<PAGE> 1
June 30, 1997 IVY FUNDS(R)
Ivy
Asia
Pacific
Fund
- ------------
Semi-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
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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
We would like to take this opportunity to welcome you as a shareholder of
the Ivy Asia Pacific Fund. The primary focus of the Ivy Asia Pacific Fund is to
provide investors with access to the regions of Northeast and Southeast Asia.
Accordingly, as of June 30, 1997, the largest country weightings in the Fund
were Hong Kong (32%), Malaysia (8%) and Singapore (8%).
Performance among Asian markets has been split between the well-performing
markets of Northeast Asia and the disappointing markets in the south. Our
research confirms that Hong Kong, in the north, has benefited from strong
liquidity conditions and positive investor sentiment. Despite the recent strong
performance of Hong Kong's Hang Seng index--it is trading near its 20-year
average price-to-earnings ratio--we believe Hong Kong is still one of the
best-valued markets in the world.
At the same time, Southeast Asian markets have suffered. The structure of
Asian economies has often led to the creation of speculative bubbles and we
believe Thailand is the latest victim. In the early 1990s, the Thai economy was
awash with cash. With bank deposit rates at unattractive levels, property and
stock markets were a natural choice. This led to massive overbuilding and
speculation. According to our research, nonperforming loans are mounting,
consumption has dropped off dramatically, and confidence in the financial
system has fallen sharply. The Thai situation has been exacerbated by the
region-wide export slowdown that began last year and has resulted in even
greater tightening of liquidity. Early in July 1997, a de facto devaluation of
the Thai baht took place, followed soon thereafter by other Southeast Asian
currencies. This has left many investors to wonder which will be the next Asian
market to fall.
We believe it is a natural tendency for investors to try to draw
similarities between a current financial crisis and a recent crisis. In this
regard, Thailand is no exception. Much time has been spent in recent weeks
comparing and contrasting the Thai crisis with the Mexican crisis of early
1995. Even more interesting is the extent to which investors have once again
punished other regional markets. We believe they fear the Thai problem will
develop into a Latin-style "tequila" crisis affecting the whole region.
From a macroeconomic standpoint, other Southeast Asian nations have more
flexibility than Thailand to deal with a potential crisis. Thailand's central
bank has been constrained by the fixed exchange rate regime. This has severely
limited the extent to which Thai monetary authorities could lower interest
rates. Other Southeast Asian countries, which follow a more flexible exchange
rate policy, have many more policy options available, including reducing
interest rates. One factor that would boost liquidity across the region would
be a pickup in the export sector. The entire Asian region has suffered as
export growth dropped to zero last year after several years of mid-teens
growth. With exports representing more than half the output of many Asian
economies, these countries are highly geared toward a recovery.
We have been using periods of market weakness to add to the Southeast
Asian holdings in the Fund and would encourage long-term investors to stay the
course.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
<PAGE> 2
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 77.6% SHARES VALUE
<S> <C> <C>
- ---------------------------------------------
AUSTRALIA -- 4.2%
Australia & New Zealand Banking Group Ltd.... 1,900 $ 14,091
National Australia Bank Ltd.................. 800 11,369
Pacific Dunlop Limited....................... 3,000 8,810
Westpac Banking Corp. Ltd.................... 1,900 11,344
----------
45,614
----------
CHINA -- 1.5%
Zhenhai Refining and Chemical Company
Limited.................................... 44,000 15,902
----------
HONG KONG -- 31.5%
CDL Hotels International Ltd................. 30,000 12,198
Chen Hsong Holdings*......................... 20,000 11,617
Cheung Kong Holdings Ltd..................... 2,000 19,749
Citic Pacific Ltd............................ 3,000 18,742
First Pacific Company Ltd.................... 10,000 12,779
Giordano Holdings Ltd........................ 24,000 16,419
Guangdong Investments........................ 10,000 15,037
Guangdong Investments Warrants*.............. 1,000 471
Guoco Group Ltd.............................. 3,000 15,799
HSBC Holdings................................ 800 24,060
Henderson Land Development Company Ltd....... 2,000 17,748
Li & Fung.................................... 24,000 26,951
National Mutual Asia Ltd..................... 14,000 15,541
New World Development Company Ltd............ 2,000 11,927
Peregrine Investment Holdings Limited........ 9,000 18,529
Sime Darby (Hong Kong)....................... 12,000 13,321
Sun Hung Kai Properties Ltd.................. 1,000 12,036
Swire Pacific Ltd Class A.................... 2,000 18,006
Union Bank of Hong Kong Ltd.................. 16,266 47,030
Wheelock & Company, Ltd...................... 6,000 14,754
----------
342,714
----------
INDONESIA -- 6.6%
PT Bank Dagang Nasional -- Foreign
Registered................................. 15,500 10,996
PT Bank Dagang Nasional Warrants*............ 500 206
PT Darya Varia Laboratoria- Foreign
Registered................................. 6,500 7,819
PT Matahari Putra Prima -- Foreign
Registered................................. 10,000 20,152
PT Mulia Industrindo -- Foreign Registered... 20,000 10,487
PT Telekomunikasi Indonesia -- Foreign
Registered................................. 10,000 16,348
Semen Gresik -- Foreign Registered........... 2,500 5,604
----------
71,612
----------
MALAYSIA -- 8.3%
AMMB Holdings Berhad......................... 2,400 14,929
Genting Berhad............................... 3,000 14,382
KFC Holdings (Malaysia) Berhad............... 4,700 17,690
Land & General Berhad........................ 11,000 12,639
Malayan Cement Berhad........................ 7,750 12,957
Sime UEP Properties Berhad................... 8,000 17,274
----------
89,871
----------
NEW ZEALAND -- 6.2%
Fisher & Paykel Industries Ltd............... 5,700 22,213
Fletcher Challenge Building.................. 4,400 13,210
Fletcher Challenge Energy.................... 4,000 12,064
Fletcher Challenge Forests................... 1,920 2,785
Tourism Holdings Limited..................... 12,000 16,997
----------
67,269
----------
PHILIPPINES -- 5.7%
Asian Terminals, Inc......................... 81,000 $ 14,741
Benpres Holdings Corporation Sponsored
GDR*....................................... 900 6,140
Metro Pacific Corporation.................... 102,800 22,216
Philippine Long Distance Telephone Co........ 372 12,059
Universal Robina Corporation................. 19,500 7,097
----------
62,253
----------
SINGAPORE -- 8.0%
Clipsal Industries Limited................... 5,000 17,700
DBS Land Limited............................. 3,000 9,484
Elec & Eltek International Co. Ltd........... 2,500 14,000
Fraser & Neave Ltd. Ordinary................. 2,000 14,267
Jardine Matheson Holdings Ltd................ 2,400 17,040
Overseas Union Bank Ltd...................... 2,200 13,694
Overseas Union Bank Ltd. Rights*............. 440 612
----------
86,797
----------
TAIWAN -- 1.8%
Tingyi (Cayman Island) Holding Co.*.......... 80,000 19,930
----------
THAILAND -- 3.8%
Asia Credit Company PLC...................... 500 1,274
Bangkok Bank Public Company Ltd.............. 1,600 10,994
Dhana Siam Finance & Securities Public
Company Ltd................................ 800 425
Robinson Department Store Public Company
Limited -- Foreign Registered.............. 7,200 2,640
Thai Airways Int'l. Public Co.,
Ltd. -- Foreign Registered................. 12,200 14,600
Total Access Communication Public Company
Ltd. -- Foreign Registered................. 2,000 10,963
----------
40,896
----------
TOTAL EQUITY SECURITIES
(Cost -- $831,265)......................... 842,858
----------
CONVERTIBLE CORPORATE BONDS -- 0.6% PRINCIPAL
- --------------------------------------------- --------
Benpres Holdings Corporation 144A, 4.20%,
11/26/49
(Cost -- $8,000)........................... $ 1,000 6,822
----------
TOTAL INVESTMENTS -- 78.2%
(Cost -- $839,265)(a)...................... 849,680
OTHER ASSETS, LESS LIABILITIES -- 21.8%...... 236,893
----------
NET ASSETS -- 100%........................... $1,086,573
==========
GDR - Global Depository Receipt
* Non-income producing security.
