .01 (.22)
------ ------ ------
Less distributions from
Net investment income............................................ .56 .29 .14
Net realized gain................................................ -- -- .08
In excess of net realized gain................................... -- .09 --
Capital paid-in.................................................. .11 -- --
------ ------ ------
Total distributions............................................ .67 .38 .22
------ ------ ------
Net asset value, end of period..................................... $ 9.78 $ 9.01 $ 9.38
============== =============== =================
Total return(%).................................................... 16.54(b) .06(c) (2.24)(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................... $5,184 $2,420 $ 761
Ratio of expenses to average daily net assets
With expense reimbursement(%).................................... 2.29 2.25(d) --
Without expense reimbursement(%)................................. 2.29 2.27(d) 2.20(d)
Ratio of net investment income to average daily net assets(%)...... 6.34(a) 6.17(a)(d) 5.44(d)
Portfolio turnover rate(%)......................................... 93 44(d) 78
(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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 110
NOTES TO FINANCIAL STATEMENTS
Ivy Bond Fund (the Fund) (formerly Mackenzie Fixed Income Trust d/b/a Ivy
Bond 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
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.
a. Securities valuation -- Debt securities (other than commercial paper and
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. 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 value.
All other securities are valued at their fair value, as determined in good faith
by the Board.
b. Securities transactions and investment income -- Securities transactions
are accounted for on the trade date. Dividend income, if any, is recorded on the
ex-dividend date, and interest income is accrued on a daily basis. Realized
gains and losses from securities transactions are calculated on an identified
cost basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
The Fund had 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.
d. Distributions to shareholders -- Distributions from net investment
income are declared monthly and distributions from net realized capital gains,
if any, are declared annually. In addition, distributions to Class A
shareholders are declared daily at the rate per share of the excess of 12b-1
fees of Class B over Class A shares. Distributions are paid at the earlier of
redemption or the designated monthly or annual payment date.
e. 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.
f. 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 and certain securities sold at a loss. As a result, Net
investment income (loss) and Net realized gain (loss) on investments 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. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of .75% of its first $500 million of average daily net assets; .60%
of its next $500 million of average daily net assets; and .40% of its average
daily net assets in excess of $1 billion.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discount retained by MIFDI was $20,028.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
<PAGE> 111
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
assets. IMI voluntarily limited the Fund's total operating expenses (excluding
taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) through January 31,
1995 to an annual rate of 1.25% of its average daily net assets. Effective
February 1, 1995, the voluntary expense limitation was terminated. Expenses
reimbursed by manager reflected in the Statement of Operations consists of a
voluntary reimbursement.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets for Class A and Class B, and .01% of its average
daily net assets for Class I. Such fee is reflected as Administrative services
fees in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,000 when net assets are $20 million and under; $1,500 when net assets
are over $20 million to $75 million; $4,000 when net assets are over $75 million
to $100 million; and $6,000 when net assets are over $100 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.75 per open account for Class A and
Class B, and $10.25 per open account for Class I and $4.36 per account that is
closed. In addition, the Fund pays certain out-of-pocket expenses. Such fees and
expenses are reflected as Transfer agent in the Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
daily net asset value of Class A and Class B shares issued after December 31,
1991. Class B shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average daily net asset value attributable to Class B
shares. MIFDI 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.
7. 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.
8. 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.
9. SUBSEQUENT EVENT
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 12b-1 fees of Class B shares
over Class A and Class I shares. As a result of this change, the net asset value
per share of Class A and Class B are expected to differ.
10. FUND SHARE TRANSACTIONS
Fund share transactions for both Class A and Class B were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,092,290 $ 10,252,225 928,252 $ 8,609,775
Issued on reinvestment of
distributions........... 551,438 5,173,367 449,164 4,160,082
Repurchased.............. (2,753,354) (25,862,953) (1,941,779) (18,045,771)
---------- ------------ ---------- ------------
Net decrease............. (1,109,626) $(10,437,361) (564,363) $ (5,275,914)
============ ============== ============ ==============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Sold..................... 359,904 $ 3,357,250 192,857 $1,792,589
Issued on reinvestment of
distributions........... 20,582 194,470 5,237 48,035
Repurchased.............. (119,296) (1,081,480) (10,650) (97,871)
---------- ----------- ---------- ----------
Net increase............. 261,190 $ 2,470,240 187,444 $1,742,753
============ ============= ============ ============
</TABLE>
<PAGE> 112
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Bond Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for the six month period ended December 31, 1994 and
for the year ended December 31, 1995, and the financial highlights for each of
the periods indicated. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for the six month period ended December 31,
1994 and for the year ended December 31, 1995, and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
IBF-2-296
<PAGE> 113
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY
SHORT-TERM
BOND
FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Dear Shareholder:
During 1995 the domestic financial markets were extremely favorable for
both equity and fixed income investors. Moderate economic growth coupled with
an absence of inflationary pressure paved the way for lower interest rates. In
January of 1996 the Federal Reserve Board once again lowered the discount rate,
marking the third cut since last summer. At the same time that rates were
declining, the economy remained strong enough for most companies to report
respectable earnings gains. This combination of good earnings, declining
interest rates, and a favorable inflation outlook created a positive
environment for the fixed income market.
Against this backdrop, the total return of Ivy Short-term Bond Fund was
8.56% on a net asset value basis for the twelve months ended December 31, 1995.
This compares favorably to the one-year US Treasury, the relevant benchmark,
which was up 8.09% for the same period. (For the Fund_s total return with sales
charge, and performance commentary, please refer to the following pages.)
The Fund is primarily invested in short-term government issues. These
include both U.S. agency paper as well as short-term treasury notes.
IVY SHORT-TERM BOND FUND SEEKS TO
OBTAIN AS HIGH A LEVEL OF CURRENT
INCOME AS IS CONSISTENT WITH
THE PRESERVATION OF CAPITAL AND
LIQUIDITY BY INVESTING IN HIGH-QUALITY,
SHORT-TERM INSTRUMENTS.
The longer maturity corporate bonds, which have a lower credit quality,
have performed well this year and provided a nice boost in yield over treasury
issues. We believe the underlying credit fundamentals continue to be positive
for these companies.
The current interest rate environment, low inflationary pressures and
prospects for economic growth should continue to provide a positive atmosphere
for Ivy Short-term Bond Fund.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
Custodian
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management,
Inc.Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE> 114
IVY SHORT-TERM BOND FUND PERFORMANCE COMMENTARY
In a period of declining interest rates, Ivy Short-term Bond Fund performed
well. For the twelve months ended December 31, 1995 the Fund's total return on a
net asset value basis was 8.56%. This compares favorably to the one-year U.S.
Treasury bond which was up 8.09% for the same period. The additional return
provided by the Fund was primarily attributable to the good performance of the
corporate bonds in the portfolio.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (8/91) OF A $10,000
INVESTMENT
[CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------
IVY SHORT-TERM BOND FUND
FOR PERIOD ENDING 12/31/95
Class A*-with sales charge Class B**
Average Annual
Total Return Average Annual Total Return
---------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
---------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
------------------------------
1 Yr. 5.30% 2.82% -- -- -- --
- ----------------------------------------------------------------------------------
Since Inception 4.01% 2.97% 3.60% 8.71% 2.29% 7.34%
- -----------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 3.00%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 3%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses and a capital contribution by the Manager. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The principal value of Ivy Short-term Bond Fund will fluctuate and at
redemption may be worth more or less than the amount of the original investment.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
Because Class B shares bear the expense of a higher distribution fee it is
expected that the level of performance of the Fund's Class B shares will be
lower than that of the Fund's Class A shares.