(a) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $ 76,654
Gross unrealized depreciation...................... (66,239)
----------
Net unrealized appreciation.................... $ 10,415
==========
Purchases and sales of securities other than short-term obligations
aggregated $839,265 and $0, respectively, for the period ended June
30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 3
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $839,265)......... $ 849,680
Cash........................................................ 279,669
Receivables
Fund shares sold.......................................... 11,305
Dividends and interest.................................... 3,257
Manager for expense reimbursement......................... 12,775
Deferred organization expenses.............................. 43,610
Other assets................................................ 2,174
-----------
Total assets.............................................. 1,202,470
-----------
LIABILITIES
Payables
Investments purchased..................................... 76,593
Management fee............................................ 726
12b-1 service and distribution fees....................... 561
Other payables to related parties......................... 1,862
Accrued expenses............................................ 36,155
-----------
Total liabilities......................................... 115,897
-----------
NET ASSETS.................................................. $ 1,086,573
===========
CLASS A
Net asset value and redemption price per share
($303,162/29,523 shares outstanding)...................... $ 10.27
===========
Maximum offering price per share ($10.27 X 100/94.25)*...... $ 10.90
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($473,474/46,199 shares outstanding)................ $ 10.25
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($309,937/30,238 shares outstanding)................ $ 10.25
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 1,071,142
Undistributed net realized loss on investments and foreign
currency transactions................................... (6)
Undistributed net investment income....................... 5,035
Net unrealized appreciation on investments and foreign
currency transactions................................... 10,402
-----------
NET ASSETS.................................................. $ 1,086,573
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 4
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income
Dividends, net of $647 foreign taxes withheld............. $ 8,572
----------
Expenses
Management fee............................................ $ 2,532
Transfer agent............................................ 507
Administrative services fee............................... 253
Custodian fees............................................ 13,482
Blue Sky fees............................................. 1,087
Auditing and accounting fees.............................. 1,553
Shareholder reports....................................... 15
Amortization of organization expenses..................... 2,719
Fund accounting........................................... 8,255
Trustees' fees............................................ 435
12b-1 service and distribution fees....................... 1,702
Legal..................................................... 8,158
Other..................................................... 1,082
----------
41,780
Expenses reimbursed by manager............................ (38,243)
----------
Net expenses............................................ 3,537
----------
NET INVESTMENT INCOME....................................... 5,035
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (6)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 10,402
----------
Net gain on investment transactions..................... 10,396
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 15,431
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 5
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 5,035
Net realized loss on investments and foreign currency
transactions............................................ (6)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 10,402
-----------
Net increase resulting from operations.................. 15,431
-----------
Fund share transactions (Note 5)
Class A................................................... 296,992
Class B................................................... 465,872
Class C................................................... 308,278
-----------
Net increase resulting from Fund share transactions..... 1,071,142
-----------
NET ASSETS AT END OF PERIOD................................. $ 1,086,573
===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 5,035
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 6
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1997*
---------------------------
CLASS A CLASS B CLASS B
SELECTED PER SHARE DATA** ------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.00 $10.00 $10.00
------ ------ ------
Income from investment operations
Net investment income(a).................................. .10 .07 .07
Net realized and unrealized gain on investment
transactions............................................ .17 .18 .18
------ ------ ------
Total from investment operations........................ .27 .25 .25
------ ------ ------
Net asset value, end of period.............................. $10.27 $10.25 $10.25
====== ====== ======
Total return(%)(b).......................................... 2.70 2.50 2.50
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 303 $ 473 $ 310
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 1.02 1.74 1.59
Without expense reimbursement(%)(c)....................... 15.95 16.67 16.52
Ratio of net investment income to average net
assets(%)(a)(c)........................................... 2.32 1.60 1.75
Portfolio turnover rate(%).................................. 0 0 0
Average commission rate(d).................................. $.0084 $.0084 $.0084
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Annualized.
(d) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
* Unaudited.
** Based on average shares outstanding.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Asia Pacific Fund (the Fund), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, broker-
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
age commissions, interest, litigation and indemnification expenses, and other
extraordinary expenses) to an annual rate of 1.95% of its average net assets.
The voluntary expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $784.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of $277,
$585 and $840, for Class A, Class B and Class C, respectively, are reflected as
12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays IMSC a monthly fee plus certain out-of-pocket expenses. Such fees
and expenses of $302, $155 and $50, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in the
Asia-Pacific region. Therefore, the Fund is more susceptible to factors
adversely affecting securities within the Asia-Pacific region than is an equity
fund that is not concentrated in such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions from January 1, 1997 (Commencement) to June 30,
1997, for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
------- ------ --------
<S> <C> <C>
Sold...................................................... 30,504 $307,051
Repurchased............................................... (981) (10,059)
------ --------
Net increase.............................................. 29,523* $296,992
====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
------- ------ --------
<S> <C> <C>
Sold...................................................... 51,958 $524,702
Repurchased............................................... (5,759) (58,830)
------ --------
Net increase.............................................. 46,199 $465,872
====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES AMOUNT
------- ------ --------
<S> <C> <C>
Sold...................................................... 30,239 $308,288
Repurchased............................................... (1) (10)
------ --------
Net increase.............................................. 30,238 $308,278
====== ========
</TABLE>
* At June 30, 1997, MIMI owned 10,001 Class A shares of the Fund.
<PAGE> 9
June 30, 1997
IVY FUNDS(R)
Ivy
Bond
Fund
Semi-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 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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
The strategy of the Ivy Bond Fund is to invest across the spectrum of
fixed income securities -- when appropriate -- in which it may invest.
Currently, about 68% of the Fund is invested in bonds rated BBB (investment
grade) or higher by Standard & Poor's (or the equivalent rating by Moody's
Investor Services) with the majority rated BBB. During the past three to four
years, our research indicated that bonds rated higher than BBB offered little
more than interest rate exposure as spreads between these bonds and comparable
maturity US Treasury bonds were relatively narrow. We continue to believe this
and because we don't attempt to "time" the bond market we have avoided
investing in more highly rated bonds. We will, however, extend maturities in
the Fund if the yield on the bellwether 30-year US Treasury bond moves above
7.25% as we believe this would appear to present good value from a longer-term
perspective.
About 30% of the Ivy Bond Fund is invested in bonds rated below investment
grade. Of that 30%, about 15% of the Fund is invested in US dollar denominated
emerging market corporate bonds, which are generally higher yielding and have
shorter maturities than bonds issued by US companies. Typically, emerging
market bonds are also rated below investment grade, generally because of the
sovereign ceiling--if the rating agencies deem a country to be below investment
grade, it is rare that any corporate bond would be rated above that level. By
positioning the Fund in credit-sensitive bonds, we have participated in a
broadly based tightening of corporate bond spreads over the past several years.
Our research shows that corporate America is healthier than it has been in
many years, and its health continues to improve. Interest costs as a percentage
of cash flow have declined to levels not seen for almost 30 years. Corporate
profitability has returned to levels last experienced in 1968. According to
Moody's, the average credit rating for all outstanding US corporate bonds is
single A, which is high quality. Companies are deleveraging their balance
sheets and replacing high-cost debt with lower coupon debt. In many cases, they
are issuing more equity. When the economy slows down, companies should be
better able to service their fixed income obligations; defaults should not
spike to high levels. Even if defaults were to rise somewhat, it is not likely
to be at levels seen in the late 1980s.
We continue to avoid most of the zero coupon telecom bonds and instead
seek out high coupon bonds issued by fairly stable businesses. Emerging market
bonds, most of which are domiciled in Latin America, continue to provide the
Fund with portfolio diversification and a great source of high yield.
Improvements in the economies of countries in this region, increased political
reforms, and benefits from privatization are all helping to add credibility on
a global basis to the corporate profiles of many corporate bond issuers.
With expectations for moderate economic growth and relatively low and
contained inflation in the foreseeable future, we believe that conditions may
be more favorable now for bond fund investors than they have been for quite
some time. The Ivy Bond Fund, which can take advantage of the fixed income
universe, should continue to benefit from a healthy business environment.
Ivy Management, Inc.