- --------------------------------------------------------------------------------
<PAGE> 115
IVY SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND AGENCY PAR
OBLIGATIONS -- 77.1% VALUE VALUE
<S> <C> <C>
- --------------------------------------------------------------------
DIRECT U.S. OBLIGATIONS -- 32.1%
U.S. Treasury Note, 6.125%, 07/31/96....... $ 500,000 $ 502,335
U.S. Treasury Note, 5.75%, 10/31/97........ 500,000 504,805
U.S. Treasury Note, 6.25%, 01/31/97........ 500,000 505,415
U.S. Treasury Strip, 0.00%, 11/15/98....... 500,000 430,620
----------
1,943,175
----------
GOVERNMENT AGENCY OBLIGATIONS -- 45.0%
Federal Home Loan Mortgage Association,
7.775%, 10/01/20......................... 43,101 42,607
Federal National Mortgage Association,
7.664%, 12/01/18......................... 182,699 189,959
Student Loan Marketing Association,
FRN, 5.20%, 07/19/96..................... 400,000 399,496
Student Loan Marketing Association,
FRN, 5.35%, 02/17/98..................... 1,500,000 1,496,250
Student Loan Marketing Association,
FRN, 5.26%, 01/13/99..................... 500,000 499,365
Student Loan Marketing Association,
FRN, 5.31%, 03/07/01..................... 100,000 98,875
----------
2,726,552
----------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (COST -- $4,615,153)......... 4,669,727
----------
DOMESTIC CORPORATE BONDS -- 1.7%
- -------------------------------------------
Weirton Steel Inc., 11.50%, 03/01/98(a).... 100,000 103,000
----------
TOTAL DOMESTIC CORPORATE BONDS
(COST -- $100,000)....................... 103,000
----------
U.S. DOLLAR DENOMINATED PAR
FOREIGN BONDS -- 13.4% VALUE
- ------------------------------------------
Banco Do Nordeste Brasil -- 144A
REGD, 9.00%, 11/12/96(a)................. $ 250,000 $ 244,062
Banpais S.A. -- 144A REGD,
7.25%, 01/28/97(a)....................... 300,000 279,000
Grupo Industrial Durango -- 144A REGD, FRN,
9.6875%, 11/18/96(a)..................... 300,000 285,000
----------
TOTAL U.S. DOLLAR DENOMINATED FOREIGN
BONDS (COST -- $753,745)................. 808,062
----------
TOTAL INVESTMENTS -- 92.2%
(COST -- $5,468,898)*.................... 5,580,789
OTHER ASSETS, LESS LIABILITIES -- 7.8%..... 473,130
----------
NET ASSETS -- 100%......................... $6,053,919
==========
*Cost is approximately the same for Federal income tax purposes.
FRN -- Floating Rate Note; reflects rate at December 31, 1995.
REGD -- Registered.
(a) Below investment grade security.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995 the net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation...................... $ 132,207
Gross unrealized depreciation...................... (20,316)
----------
Net unrealized appreciation.................... $ 111,891
==========
OTHER INFORMATION:
Purchases and sales of securities other than short-term and U.S.
Government and Government Agency obligations aggregated $414,870 and
$2,112,775, respectively, for the year ended December 31, 1995.
Purchases and sales of U.S. Government and Government Agency
obligations aggregated $2,943,765 and $3,124,704, respectively, for
the year ended December 31, 1995.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 116
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $5,468,898)................................................................ $5,580,789
Cash................................................................................................................. 317,861
Receivables:
Interest........................................................................................................... 72,212
Manager for expense reimbursement.................................................................................. 20,092
Deferred organization expenses....................................................................................... 65,656
Other assets......................................................................................................... 8,145
----------
Total assets....................................................................................................... 6,064,755
----------
LIABILITIES
Payables:
Fund shares repurchased............................................................................................ 66
Management fee..................................................................................................... 3,096
12b-1 service and distribution fees................................................................................ 936
Administrative services fee........................................................................................ 516
Fund accounting.................................................................................................... 2,001
Transfer agent..................................................................................................... 1,211
Other accrued expenses and liabilities............................................................................... 3,010
----------
Total liabilities.................................................................................................. 10,836
----------
NET ASSETS........................................................................................................... $6,053,919
==========
CLASS A:
Net asset value and redemption price per share ($6,027,153 / 619,271 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 ($26,766 / 2,751 shares outstanding)**.................................. $ 9.73
==========
NET ASSETS CONSIST OF:
Capital paid-in.................................................................................................... $6,723,281
Accumulated net realized loss on investments....................................................................... (806,470)
Accumulated undistributed net investment income.................................................................... 25,217
Net unrealized appreciation on investments......................................................................... 111,891
----------
NET ASSETS........................................................................................................... $6,053,919
==========
</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> 117
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................................................................. $ 452,627
---------
EXPENSES
Management fee............................................................................................ $42,049
Transfer agent............................................................................................ 13,645
Administrative services fee............................................................................... 7,008
Custodian fees............................................................................................ 1,521
Blue Sky fees............................................................................................. 31,386
Auditing and accounting fees.............................................................................. 25,323
Shareholder reports....................................................................................... 4,105
Amortization of organization expenses..................................................................... 24,640
Fund accounting........................................................................................... 22,290
Trustees' fees............................................................................................ 3,960
12b-1 service and distribution fees
Class A................................................................................................. 17,428
Class B................................................................................................. 299
Legal..................................................................................................... 27,587
Other..................................................................................................... 8,401
---------
229,642
Expenses reimbursed by manager............................................................................ (163,233)
Fees paid indirectly...................................................................................... (822)
---------
Net expenses.............................................................................................. 65,587
---------
Net investment income....................................................................................... 387,040
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments and foreign currency transactions........................................ (321,600)
Net unrealized appreciation during the period on investments.............................................. 313,952
---------
Net loss on investments................................................................................. (7,648)
---------
Net increase in net assets resulting from operations........................................................ $ 379,392
=========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 118
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations:
Net investment income............................................................................. $ 387,040 $ 251,814
Net realized loss on investments and foreign currency transactions................................ (321,600 ) (184,971 )
Net unrealized appreciation (depreciation) during the period on investments....................... 313,952 (47,477 )
------------ ------------
Net increase resulting from operations.......................................................... 379,392 19,366
------------ ------------
CLASS A:
Distributions from
Net investment income............................................................................. (384,755 ) (230,499 )
In excess of net investment income................................................................ (572 ) --
------------ ------------
Total distributions to Class A shareholders..................................................... (385,327 ) (230,499 )
------------ ------------
CLASS B:
Distributions from
Net investment income............................................................................. (2,285 ) --
------------ ------------
Total distributions to Class B shareholders..................................................... (2,285 ) --
------------ ------------
CLASS I:
Distributions from
Net investment income............................................................................. -- (20,240 )
------------ ------------
Fund share transactions (Note 11):
Net decrease resulting from Fund share transactions
Class A......................................................................................... (2,720,391 ) (3,477,341 )
Class B......................................................................................... 27,045 --
Class I......................................................................................... -- (1,481,730 )
------------ ------------
Net decrease resulting from Fund share transactions........................................... (2,693,346 ) (4,959,071 )
------------ ------------
Capital contributed by manager (Note 9)............................................................. 183,827 --
------------ ------------
Total decrease in net assets........................................................................ (2,517,739 ) (5,190,444 )
NET ASSETS
Beginning of period............................................................................... 8,571,658 13,762,102
------------ ------------
End of period..................................................................................... $ 6,053,919 $ 8,571,658
============== ===========
Accumulated undistributed net investment income..................................................... $ 25,217 $ 27,935
============== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 119
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED FOR THE YEAR ENDED JUNE
DECEMBER 31, DECEMBER 31, 30,
CLASS A ------------ ------------ -----------------------
SELECTED PER SHARE DATA 1995 1994 1994 1993
------------ ------------ ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.49 $ 9.71 $ 9.92 $ 9.96
------ ------ ------- -------
Income (loss) from investment operations
Net investment income(a)............................... .54 .23 .36 .46
Net loss on investment transactions (both realized and
unrealized).......................................... (.02) (.22) (.21) (.04)
------ ------ ------- -------
Total from investment operations..................... .52 .01 .15 .42
------ ------ ------- -------
Less distributions from
Net investment income.................................. .54 .23 .36 .46
Capital paid-in........................................ -- -- -- --
------ ------ ------- -------
Total distributions.................................. .54 .23 .36 .46
------ ------ ------- -------
Capital contributed by manager (Note 9)................ .26 -- -- --
------ ------ ------- -------
Net asset value, end of period.......................... $ 9.73 $ 9.49 $ 9.71 $ 9.92
================ ================= ======== ========
Total return(%)......................................... 8.56 (b)(g .03(c) 1.57(b) 4.33(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $6,027 $8,572 $12,267 $44,375
Ratio of total expenses to average daily net assets
With expense reimbursement and fees paid
indirectly(%)(e)..................................... .93 1.38(d) .92 .82
Without expense reimbursement and fees paid
indirectly(%)(e)..................................... 3.27 2.80(d) 1.52 1.45
Ratio of net investment income to average daily net
assets(%)(a)........................................... 5.53 4.65(d) 3.73 4.54
Portfolio turnover rate(%).............................. 54 143(d) 37 69
</TABLE>
(See Notes to Financial Statements)