BOARD OF TRUSTEES RTC
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 10
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
CORPORATE BONDS -- 80.9% PRINCIPAL VALUE
<S> <C> <C>
- -----------------------------------------
Affinity Group Inc., 11.50%, 10/15/03*... $1,000,000 $ 1,072,500
American President Co. Ltd., 8.00%,
01/15/24............................... 1,000,000 898,750
Bank United Corp., 8.875%, 05/01/07*..... 1,000,000 1,011,250
Cobb Theatres, 10.625%, 03/01/03*........ 1,000,000 1,096,250
Comcast Cablevision 144A, 8.375%,
05/01/07............................... 1,000,000 1,057,500
Conseco Inc., 10.50%, 12/15/04........... 1,500,000 1,751,250
Cyprus Amax Minerals, 8.375%, 02/01/23... 1,000,000 1,003,750
Delphi Financial Group Inc., 8.00%,
10/01/03............................... 2,500,000 2,518,750
Delta Air Lines, 9.30%, 01/02/11......... 1,000,000 1,116,250
Delta Air Lines, 9.59%, 01/12/17......... 1,500,000 1,745,625
Developers Diversified Realty Corp.,
7.28%, 11/24/05........................ 1,000,000 981,250
Duty Free International Inc., 7.00%,
01/15/04............................... 2,000,000 1,902,500
Farmers Insurance Exchange, 8.625%,
05/01/24............................... 2,000,000 2,080,000
Fort Howard, 10.92%, 02/15/12*........... 1,453,060 1,547,509
Freeport-McMoRan Copper & Gold, 7.50%,
11/15/06............................... 2,000,000 1,990,000
Great Atlantic & Pacific Tea Inc., 7.70%,
01/15/04............................... 1,000,000 1,025,000
HMC Acquisition Properties Inc., 9.00%,
12/15/07*.............................. 1,000,000 1,022,900
Indianapolis Life Insurance Co., 8.66%,
04/01/11............................... 2,000,000 2,085,000
International Knife & Saw 144A, 11.375%,
11/15/06*.............................. 1,000,000 1,072,500
Jackson National Life Ins. Co. 144A,
8.15%, 03/15/27........................ 1,000,000 1,011,250
K-III Communication Corp., 8.50%,
02/01/06*.............................. 1,000,000 1,007,500
Kaiser Aluminum & Chemical, 12.75%,
02/01/03*.............................. 1,000,000 1,087,500
Leucadia National Corp., 7.75%,
08/15/13............................... 2,000,000 1,912,500
Long Island Lighting Co., 8.625%,
04/15/04............................... 2,000,000 2,077,500
Lumbermens Mutual Casualty 144A, 9.15%,
07/01/26............................... 2,000,000 2,190,000
MCII Buses Inc., 10.00%, 11/26/97........ 500,000 496,920
McCaw International Ltd., 13.00%,
04/15/07*................................ 2,000,000 1,000,000
McDermott Inc., 8.75%, 05/19/23*......... 1,500,000 1,436,250
Mitchell Energy & Development Corp.,
6.75%, 02/15/04........................ 1,000,000 968,750
Motors and Gears Inc., 10.75%,
11/15/06*.............................. 1,000,000 1,033,750
News America Holdings, 7.75%, 01/20/24... 2,000,000 1,895,000
News America Holdings, 7.70%, 10/30/25... 1,000,000 943,750
Northrop Grumman Corp., 9.375%,
10/15/24............................... 2,000,000 2,200,000
Ocean Energy Inc. 144A, 8.875%,
07/15/07*.............................. 1,000,000 997,500
Ocwen Federal Bank, 12.00%, 06/15/05*.... 500,000 545,625
Overseas Shipholding Group, Inc., 8.75%,
12/01/13............................... 3,000,000 3,048,750
PDV America Inc., 7.875%, 08/01/03....... 3,000,000 3,041,250
Pegasus Media & Communications, 12.50%,
07/01/05*.............................. 1,000,000 1,100,000
Pioneer-Standard, 8.50%, 08/01/06........ 3,000,000 3,127,500
Praxair Inc., 8.70%, 07/15/22............ $2,500,000 $ 2,690,625
RHG Finance Corp., 8.875%, 10/01/05...... 2,000,000 2,180,000
RJR Nabisco Inc., 8.75%, 07/15/07........ 2,000,000 2,012,500
RSL Communications Ltd., 12.25%,
11/15/06*.............................. 1,000,000 1,057,500
Shop Vac Corp. 144A, 10.625%, 09/01/03*.. 1,000,000 1,062,500
Sithe/Independence Funding, 9.00%,
12/30/13............................... 2,000,000 2,177,500
Stuart Entertainment 144A, 12.50%,
11/15/04*.............................. 1,250,000 1,201,563
TCI Communications, Inc., 8.75%,
08/01/15............................... 1,000,000 1,045,000
TCI Communications, Inc., 9.25%,
01/15/23............................... 2,000,000 2,092,500
Terex Corp., 13.25%, 05/15/02*........... 1,000,000 1,120,000
Time Warner Inc., 9.125%, 01/15/13....... 1,500,000 1,646,250
Time Warner Inc., 9.15%, 02/01/23........ 2,000,000 2,197,500
Turner Broadcasting System, 8.40%,
02/01/24............................... 1,000,000 976,250
USX Marathon Group, 9.375%, 05/15/22..... 1,000,000 1,152,500
United Air Lines, 9.75%, 08/15/21........ 2,500,000 2,956,250
United Refining 144A, 10.75%, 06/15/07*.. 1,000,000 995,000
Willcox & Gibbs Inc., 12.25%,
12/15/03*.............................. 1,000,000 1,008,750
------------
TOTAL CORPORATE BONDS
(Cost -- $82,820,898).................. 85,672,017
------------
U.S. GOVERNMENT OBLIGATIONS -- 2.9%
- -----------------------------------------
U.S. Treasury Bond, 7.25%, 05/15/16...... 100,000 104,235
U.S. Treasury Note, 6.25%, 01/31/02...... 3,000,000 2,982,600
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost -- $3,085,850)................... 3,086,835
------------
U.S. DOLLAR DENOMINATED FOREIGN
BONDS -- 14.5%
- -----------------------------------------
APP International Finance, 11.75%,
10/01/05*.............................. 500,000 548,750
Acindar Industries, 11.25%, 02/15/04..... 500,000 527,500
Banco Ganadero S.A., 9.75%, 08/26/99..... 1,000,000 1,050,000
Bombril S.A., 8.00%, 08/26/98*........... 500,000 498,520
Buenos Aires Embotelladora 144A, 8.50%,
12/29/00*.............................. 500,000 366,250
Cemex S.A. 144A, 12.75%, 07/15/06........ 500,000 578,125
Ceval Alimentos S.A. REGD, 11.00%,
12/30/04............................... 1,000,000 1,027,500
Companhia Suzano Papel 144A REGD, 10.25%,
10/06/01*.............................. 900,000 915,750
Comtel Brasiliera 144A, 10.75%,
09/26/04............................... 400,000 431,500
Greater Beijing 144A, 9.50%, 06/15/07*... 1,000,000 1,012,500
Grupo Industrial Durango, 12.00%,
07/15/01*.............................. 500,000 543,125
Grupo Televisa S.A. 144A, 13.25%,
05/15/08*.............................. 1,000,000 701,250
Inco Ltd., 9.60%, 06/15/22............... 1,000,000 1,106,250
Indah Kiat Finance 144A, 10.00%,
07/01/07*.............................. 500,000 498,125
Industrias Unidas, 8.50%, 01/27/99*...... 1,000,000 995,000
Iochpe-Maxion S.A. 144A, 12.375%,
11/08/02*.............................. 900,000 912,375
Mechala Group Jamaica, 12.75%,
12/30/99*.............................. 1,000,000 1,037,500
</TABLE>
(See Notes to Financial Statements)
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
CORPORATE BONDS PRINCIPAL VALUE
<S> <C> <C>
- -----------------------------------------
Metalurgica Gerdau S.A., 10.25%,
11/23/01*.............................. $ 500,000 $ 513,125
Metalurgica Gerdau S.A., 11.125%,
05/24/04*.............................. 500,000 528,125
Ongko International Finance Co. 144A,
10.50%, 03/29/04*...................... 1,000,000 1,026,250
Polysindo International Finance, 11.375%,
06/15/06*.............................. 500,000 548,750
------------
TOTAL U.S. DOLLAR DENOMINATED FOREIGN
BONDS (Cost -- $14,642,832)............ 15,366,270
------------
RIGHTS & WARRANTS -- 0.1% SHARES
- ----------------------------------------- ----------
RSL Communications Ltd. Warrants(a)...... 1,000 30,000
Terex Corp. -- Appreciation Rights(a).... 4,000 48,000
------------
TOTAL RIGHTS & WARRANTS
(Cost -- $0)........................... 78,000
------------
TOTAL INVESTMENTS -- 98.4%
(Cost -- $100,549,580)(b).............. 104,203,122
OTHER ASSETS, LESS LIABILITIES -- 1.6%... 1,735,083
------------
NET ASSETS -- 100%....................... $105,938,205
REGD- Registered
* Below investment grade security.
(a) Non-income producing security.
(b) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 4,228,405
Gross unrealized depreciation.................... (574,863)
------------
Net unrealized appreciation.................. $ 3,653,542
============
</TABLE>
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $34,627,976 and
$28,327,713, respectively, for the period ended June 30, 1997.