<PAGE> 120
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 12, 1995
(COMMENCEMENT) TO
DECEMBER 31,
CLASS B -----------------
SELECTED PER SHARE DATA 1995
-----------------
<S> <C>
Net asset value, beginning of period.......................................................................... $9.44
-----
Income from investment operations
Net investment income(a).................................................................................... .49
Net loss on investment transactions (both realized and unrealized).......................................... .03
-----
Total from investment operations.......................................................................... .52
-----
Less distributions from
Net investment income....................................................................................... .49
-----
Capital contributed by manager (Note 9)..................................................................... .26
-----
Net asset value, end of period................................................................................ $9.73
===============
Total return(%)............................................................................................... 8.53(c)(g)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)...................................................................... $ 27
Ratio of total expenses to average daily net assets
With expense reimbursement and fees paid indirectly(%)(e)................................................... 1.43(d)
Without expense reimbursement and fees paid indirectly(%)(e)................................................ 3.77(d)
Ratio of net investment income to average daily net assets(%)(a).............................................. 5.03(d)
Portfolio turnover rate(%).................................................................................... 54
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
YEAR ENDED FOR THE SIX JULY 3, 1993
DECEMBER MONTHS ENDED (COMMENCEMENT)
31, DECEMBER 31, TO JUNE 30,
CLASS I ---------- ------------ --------------
SELECTED PER SHARE DATA 1995(F) 1994 1994
---------- ------------ --------------
<S> <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 gain (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(%).............................................................. -- (.99)(c) 1.77(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..................................... $ --(f) $ --(f) $1,495
Ratio of total expenses to average daily net assets:
With expense reimbursement and fees paid indirectly(%)(e).................. -- 1.13(d) .67(d)
Without expense reimbursement and fees paid indirectly(%)(e)............... -- 2.55(d) 1.27(d)
Ratio of net investment income to average daily net assets(%)(a)............. -- 4.90(d) 3.98(d)
Portfolio turnover rate(%)................................................... -- 143(d) 37
(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) Beginning in 1995, total expenses include fees paid indirectly through an expense offset arrangement.
(f) There were no Class I shares outstanding as of December 31, 1994, or as of or during the year ended December 31, 1995.
(g) Without a capital contribution by the manager, total return for Class A and Class B would have been 5.82% and 5.78%,
respectively.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS
Ivy Short-Term Bond Fund (the Fund) (formerly Mackenzie Short-Term U.S.
Government Securities Fund d/b/a Ivy Short-Term U.S. Government Securities
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
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.
a. Securities 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 value.
b. Securities transactions and investment income -- Securities transactions
are accounted for on the trade date. Interest income is accrued on a daily
basis. Realized gains and losses from securities transactions are calculated on
an identified cost basis for financial statement and Federal income tax
purposes.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. 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.
d. Distributions to shareholders -- Currently, distributions from net
investment income are declared monthly. In addition, distributions to Class A
shareholders are declared daily at the rate per share of the excess of 12b-1
fees of Class B over Class A shares. Distributions are paid at the earlier of
redemption or the last business day of the month. Distributions derived from net
realized capital gain, if any, are made in December.
e. Deferred organization expense -- 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.
f. 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 bond premium amortization,
foreign denominated securities and certain securities sold at a loss. As a
result, Net investment income (loss) and Net realized gain (loss) on investments
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.
g. 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 $822 under this arrangement.
2. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of .60% of its average daily net assets.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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 year ended December 31, 1995, the net amount of
underwriting discounts retained by MIFDI was $506.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
net assets; and 1.5% of the remaining average daily net assets. In addition, IMI
may voluntarily reimburse the Fund's expenses. Voluntary expense reimbursements
may be terminated or revised at any time. Expenses reimbursed by manager
reflected in the Statement of Operations consist of required and voluntary
reimbursements of $36,704 and $126,529, respectively.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee plus
telephone, delivery and other out-of-pocket expenses. The monthly fee is based
upon the net assets of the Fund at the preceding month end at the following
rates: $1,000 when net assets are $20 million and under; $1,500 when net assets
are over $20 million to $75 million; $4,000 when net assets are over $75 million
to $100 million; and $6,000 when net assets are over $100 million. Such fee and
expenses are reflected as Fund accounting in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $20.75 per open account for Class A and
Class B, and $10.25 per open account for Class I and $4.36 per account that is
closed. In addition, the Fund pays certain out-of-pocket expenses. Such fees and
expenses are reflected as Transfer agent in the Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund reimburses MIFDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
daily 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 .50% of the average
daily net asset value attributable to Class B shares. MIFDI 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. Class I shares are not subject to service or distribution fees.
7. 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.
8. 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 on December 31,
1994. The reorganization was accomplished by a tax-free exchange of 903,236
Class A shares (NAV $9.49) shares 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.
9. 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 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.
10. SUBSEQUENT EVENT
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 and Class I shares. As a result of this change, the net asset value per
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
share of Class A, Class B and Class I are expected to differ.
11. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class I were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------ -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 29,579 $ 283,933 60,720 $ 585,954
Issued on reinvestment of
distributions................ 28,768 276,261 17,751 170,596
Repurchased................... (342,312) (3,280,585) (438,073) (4,233,891)
-------- ----------- -------- -----------
Net decrease.................. (283,965) $(2,720,391) (359,602) $(3,477,341)
========== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
JANUARY 12, 1995
(COMMENCEMENT) TO
DECEMBER 31, 1995
-----------------------
CLASS B SHARES AMOUNT
- ---------------------------------------------------- ------- ---------
<S> <C> <C>
Sold................................................ 20,705 $ 198,314
Issued on reinvestment of
distributions...................................... 169 1,615
Repurchased......................................... (18,123) (172,884)
------- ---------
Net increase........................................ 2,751 $ 27,045
======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ----------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- ------------------------------ -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... -- $ -- -- $ --
Issued on reinvestment of
distributions................ -- -- 2,072 20,014
Repurchased................... -- -- (155,974) (1,501,744)
-------- ----------- -------- -----------
Net decrease.................. -- $ -- (153,902) $(1,481,730)
========== ============= ========== =============
</TABLE>
<PAGE> 124
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Short-term Bond Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for the six month period ended December 31, 1994 and
for the year ended December 31, 1995, and the financial highlights for each of
the periods indicated. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for the six month period ended December 31,
1994 and for the year ended December 31, 1995, and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
ISTBF-2-296
<PAGE> 125
DECEMBER 31, 1995 [IVY FUNDS LOGO]
IVY
MONEY
MARKET
FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Dear Shareholder:
During 1995, the domestic financial markets were extremely favorable for
both equity and fixed income investors. Moderate economic growth coupled with
an absence of inflationary pressure paved the way for lower interest rates. In
January of 1996, the Federal Reserve Board once again lowered the discount
rate, marking the third such cut since last summer. At the same time that rates
were declining, the economy remained strong enough for most companies to report
respectable earnings gains.
Against this backdrop, the manager of Ivy Money Market Fund continued to
maintain a portfolio position that stressed only the highest quality money
market instruments with ratings
[GRAPH]
THE IVY MONEY MARKET FUND SEEKS TO
OBTAIN AS HIGH A LEVEL OF CURRENT
INCOME AS IS CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND LIQUIDITY
BY INVESTING IN HIGH-QUALITY,
SHORT-TERM SECURITIES.
of A1+/P1 while maintaining an average portfolio maturity of less than 90
days.
As in the past, derivative products were avoided in an effort to protect
shareholders from undue risk.
As always, we will continue to actively manage the Ivy Money Market Fund
to obtain the highest yield, while maintaining as much stability as possible.