Purchases and sales of U.S. Government and Government Agency
obligations aggregated $6,973,294 and $9,924,814, respectively, for
the period ended June 30, 1997.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $100,549,580)..... $104,203,122
Cash........................................................ 163,773
Receivables
Investments sold.......................................... 360,000
Fund shares sold.......................................... 319,202
Interest.................................................. 2,490,808
Other assets................................................ 50,270
------------
Total assets............................................ 107,587,175
------------
LIABILITIES
Payables
Distributions to shareholders............................. 1,631
Investments purchased..................................... 1,495,035
Fund shares repurchased................................... 18,095
Management fee............................................ 64,044
12b-1 service and distribution fees....................... 27,766
Other payables to related parties......................... 29,460
Accrued expenses............................................ 12,939
------------
Total liabilities....................................... 1,648,970
------------
NET ASSETS.................................................. $105,938,205
============
CLASS A
Net asset value and redemption price per share
($97,497,016/9,801,771 shares outstanding)................ $ 9.95
============
Maximum offering price per share ($9.95 x 100/95.25)*....... $ 10.45
============
CLASS B
Net asset value, offering price and redemption price** per
share ($7,177,472/721,912 shares outstanding)............. $ 9.94
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,263,717/126,849 shares outstanding)............. $ 9.96
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $107,915,966
Undistributed net realized loss on investments............ (5,674,670)
Undistributed net investment income....................... 43,367
Net unrealized appreciation on investments................ 3,653,542
------------
NET ASSETS.................................................. $105,938,205
============
</TABLE>
* On sales of more than $100,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 12
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $4,515,443
----------
EXPENSES
Management fee............................................ $380,943
Transfer agent fees....................................... 79,854
Administrative services fee............................... 51,395
Custodian fees............................................ 11,916
Blue Sky fees............................................. 10,609
Auditing and accounting fees.............................. 17,708
Shareholder reports....................................... 3,517
Fund accounting........................................... 50,968
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 154,917
Legal..................................................... 13,725
Other..................................................... 18,291
----------
Total expenses............................................ 796,820
----------
NET INVESTMENT INCOME....................................... 3,718,623
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
Investments............................................. (23,402)
Options................................................. 16,281
Net unrealized appreciation during the period on
Investments............................................. 1,426,058
Options................................................. 23,031
----------
Net gain on investments................................. 1,441,968
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $5,160,591
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1997* 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 3,718,623 $ 7,628,739
Net realized gain (loss) on
Investments............................................. (23,402) 647,584
Options................................................. 16,281 (173,422)
Net unrealized appreciation (depreciation) during the
period on
Investments............................................. 1,426,058 (339,684)
Options................................................. 23,031 (23,031)
------------ ------------
Net increase resulting from operations................ 5,160,591 7,740,186
------------ ------------
Class A distributions
From net investment income................................ (3,448,115) (7,282,279)
In excess of net investment income........................ -- (143,137)
------------ ------------
Total distributions to Class A shareholders............. (3,448,115) (7,425,416)
------------ ------------
Class B distributions
From net investment income................................ (202,719) (332,726)
In excess of net investment income........................ (2,921) (9,105)
------------ ------------
Total distributions to Class B shareholders............. (205,640) (341,831)
------------ ------------
Class C distributions
From net investment income................................ (28,460) (13,734)
In excess of net investment income........................ (3,986) (1,753)
------------ ------------
Total distributions to Class C shareholders............. (32,446) (15,487)
------------ ------------
Fund share transactions (Note 5)
Class A................................................... (1,750,677) (10,914,806)
Class B................................................... 1,782,602 126,355
Class C................................................... 632,599 606,878
------------ ------------
Net increase (decrease) resulting from Fund share
transactions........................................... 664,524 (10,181,573)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 2,138,914 (10,224,121)
NET ASSETS
Beginning of period....................................... 103,799,291 114,023,412
------------ ------------
END OF PERIOD............................................. $105,938,205 $103,799,291
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 43,367 $ 10,945
============ ============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
CLASS A MONTHS ENDED FOR THE YEAR ENDED MONTHS ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
------------ ----------------------- ------------
1997* 1996 1995 1994
SELECTED PER SHARE DATA ------------ ------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 9.80 $ 9.78 $ 9.01 $ 9.38
------- ------- -------- --------
Income from investment operations
Net investment income...................... .35 .72 .67(a) .33(a)
Net realized and unrealized gain (loss) on
investments.............................. .15 .03 .84 (.29)
------- ------- -------- --------
Total from investment operations......... .50 .75 1.51 .04
------- ------- -------- --------
Less distributions
From net investment income................. .35 .72 .63 .32
In excess of net investment income......... -- .01 -- --
From net realized gain..................... -- -- -- --
In excess of net realized gain............. -- -- -- .09
From capital paid-in....................... -- -- .11 --
------- ------- -------- --------
Total distributions...................... .35 .73 .74 .41
------- ------- -------- --------
Net asset value, end of period.............. $ 9.95 $ 9.80 $ 9.78 $ 9.01
======= ======= ======== ========
Total return(%)............................. 5.23(c) 8.06(b) 17.41(b) .43(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $97,497 $97,881 $108,840 $110,232
Ratio of expenses to average net assets
With expense reimbursement(%).............. -- -- 1.54 1.50(d)
Without expense reimbursement(%)........... 1.50(d) 1.56 1.54 1.52(d)
Ratio of net investment income to average
net assets(%).............................. 7.29(d) 7.36 7.09(a) 6.92(a)(d)
Portfolio turnover rate(%).................. 37 90 93 22
<CAPTION>
CLASS A
FOR THE YEAR ENDED JUNE 30,
----------------------------------
1994 1993 1992
SELECTED PER SHARE DATA -------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period........ $ 10.34 $ 9.95 $ 9.61
-------- -------- --------
Income from investment operations
Net investment income...................... .63 .55 .63(a)
Net realized and unrealized gain (loss) on
investments.............................. (.60) 1.00 .73
-------- -------- --------
Total from investment operations......... .03 1.55 1.36
-------- -------- --------
Less distributions
From net investment income................. .61 .64 .63
In excess of net investment income......... -- -- --
From net realized gain..................... .38 .52 .25
In excess of net realized gain............. -- -- --
From capital paid-in....................... -- -- .14
-------- -------- --------
Total distributions...................... .99 1.16 1.02
-------- -------- --------
Net asset value, end of period.............. $ 9.38 $ 10.34 $ 9.95
======== ======== ========
Total return(%)............................. 0.00(b) 16.29(b) 14.77(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $120,073 $132,721 $102,328
Ratio of expenses to average net assets
With expense reimbursement(%).............. -- -- 1.50
Without expense reimbursement(%)........... 1.45 1.49 1.55
Ratio of net investment income to average
net assets(%).............................. 6.19 6.42 6.92(a)
Portfolio turnover rate(%).................. 78 134 129
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED FOR THE YEAR ENDED MONTHS ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
------------ -------------------- ------------ ----------------
1997* 1996 1995 1994 1994
SELECTED PER SHARE DATA ------------ ------ ------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 9.82
------ ------ ------ ------ ------
Income (loss) from investment operations
Net investment income......................... .31 .64 .60(a) .30(a) .10
Net realized and unrealized gain on
investments................................. .15 .04 .84 (.29) (.32)
------ ------ ------ ------ ------
Total from investment operations............ .46 .68 1.44 .01 (.22)
------ ------ ------ ------ ------
Less distributions
From net investment income.................... .31 .64 .56 .29 .14
In excess of net investment income............ .01 .02 -- -- --
From net realized gain........................ -- -- -- -- .08
In excess of net realized gain................ -- -- -- .09 --
From capital paid-in.......................... -- -- .11 -- --
------ ------ ------ ------ ------
Total distributions......................... .32 .66 .67 .38 .22
------ ------ ------ ------ ------
Net asset value, end of period................. $ 9.94 $ 9.80 $ 9.78 $ 9.01 $ 9.38
====== ====== ====== ====== ======
Total return(%)................................ 4.77(c) 7.25(b) 16.54(b) .06(c) (2.24)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $7,177 $5,300 $5,184 $2,420 $ 761
Ratio of expenses to average net assets
With expense reimbursement(%)................. -- -- 2.29 2.25(d) --
Without expense reimbursement(%).............. 2.23(d) 2.29 2.29 2.27(d) 2.20(d)
Ratio of net investment income to average net
assets(%)..................................... 6.55(d) 6.62 6.34(a) 6.17(a)(d) 5.44(d)
Portfolio turnover rate(%)..................... 37 90 93 22 78
</TABLE>
(See Notes to Financial Statements)
<PAGE> 14
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 30, 1996
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 9.82 $9.44
------ -----
Income from investment operations
Net investment income..................................... .28 .39
Net realized and unrealized gain on investments........... .18 .43
------ -----
Total from investment operations........................ .46 .82
------ -----
Less distributions
From net investment income................................ .28 .39
In excess of net investment income........................ .04 .05
------ -----
Total distributions..................................... .32 .44
------ -----
Net asset value, end of period.............................. $ 9.96 $9.82
====== =====
Total return(%)(c).......................................... 4.76 8.81
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,264 $ 618
Ratio of expenses to average net assets(%)(d)............... 2.26 2.35
Ratio of net investment income to average net
assets(%)(d).............................................. 6.52 6.56
Portfolio turnover rate(%).................................. 37 90
</TABLE>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized.
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Bond Fund (the Fund), is a diversified series of shares of Ivy Fund.