Sincerely,
/s/ Michael G. Landry /s/ Michael R. Peers
Michael G. Landry Michael R. Peers
President Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glaube
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, M
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management, Inc
Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE> 126
IVY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAR
COMMERCIAL PAPER -- 14.8% VALUE VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------
American General, 5.67%, 01/05/96......... $1,300,000 $1,299,184
Associates Corp. of North America,
5.79%, 01/08/96......................... 451,000 450,495
General Electric Capital Corp.,
5.68%, 01/03/96......................... 847,000 846,734
Prudential Funding Corp., 5.66%,
01/10/96................................ 1,048,000 1,046,520
-----------
TOTAL COMMERCIAL PAPER
(COST -- $3,642,933).................... 3,642,933
-----------
<CAPTION>
U.S. GOVERNMENT AGENCIES AND PAR MARKET
OBLIGATIONS -- 85.5% VALUE VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Federal Farm Credit, 5.69%, 01/23/96...... $5,685,000 $ 5,665,573
Federal Home Loan Bank, 5.66%, 01/29/96... 2,000,000 1,991,258
Federal Home Loan Mortgage Corporation,
5.50%, 01/02/96......................... 5,580,000 5,579,148
Federal National Mortgage Association,
5.60%, 02/16/96......................... 3,000,000 2,978,764
Federal National Mortgage Association,
5.70%, 01/17/96......................... 3,830,000 3,820,347
Student Loan Marketing Association, 4.76%,
01/02/96(a)............................. 1,000,000 999,100
-----------
TOTAL U.S. GOVERNMENT AGENCIES AND
OBLIGATIONS (COST -- $21,034,190)....... 21,034,190
-----------
TOTAL INVESTMENTS -- 100.3%
(COST -- $24,677,123)(B)................ 24,677,123
OTHER ASSETS, LESS
LIABILITIES -- (0.3%)................... (68,361)
-----------
NET ASSETS -- 100%........................ $24,608,762
===========
(a) Floating rate note; reflects variable rate as of December 31,
1995 and maturity date reflects reset date.
(b) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
Purchases and sales (including maturities) of investment securities
(all short-term obligations) aggregated $264,248,670 and
$265,903,358 respectively, for the year ended December 31, 1995.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $24,677,123).............................................................. $24,677,123
Cash................................................................................................................ 100,000
Receivables:
Interest.......................................................................................................... 9,739
Manager for expense reimbursement................................................................................. 19,425
Deferred organization expenses...................................................................................... 37,375
Other assets........................................................................................................ 7,917
-----------
Total assets...................................................................................................... 24,851,579
-----------
LIABILITIES
Payables:
Management fee.................................................................................................... 8,764
Administrative services fee....................................................................................... 2,191
Fund accounting................................................................................................... 2,441
Transfer agent.................................................................................................... 11,302
Due to custodian.................................................................................................... 218,119
-----------
Total liabilities................................................................................................. 242,817
-----------
NET ASSETS.......................................................................................................... $24,608,762
===========
NET ASSETS CONSIST OF:
Capital paid-in................................................................................................... $24,608,762
-----------
NET ASSETS.......................................................................................................... $24,608,762
===========
Number of shares outstanding........................................................................................ 24,608,762
===========
Net asset value, offering price, and redemption price per share..................................................... $ 1.00
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 127
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................................................................ $1,594,570
----------
EXPENSES
Management fee.......................................................................................... $110,748
Transfer agent.......................................................................................... 124,309
Administrative services fee............................................................................. 27,687
Custodian fees.......................................................................................... 5,382
Blue Sky fees........................................................................................... 28,774
Auditing and accounting fees............................................................................ 7,603
Shareholder reports..................................................................................... 5,623
Amortization of organization expenses................................................................... 12,766
Fund accounting......................................................................................... 30,957
Trustees' fees.......................................................................................... 3,255
Legal................................................................................................... 15,620
Other................................................................................................... 11,378
----------
384,102
Expenses reimbursed by manager............................................................................ (148,768)
----------
Net expenses............................................................................................ 235,334
----------
Net investment income and net increase in net assets resulting from operations............................ $1,359,236
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income and net increase resulting from operations............................... $ 1,359,236 $ 888,162
------------ -------------
Distributions to shareholders from net investment income......................................... (1,359,236 ) (888,162 )
------------ -------------
Fund share transactions:
Proceeds from shares sold...................................................................... 67,708,114 232,481,085
Proceeds from shares issued on reinvestment of distributions................................... 1,245,290 772,399
Cost of shares repurchased..................................................................... (71,172,047 ) (232,208,219 )
------------ -------------
Net increase (decrease) resulting from fund share transactions............................... (2,218,643 ) 1,045,265
------------ -------------
Total increase (decrease) in net assets.......................................................... (2,218,643 ) 1,045,265
NET ASSETS
Beginning of period............................................................................ 26,827,405 25,782,140
------------ -------------
End of period.................................................................................. $24,608,762 $ 26,827,405
============== ==============
NUMBER OF FUND SHARES
Sold........................................................................................... 67,708,114 232,481,085
Issued on reinvestment of distributions........................................................ 1,245,290 772,399
Repurchased.................................................................................... (71,172,047 ) (232,208,219 )
------------ -------------
Net increase (decrease) in shares outstanding.................................................... (2,218,643 ) 1,045,265
============== ==============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 128
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------
SELECTED PER SHARE DATA 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from investment operations
Net investment income(a)................................................ .05 .04 .02 .03 .05
Less distributions from
Net investment income................................................... (.05) (.04) (.02) (.03) (.05)
------- ------- ------- ------- -------
Net asset value, end of period.......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return(%)......................................................... 4.80 4.21 2.42 2.81 5.16
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................................ $24,609 $26,827 $25,782 $18,839 $21,675
Ratio of expenses to average daily net assets
With expense reimbursement(%)......................................... .85 .85 .85 .85 .85
Without expense reimbursement(%)...................................... 1.39 1.24 1.56 1.45 1.21
Ratio of net investment income to average daily net assets(%)(a)........ 4.91 3.29 2.22 2.75 5.06
</TABLE>
(a) Net investment income is net of expenses reimbursed by manager.