The shares of beneficial interest are assigned no par value and an unlimited
number of shares of Class A, Class B, Class C and Class I are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Debt securities (other than short-term obligations
and commercial paper) 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 and
commercial paper are valued at amortized cost, which approximates market. For
valuation purposes, quotations of foreign securities in foreign currencies are
translated into U.S. dollar equivalents using the foreign exchange quotation in
effect. All other securities are valued at their fair value as determined in
good faith by the Valuation Committee of the Board; as of June 30, 1997, there
were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
Realized gains and losses from security transactions are calculated on an
identified cost basis.
OPTIONS -- The Fund may write (sell) covered put options and covered call
options on securities and stock indicies on securities held in its portfolio.
When the Fund writes a call, it gives the purchaser of the call option the right
to buy the underlying security at the price specified in the option (the
"exercise price") at any time during the option period, generally ranging up to
nine months.
If the option expires unexercised, the Fund will realize income, in the
form of a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder. For
options on indices, cash settlement by the Fund will be required if the option
is exercised.
By writing a call option, the Fund forgoes, in exchange for the premium
less the commission ("net premium"), the opportunity to profit during the option
period from an increase in the market value of the underlying security or
currency above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call option is valued at the last sale price or, in the absence of a
sale, the last offering price.
In addition, the Fund may purchase put and call options on securities and
stock indices, and engage in options on interest rate and currency futures
contracts. Exchange traded purchased options are valued at the last sales price
or, in the absence of a sale, the last bid price.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$5,411,000 as of December 31, 1996 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 $1,985,000 in
1997, $984,000 in 1999 and $2,442,000 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared monthly. Distributions of net realized capital gains, if any, are
declared in December.
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 may differ significantly in amount and character from distributions
during such period. Accordingly, the Fund may make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .75% of
the
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
first $100 million in average net assets, and .50% of average net assets in
excess of $100 million.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. As compensation for those services, the Fund pays MIMI fees plus
certain out-of-pocket expenses. Such fees and expenses are reflected as
Administrative services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $13,583.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net assets, excluding Class I. Class B and Class C shares are also subject to an
ongoing distribution fee at an annual rate of .75% of the average net asset
value attributable to Class B and Class C shares. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$119,678, $30,891 and $4,348, for Class A, Class B and Class C, respectively,
are reflected as 12b-1 service and distribution fees in the Statement of
Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $74,893, $4,184 and $777, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. SECURITIES IN DEFAULT
The Fund has been served notice of an event of default regarding the
non-payment of semi-annual interest on Buenos Aires Embotelladora S.A.
("BAESA"), which was due on June 30, 1997. Interest receivable due on this bond
as of June 30, 1997 is $42,500. BAESA currently plans to restructure its debt
and, at this time, does not anticipate filing for bankruptcy.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class I* were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,304,903 $ 12,942,606 1,351,568 13,152,817
Issued on reinvestment of
distributions........... 223,250 2,193,355 478,725 4,613,419
Repurchased.............. (1,714,889) (16,886,638) (2,965,988) (28,681,042)
---------- ------------ ---------- ------------
Net decrease............. (186,736) $ (1,750,677) (1,135,695) $(10,914,806)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold...................... 275,260 $ 2,708,434 224,963 $ 2,188,764
Issued on reinvestment of
distributions............ 15,215 149,397 27,331 263,390
Repurchased............... (109,540) (1,075,229) (241,113) (2,325,799)
---------- ------------ --------- ------------
Net increase.............. 180,935 $ 1,782,602 11,181 $ 126,355
========== ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
------------------------- ------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold...................... 171,518 $ 1,688,028 64,693 $ 624,316
Issued on reinvestment of
distributions............ 1,480 14,572 1,029 9,839
Repurchased............... (109,110) (1,070,001) (2,761) (27,277)
---------- ------------ --------- ------------
Net increase.............. 63,888 $ 632,599 62,961 $ 606,878
========== ============ ========= ============
</TABLE>
* There were no Class I shares outstanding during the periods.
<PAGE> 17
June 30, 1997
IVY FUNDS(TM)
Ivy
Canada
Fund
- -----------
Semi-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
Market Commentary:
We believe the current economic environment should continue to support a
rally in economically sensitive stocks as demand continues to strengthen,
production remains restrained, system-wide inventories decline and price
initiatives are implemented. We would specifically highlight the following
trends, which demonstrate the progress and opportunity in Canada: government
budget deficits are collapsing -- far outpacing improvement in any other
country; inflation pressures are well contained and there remains sufficient
"slack" in the economy to facilitate growth; international investors are
recognizing the improvement and have driven interest rates well below rates in
the US in all but the longest maturity bonds; recent elections support political
continuity and have exposed a rapid decline in the popularity of separatists in
Quebec; Canada is a major winner in world trade and we believe that by the turn
of the century, half of Canada's production will be destined for world markets.
For the past several years, the Ivy Canada Fund has been positioned as a
country/sector fund, focusing on metals and mining, precious metals, energy and
forest products. These sectors have underperformed the broader Canadian market,
which has been lead by the financial sector.
We believe the resource sector that is the most controversial, yet has
perhaps the greatest opportunity, is precious metals. According to our research,
the supply/demand fundamentals for precious metals are very positive. The one
exception is central bank activities (as discussed below). Platinum and
palladium advanced to multi-year highs and silver inventories are depleting
rapidly. We continue to prefer silver to gold.
European central banks, in pursuit of European Monetary Union compliance,
have been selling gold reserves. Australia, for example, recently sold most of
its reserves. The steady decline in gold prices resulting from central bank
selling, as well as forward producer selling and outright speculative short
selling, has led to a sale on gold shares. Until the downtrend is arrested, the
negative sentiment could cause share prices to drift still lower. We believe,
however, that we are in the later stages of the decline and reserves are at the
low end of past ranges. We expect to see mergers and takeovers confirm these
values. And while there are no guarantees, according to our research, within one
to three years after multi-year lows, gold stocks should outperform
significantly. The early stages of recovery usually favor the strongest,
world-class companies with low-cost assets, good balance sheets and superior
management.
According to our research, commodity prices continue to lag world growth
but strong demand and declining inventory levels suggest firming prices and
better profitability over the next year, which would support a catch-up rally in
resources.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 18
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 89.6% SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS -- 4.9%
Oralife Group, Inc.*..................... 28,300 $ 18,873
Schneider Corporation Class A............ 8,500 77,017
Semi-Tech Corporation.................... 300,000 643,684
Sport Specific International, Inc.*...... 112,500 0
-----------
739,574
-----------
DIAMONDS -- 7.9%
Aber Resources, Ltd.*.................... 40,000 559,600
Rex Diamond Mining Corp.*................ 120,000 200,064
SouthernEra Resources Ltd.*.............. 75,000 424,049
-----------
1,183,713
-----------
GOLD & PRECIOUS MINERALS -- 17.2%
Barrick Gold Corporation................. 3,000 65,347
Battle Mountain Canada................... 125,000 715,809
Dakota Mining Corp.*..................... 130,000 127,215
Goldcorp Inc. Class A*................... 15,000 108,187
Golden Knight Resources, Inc.*........... 150,000 306,620
Meridian Gold, Inc....................... 75,000 203,870
Orvana Minerals Corporation*............. 150,000 625,200
REA Gold Corporation*.................... 119,000 68,145
William Resources, Inc.*................. 225,000 350,656
-----------
2,571,049
-----------
INDUSTRIAL PRODUCTS -- 10.2%
Offshore Systems International Ltd.*..... 308,824 257,436
Offshore Systems International Ltd.
Warrants*.............................. 75,000 0(a)
PC Docs Group International, Inc.*....... 30,000 191,366
Simmonds Capital Ltd.*................... 100,000 112,355
Slater Steel, Inc........................ 56,200 682,356
Speedy Muffler King, Inc.*............... 50,000 282,699
-----------
1,526,212
-----------
METALS & MINERALS -- 14.8%
Breakwater Resources, Ltd.*.............. 50,000 173,969
Cameco Corporation....................... 6,000 225,072
Inco Ltd................................. 12,500 373,761
International Uranium Corp............... 300,000 282,699
Noranda Inc.............................. 15,000 323,473
Redfern Resources Ltd.*.................. 75,500 76,619
Teck Corp. Class A....................... 12,500 244,643
Teck Corp. Class B....................... 7,700 156,003
Tenke Mining Corp.*...................... 50,000 154,035
Tenke Mining Corp. Warrants*............. 15,000 0(a)
Western Garnet Company Ltd.*............. 70,000 211,843
-----------
2,222,117
-----------
OIL & GAS -- 23.4%
Barrington Petroleum Ltd.*............... 75,000 299,009
Beau Canada Exploration Ltd.............. 175,000 393,242
Canadian Conquest Exploration Co. Ltd.*.. 150,000 147,873
HCO Ltd. Energy*......................... 150,000 228,334
Hurricane Hydrocarbons Ltd. Series 1*.... 60,000 217,461(a)
Hurricane Hydrocarbons Ltd. Series 2*.... 125,000 249,174(a)
Olympia Energy, Inc. Class A*............ 725,000 289,041
NQL Drilling Tools, Inc. -- Class A*..... 76,200 386,646
Pacalta Resources Ltd.*.................. 21,000 254,973
Paragon Petroleum Corp.*................. 135,000 391,430
Penn West Petroleum Ltd.*................ 20,000 255,879
Vermilion Resources Ltd.*................ 80,000 391,430
-----------
3,504,492
-----------
PAPER & FOREST PRODUCTS -- 11.2%
Ainsworth Lumber Company*................ 100,000 $ 427,673
Alliance Forest Products, Inc.*.......... 15,000 366,422
Donohue, Inc............................. 15,000 326,191
Sino-Forest Corp. Class A................ 200,000 253,704
St. Laurent Paperboard Inc.*............. 20,000 311,694
-----------
1,685,684
-----------
TOTAL EQUITY SECURITIES
(Cost -- $16,234,405).................. 13,432,841
-----------
SHORT-TERM OBLIGATIONS -- 10.1% PRINCIPAL
- ----------------------------------------- --------
U.S. Treasury Bill, 4.92%, 07/31/97...... $220,000 219,098
U.S. Treasury Bill, 4.98%, 07/31/97...... 400,000 398,340
U.S. Treasury Bill, 4.94%, 08/07/97...... 215,000 213,909
U.S. Treasury Bill, 5.005%, 08/07/97..... 10,000 9,949
U.S. Treasury Bill, 5.10%, 08/14/97...... 55,000 54,663
U.S. Treasury Bill, 4.73%, 08/28/97...... 30,000 29,771
U.S. Treasury Bill, 4.80%, 08/28/97...... 240,000 238,144
U.S. Treasury Bill, 4.91%, 09/04/97...... 50,000 49,557
U.S. Treasury Bill, 4.915%, 09/04/97..... 10,000 9,911
U.S. Treasury Bill, 4.77%, 09/11/97...... 30,000 29,714
U.S. Treasury Bill, 4.815%, 09/11/97..... 90,000 89,133
U.S. Treasury Bill, 4.92%, 09/18/97...... 40,000 39,568
U.S. Treasury Bill, 4.95%, 09/25/97...... 70,000 69,172
U.S. Treasury Bill, 4.96%, 09/25/97...... 65,000 64,230
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost -- $1,515,159)................... 1,515,159
-----------
TOTAL INVESTMENTS -- 99.7%
(Cost -- $17,749,564)(b)............... 14,948,000
OTHER ASSETS, LESS LIABILITIES -- 0.3%... 45,378
-----------
NET ASSETS -- 100%....................... $14,993,378
===========
* Non-income producing security.
(a) Securities valued in good faith by the
Valuation Committee of the Board of Trustees.
The cost of these securities at June 30, 1997
aggregated $114,053.
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized depreciation based on cost for
Federal income tax purposes is as follows:
Gross unrealized appreciation.................. $ 1,727,185
Gross unrealized depreciation.................. (4,528,749)
-----------
Net unrealized depreciation................ $(2,801,564)
============
</TABLE>
Purchases and sales of investments (excluding short-term
obligations) aggregated $6,955,442 and $9,109,121, respectively,
for the period ended June 30, 1997.
(See Notes to Financial Statements)
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $17,749,564)...... $14,948,000
Receivables
Investments sold.......................................... 217,037
Fund shares sold.......................................... 9,417
Dividends and interest.................................... 4,051
Other assets................................................ 30,220
-----------
Total assets.............................................. 15,208,725
-----------
LIABILITIES
Payables
Investments purchased..................................... 13,294
Fund shares repurchased................................... 4,326
Management and advisory fees.............................. 11,143
12b-1 service and distribution fees....................... 6,821
Other payables to related parties......................... 9,698
Due to custodian............................................ 161,128
Accrued expenses............................................ 8,937
-----------
Total liabilities......................................... 215,347
-----------
Net assets.................................................. $14,993,378
===========
CLASS A
Net asset value and redemption price per share
($12,456,953/1,422,348 shares outstanding).............. $ 8.76
===========
Maximum offering price per share ($8.76 X 100/94.25)*..... $ 9.29
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($2,051,641/235,873 shares outstanding)........... $ 8.70
===========
CLASS C
Net asset value, offering price and redemption price***
per share ($484,784/55,514 shares outstanding).......... $ 8.73
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $17,066,624
Undistributed net realized gain on investments and foreign
currency transactions................................... 907,582
Undistributed net investment loss......................... (178,665)
Net unrealized depreciation on investments and foreign
currency transactions................................... (2,802,163)
-----------
NET ASSETS.................................................. $14,993,378
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 20
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $4,693 foreign taxes withheld........... $ 26,592
Interest.................................................. 33,061
-----------
59,653
-----------
EXPENSES
Management fee............................................ $41,817
Advisory fee.............................................. 29,272
Transfer agent............................................ 41,664
Administrative services fee............................... 8,363
Custodian fees............................................ 8,919
Blue Sky fees............................................. 10,052
Auditing and accounting fees.............................. 14,640
Shareholder reports....................................... 3,069
Fund accounting........................................... 17,412
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 41,535
Legal..................................................... 12,646
Other..................................................... 5,952
-----------
Total expenses............................................ 238,318
-----------
NET INVESTMENT LOSS......................................... (178,665)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 864,544
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (2,314,048)
-----------
Net loss on investment transactions..................... (1,449,504)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $(1,628,169)
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1997* 1996
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (178,665) $ (340,228)
Net realized gain on investments and foreign currency
transactions............................................ 864,544 2,677,225
Net unrealized appreciation (depreciation) during the
period on investments and foreign currency
transactions............................................ (2,314,048) 1,776,983
----------- -----------
Net increase (decrease) resulting from operations..... (1,628,169) 4,113,980
----------- -----------
Distributions from net realized gain
Class A................................................... -- (2,405,970)
Class B................................................... -- (251,588)
Class C................................................... -- (14,472)
----------- -----------
Total distributions to shareholders................... -- (2,672,030)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (1,461,845) (5,559,037)
Class B................................................... 238,405 906,002
Class C................................................... 383,106 178,392
----------- -----------
Net decrease resulting from Fund share transactions... (840,334) (4,474,643)
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (2,468,503) (3,032,693)
NET ASSETS
Beginning of period....................................... 17,461,881 20,494,574
----------- -----------
END OF PERIOD............................................. $14,993,378 $17,461,881
=========== ===========
UNDISTRIBUTED NET INVESTMENT LOSS........................... $ (178,665) $ --
=========== ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
CLASS A MONTHS ENDED FOR THE YEAR ENDED MONTHS ENDED
JUNE 30, DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
------------ -------------------- ------------ ---------------------------------
1997* 1996 1995 1994 1994 1993 1992
SELECTED PER SHARE DATA ------------ ------- ------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 9.64 $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43 $ 8.89
------- ------- ------- ------- ------- ------- -------
Income (loss) from
investment operations
Net investment loss......... (.09)(g) (.21) (.19)(a) (.11) (.11) (.01) (.12)
Net realized and unrealized
gain (loss) on investment
transactions.............. (.79)(g) 2.29 .75 (.81) .24 3.35 (1.34)
------- ------- ------- ------- ------- ------- -------
Total from investment
operations............ (.88) 2.08 .56 (.92) .13 3.34 (1.46)
------- ------- ------- ------- ------- ------- -------
Less distributions
From net realized gain...... -- 1.65 .25 -- .31 .73 --
From capital paid-in........ -- -- -- .03 .01 -- --
------- ------- ------- ------- ------- ------- -------
Total distributions..... -- 1.65 .25 .03 .32 .73 --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period...................... $ 8.76 $ 9.64 $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43
======= ======= ======= ======= ======= ======= =======
Total return(%)............... (9.13)(c) 23.86(b) 6.37(b) (9.38)(c) 1.05(b) 47.10(b) (16.42)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).................. $12,457 $15,249 $19,353 $23,296 $34,549 $30,971 $11,280
Ratio of expenses to average
net assets(%)............... 2.80(d) 2.79 2.90(f) 2.44(d) 2.05 2.63 2.70
Ratio of net investment loss
to average net assets(%).... (2.09)(d) (1.78) (2.13)(a) (1.85)(d) (1.09) (1.41) (1.39)
Portfolio turnover rate(%).... 42 56 21 18 62 32 2
Average commission rate(e).... $ .0207 $ .0134 N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE SIX APRIL 1, 1994
CLASS B MONTHS ENDED FOR THE YEAR ENDED MONTHS ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
------------ -------------------- ------------ --------------
1997* 1996 1995 1994 1994
SELECTED PER SHARE DATA ------------ ------ ------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 9.59 $ 9.21 $ 8.90 $ 9.85 $10.16
------ ------ ------ ------ ------
Income (loss) from investment operations
Net investment loss........................... (.11)(g) (.17) (.20)(a) (.09) (.02)
Net realized and unrealized gain (loss) on
investment transactions..................... (.78)(g) 2.19 .71 (.86) (.29)
------ ------ ------ ------ ------
Total from investment operations.......... (.89) 2.02 .51 (.95) (.31)
------ ------ ------ ------ ------
Less distributions
From net realized gain........................ -- 1.64 .20 -- --
------ ------ ------ ------ ------
Total distributions....................... -- 1.64 .20 -- --
------ ------ ------ ------ ------
Net asset value, end of period.................. $ 8.70 $ 9.59 $ 9.21 $ 8.90 $ 9.85
====== ====== ====== ====== ======
Total return(%)................................. (9.28)(c) 23.26(b) 5.74(b) (9.64)(c) (3.05)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........ $2,052 $2,040 $1,142 $ 741 $ 227
Ratio of expenses to average net assets(%)...... 3.12(d) 3.30 3.50(f) 3.03(d) 2.68(d)
Ratio of net investment loss to average net
assets(%)..................................... (2.40)(d) (2.30) (2.73)(a) (2.44)(d) (1.72)(d)
Portfolio turnover rate(%)...................... 42 56 21 18
Average commission rate(e)...................... $.0207 $.0134 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 22
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 30, 1996
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 9.62 $10.67
------ ------
Income (loss) from investment operations
Net investment loss....................................... (.10)(g) (.14)
Net realized and unrealized gain (loss) on investment
transactions............................................ (.79)(g) .72
------ ------
Total from investment operations........................ (.89) .58
------ ------
Less distributions
From net realized gain.................................... -- 1.63
------ ------
Total distributions..................................... -- 1.63
------ ------
Net asset value, end of period.............................. $ 8.73 $ 9.62
====== ======
Total return(%)(c).......................................... (9.25) 6.51
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 485 $ 173
Ratio of expenses to average net assets(%)(d)............... 3.04 3.15
Ratio of net investment loss to average net assets(%)(d).... (2.32) (2.15)
Portfolio turnover rate(%).................................. 42 56
Average commission rate(e).................................. $.0207 $.0134
</TABLE>
(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) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(f) The ratio of expenses to average net assets is net of
expenses reimbursed by manager. Without the expense
reimbursement, the ratio of expenses to average net assets
would have been 3.23% and 3.83% for Class A and Class B,
respectively, for the year ended December 31, 1995.