Note: The seven-day yield as of December 31, 1995 was 4.74%. The thirty-day
yield as of December 31, 1995 was 4.81%.
(See Notes to Financial Statements)
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS
Ivy Money Market Fund (the Fund) is a series of shares of beneficial
interest of Ivy Fund. The shares of beneficial interest are assigned no par
value and an unlimited number of shares 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.
a. Securities valuation -- Short-term obligations are valued at amortized
cost, which approximates market value.
b. Securities transactions and investment income -- Securities transactions
are accounted for on the trade date. Discount securities are accreted daily on a
straight-line basis to par. Interest bearing securities purchased at par accrue
interest daily based on the security's nominal value. Interest on commercial
paper is accrued on a daily basis.
c. Federal income taxes -- The Fund is a separate taxable entity and
intends to qualify for tax treatment applicable to regulated investment
companies under the Internal Revenue Code, as amended, and, among other things,
is required to make the requisite distributions to its shareholders which will
relieve it from Federal income and excise taxes. Therefore, no provision has
been recorded for Federal income or excise taxes.
d. Distributions to shareholders -- Distributions are declared daily and
paid at the earlier of redemption or the last business day of the month.
e. 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. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly management fee at the
annual rate of .40% of its average daily net assets.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), 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. There were no underwriting discounts retained by MIFDI.
If the Fund's total expenses in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which its shares are then
qualified for sale, IMI will bear the excess expenses. The most restrictive
state expense limitation provision limits a fund's annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and other
expenses subject to approval by state securities administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0% of the next $70 million
of the average daily net assets; and 1.5% of the remaining average daily net
assets. IMI agreed to limit the Fund's total operating expenses (excluding
interest, taxes, brokerage commissions, litigation and indemnification expenses,
and other extraordinary expenses) to an annual rate of .85% of its average daily
net assets through January 31, 1995. The current 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.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at the annual rate of .10%
of its average daily net assets. Such fee is reflected as Administrative
services fees in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a monthly fee at the annual
rate of .10% of its average daily net assets plus telephone, delivery and other
out-of-pocket expenses. Such fee and expenses are reflected as Fund accounting
in the Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent for the Fund. The Fund
pays a monthly fee at an annual rate of $22.00 per open account and $4.36 per
account that is closed. In addition, the Fund pays certain out-of-pocket
expenses. Such fees and expenses are reflected as Transfer agent in the
Statement of Operations.
<PAGE> 130
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustee's fees in the Statement of Operations.
7. SUBSEQUENT EVENT
Effective January 1, 1996, under a Plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940, approved by the Board of Trustees December 2,
1995, the Trustees redesignated the Fund's shares into two separate classes,
identified as Class A and Class B, each of which represents an interest in the
same portfolio of investments of the Fund. In all relevant respects, the Fund's
Class A and Class B shares are identical. The purpose of this redesignation is
primarily to enable MIISC to track the contingent deferred sales charge period
that applies to Class B shares of other Ivy and Mackenzie funds that are
exchanged for shares of the Fund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Money Market Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the year ended December 31, 1991, were audited by other auditors,
whose report, dated January 31, 1992, expressed an unqualified opinion on the
selected per share data and ratios.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements and financial highlights referred to above present fairly,
in all material respects, the financial position of the Fund as of December 31,
1995, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
IMMF-2-296