(g) Based on average shares outstanding.
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Canada Fund (the Fund), is a diversified series of shares of Ivy Fund.
The shares of beneficial interest are assigned no par value and an unlimited
number of shares of Class A, Class B and Class C are authorized. Ivy Fund was
organized as a Massachusetts business trust under a Declaration of Trust dated
December 21, 1983 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board. As of June 30, 1997, securities valued in good faith by the Valuation
Committee of the Board amounted to $466,635 (3.11% of net assets) and have been
noted as such in the investment portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI), a wholly owned subsidiary of Mackenzie
Investment Management, Inc. (MIMI), is the Manager of the Fund. For its
services, IMI receives a fee monthly at the annual rate of .50% of the Fund's
average net assets.
Mackenzie Financial Corporation (MFC) in Toronto, Ontario, Canada is the
Investment Adviser of the Fund. For its services, MFC receives a fee monthly at
the annual rate of .35% of the Fund's average net assets.
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
The fee is collected from the Fund and remitted to MFC by MIMI, a subsidiary of
MFC.
MIMI also provides certain administrative, accounting and pricing services
for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $3,003.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class A shares are also subject to an ongoing distribution fee
at an annual rate of .15% of the average net asset value of Class A shares.
Class B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net asset value attributable to Class B and
Class C shares. IMDI may use such distribution fee for purposes of advertising
and marketing shares of the Fund. Such fees of $28,065, $11,026 and $2,444, for
Class A, Class B and Class C, respectively, are reflected as 12b-1 service and
distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $38,613, $2,666 and $385, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 136,294 $ 1,301,199 1,404,805 $ 13,996,192
Issued on reinvestment of
distributions............. -- -- 238,777 2,234,621
Repurchased................ (295,584) (2,763,044) (2,163,206) (21,789,850)
-------- ----------- ---------- ------------
Net decrease............... (159,290) $(1,461,845) (519,624) $ (5,559,037)
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 53,598 $ 514,416 180,509 $ 1,783,269
Issued on reinvestment of
distributions............. -- -- 21,699 203,806
Repurchased................ (30,471) (276,011) (113,445) (1,081,073)
-------- ----------- ---------- ------------
Net increase............... 23,127 $ 238,405 88,763 $ 906,002
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
---------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 44,076 $ 439,946 49,422 $ 495,277
Issued on reinvestment of
distributions............. -- -- 795 7,533
Repurchased................ (6,531) (56,840) (32,248) (324,418)
-------- ----------- ---------- ------------
Net increase............... 37,545 $ 383,106 17,969 $ 178,392
======== =========== ========== ============
</TABLE>
03MCCNX063097
<PAGE> 25
June 30, 1997
IVY FUNDS(R)
Ivy
China
Region
Fund
- -------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
Two major stories emanated from China during the first six months of 1997.
The first was the passing of Deng Xiaoping and the second was the July 1, 1997
handover of Hong Kong back to Chinese sovereignty. Each of these events was
long-anticipated and had little impact on the Chinese and Hong Kong stock
markets.
Since the beginning of 1997, Hong Kong's Hang Seng index has substantially
outperformed other markets in the China region. During this time, approximately
63% of the Ivy China Region Fund was invested in Hong Kong. Given the strong
performance of the Hong Kong market, this weighting proved beneficial to the
Fund. Our investment strategy for Hong Kong has not changed. We continue to
invest in a group of well-managed companies that are benefiting directly from
growth in mainland China. The largest holding in the Fund, HSBC Holdings (5% of
assets), has by far been the best performing stock in Hong Kong. Its share price
has increased more than 40% since January. Despite Hong Kong's recent
performance -- it is trading near its 20-year average price-to-earnings ratio --
we believe it is still one of the best-valued markets in the world. During
periods of strong enthusiasm about China, investors have been willing to pay
much higher prices for Hong Kong stocks. We would not be surprised if this were
to happen to the Hong Kong market in the post-handover era.
In recent months, China's B-shares have moved higher on the back of very
enthusiastic local buying. These moves have not been supported by fundamentals
and as a result price-to-earnings ratios have expanded to very high levels. The
situation in China today is reminiscent of the "housewife rally" that took place
in Taiwan in the late 1980s.
During that time, local Taiwanese investors aggressively bought shares and
bid up prices to as high as 80 to 90 times earnings. It all came to an end when
the government intervened in the early 1990s. The government in China has made
some halfhearted attempts to put a lid on stock speculation; however, so far
none of these measures have worked. It is difficult to predict how high B-shares
will go.
In January, about 8% of the Ivy China Region Fund was invested in a group
of Taiwan stocks, primarily in the technology sector. Although these stocks,
many of which are of world-class companies, have performed well, we believe that
favorable liquidity conditions in Taiwan could drive the market higher. In
addition, according to our research technology stocks in Taiwan are still at
relatively attractive levels.
Going forward, we believe the Ivy China Region Fund is well positioned to
benefit from growth in the China region and encourage investors with a
longer-term time horizon, and who recognize the benefits of international
diversification, to stay the course.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 26
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 91.7% SHARES VALUE
<S> <C> <C>
- ------------------------------------------
AMERICAS -- 0.4%
- ------------------------------------------
UNITED STATES -- 0.4%
Amway Asia Pacific Ltd.................... 2,500 $ 109,063
-----------
ASIA/PACIFIC -- 91.3%
- ------------------------------------------
CHINA -- 13.5%
China Southern Glass Co. -- Class B....... 305,890 159,908
Huaneng Power International, Inc. ADR*.... 15,000 382,500
Inner Mongolia Erdos Cashmere Products
Co. -- Class B.......................... 276,000 231,840
Qinling Motors Company Ltd................ 1,100,000 567,941
Shanghai China International Travel
Service Co., Ltd. -- Class B............ 215,000 107,070
Shanghai Dazhong Taxi Company -- Class
B....................................... 780,000 692,640
Shanghai Diesel Engine Co. Ltd. -- Class
B*...................................... 648,000 220,320
Shanghai Erfangji Company Limited -- Class
B*...................................... 998,250 129,773
Shanghai Industrial Sewing Machine Co.
Ltd. -- Class B......................... 780,000 95,160
Shanghai Narcissus Electric Appliances
Industrial Company Ltd. -- Class B*..... 467,500 66,385
Shanghai Post & Telecom Eq. -- Class B.... 393,000 205,932
Shanghai Shangling Electric Appliances Co.
Ltd. -- Class B*........................ 312,000 64,272
Shanghai Yaohua Pilkington Glass Class
B*...................................... 200,000 72,400
Shenzhen China Bicycles -- Class B........ 865,800 340,854
Shenzhen Konka Electronics Group
Limited -- Class B...................... 260,000 385,606
Zhenhai Refining and Chemical Company
Limited................................. 900,000 325,275
-----------
4,047,876
-----------
HONG KONG -- 63.4%
Asia Satellite Telecom ADR*............... 4,000 120,500
C.P. Pokphand............................. 1,242,000 384,754
Chen Hsong Holdings*...................... 450,000 261,382
Cheung Kong Holdings Ltd.................. 123,000 1,214,555
Cheung Kong Infrastructure Holdings*...... 36,000 104,320
China Travel International Investment Hong
Kong Ltd................................ 864,400 502,086
Citic Pacific Ltd......................... 161,000 1,005,824
Esprit Asia Holdings Ltd.................. 696,000 494,109
Founder Hong Kong Ltd.*................... 348,000 235,825
Giordano Holdings Ltd..................... 476,000 325,637
Gold Peak Industries...................... 923,000 595,693
Guangdong Investments..................... 799,000 1,201,499
Guangdong Investments Warrants*........... 79,900 37,644
Guangdong Tannery Ltd.*................... 39,950 15,470
HSBC Holdings............................. 46,867 1,409,528
Hang Seng Bank............................ 27,900 397,940
Henderson Land Development Company Ltd.... 52,000 461,452
Hong Kong & China Gas Company Ltd......... 223,200 446,557
Hong Kong Land Holdings Ltd............... 152,000 404,320
Hong Kong Telecommunications Limited...... 299,600 715,425
Jardine International Motor Holdings Co... 136,000 172,034
Jardine Strategic Holdings Ltd............ 100,250 378,945
Jardine Strategic Holdings Warrants*...... 13,250 5,234
Johnson Electric Holdings Ltd............. 237,000 706,661
Kumagai Gumi (Hong Kong) Ltd.............. 360,000 374,067
Lamex Holdings............................ 300,000 $ 81,319
Li & Fung................................. 615,800 691,528
Manhattan Card Company Ltd. .............. 868,000 394,939
Melco International Development Ltd.*..... 15,900 5,182
National Mutual Asia Ltd.................. 440,000 488,429
New World Development Company Ltd. ....... 80,535 480,261
New World Infrastructure Ltd.*............ 133 376
Peregrine Investment Holdings Limited..... 262,000 539,402
Peregrine Investment Holdings Limited
Warrants*............................... 26,200 11,498
Realty Development 'A'.................... 30,000 124,689
Semi-Tech (Global)........................ 78,000 127,361
Shangri-La Asia Ltd....................... 230,000 276,097
Sime Darby (Hong Kong).................... 92,000 102,126
(with 444,130 rights)................... 1,110,327 81,691
Sun Hung Kai Properties Ltd............... 42,800 515,161
Swire Pacific Ltd Class A................. 59,500 535,688
Techtronic Industries Co. ................ 1,888,000 336,304
Tsingtao Brewery Co. Ltd Series H......... 600,000 232,340
Union Bank of Hong Kong Ltd. ............. 366,833 1,060,638
Wharf Holdings Ltd. ...................... 80,000 346,960
Wo Kee Hong Holdings Ltd. ................ 674,400 47,877
Wo Kee Hong Holdings Ltd. Warrants*....... 112,400 900
Yue Yuen Industrial Holdings.............. 229,200 474,832
-----------
18,927,059
-----------
MALAYSIA -- 0.4%
Leader Universal Holdings -- Class A...... 61,666 110,920
-----------
SINGAPORE -- 1.8%
Clipsal Industries Limited................ 100,000 354,000
Elec & Eltek International Co. Ltd........ 35,000 196,000
-----------
550,000
-----------
SOUTH KOREA -- 3.5%
Daewoo Corporation........................ 400 3,252
Hyundai Motor Co, Ltd..................... 2,500 82,376
Keum Kang Development Ind. Company*....... 8,800 123,874
Korea Electric Power Corporation.......... 6,300 188,007
L.G. Electronics (with 422 rights)........ 8,000 148,649
Pohang Iron & Steel Co. Ltd............... 2,000 203,405
Samsung Electronics Co. GDR............... 640 17,600
Samsung Electronics Co. GDR Rights........ 10 314
Samsung Electronics Co. GDR 144A
Registered*............................. 300 17,775
Samsung Electronics Co. New Common........ 1,423 158,164
Samsung Electronics Co. New Common
Rights.................................. 23 870
Samsung Heavy Industries.................. 509 5,365
Shinhan Bank.............................. 8,000 116,937
-----------
1,066,588
-----------
TAIWAN -- 8.0%
Acer Incorporation*....................... 91,000 327,338
Compeq Manufacturing Co. ................. 56,000 398,848
Far Eastern Department Stores Ltd. ....... 248,000 394,302
President Enterprises*.................... 204,000 403,597
Systex Corporation*....................... 115,187 254,820
Systex Corporation Rights*................ 26,287 25,058
Tingyi (Cayman Island) Holding Co.*....... 810,000 201,787
Yung Shin Pharmaceuticals Industries Co... 124,000 350,143
-----------
2,355,893
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 27
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
THAILAND -- 0.5%
Bank of Ayudhya -- Foreign Registered..... 68,750 $ 107,484
Krung Thai Bank Public Company Limited.... 50,000 52,113
-----------
159,597
-----------
VIETNAM -- 0.2%
The Vietnam Fund Limited*................. 7,800..... 63,375
-----------
TOTAL EQUITY SECURITIES
(Cost -- $22,505,903)................... 27,390,371
-----------
CONVERTIBLE CORPORATE BONDS -- 0.8% PRINCIPAL
- ------------------------------------------ ----------
Piltel International Holding Corp., 1.75%,
07/17/06 (Cost -- $240,000)............. $240,000... 234,600
-----------
TOTAL INVESTMENTS -- 92.5%
(Cost -- $22,745,903)(a)................ 27,624,971
OTHER ASSETS, LESS LIABILITIES -- 7.5%.... 2,226,579
-----------
NET ASSETS -- 100%........................ $29,851,550
===========
</TABLE>
ADR - American Depository Receipt
GDR - Global Depository Receipt
* Non-income producing security.
(a) Cost for Federal income tax purposes is
$22,918,417.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for and
Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 7,907,451
Gross unrealized depreciation..................... (3,200,897)
-----------
Net unrealized appreciation................... $ 4,706,554
===========
Purchases and sales of securities other than short-term obligations
aggregated $1,959,496 and $2,777,937, respectively, for the period
ended June 30, 1997.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $22,745,903)...... $27,624,971
Cash........................................................ 1,888,358
Cash denominated in foreign currencies (cost -- $140,457)... 139,260
Receivables
Fund shares sold.......................................... 200,217
Dividends and interest.................................... 141,511
Other assets................................................ 23,368
-----------
Total assets.............................................. 30,017,685
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 101,083
Management fee............................................ 23,501
12b-1 service and distribution fees....................... 13,320
Other payables to related parties......................... 12,960
Accrued expenses............................................ 15,271
-----------
Total liabilities......................................... 166,135
-----------
NET ASSETS.................................................. $29,851,550
===========
CLASS A:
Net asset value and redemption price per share
($17,481,686/1,497,788 shares outstanding)................ $ 11.67
===========
Maximum offering price per share ($11.67 x 100/94.25)*...... $ 12.38
===========
CLASS B:
Net asset value, offering price and redemption price** per
share ($11,265,225/970,714 shares outstanding)............ $ 11.61
===========
CLASS C:
Net asset value, offering price and redemption price*** per
share ($1,104,639/95,460 shares outstanding).............. $ 11.57
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $26,532,288
Undistributed net realized loss on investments and foreign
currency transactions................................... (1,636,653)
Undistributed net investment income....................... 78,009
Net unrealized appreciation on investments and foreign
currency transactions................................... 4,877,906
-----------
NET ASSETS.................................................. $29,851,550
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 28
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $7,734 foreign taxes withheld........... $ 399,252
Interest.................................................. 2,212
----------
401,464
----------
EXPENSES
Management fee............................................ $129,636
Transfer agent............................................ 48,247
Administrative services fee............................... 12,964
Custodian fees............................................ 27,929
Blue Sky fees............................................. 10,848
Auditing and accounting fees.............................. 8,029
Shareholder reports....................................... 3,579
Fund accounting........................................... 18,228
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 70,658
Legal..................................................... 15,171
Other..................................................... 9,462
----------
357,728
Expenses reimbursed by manager............................ (13,980)
Fees paid indirectly...................................... (20,293)
----------
Net expenses............................................ 323,455
----------
NET INVESTMENT INCOME....................................... 78,009
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (38,132)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 3,371,987
----------
Net gain on investment transactions..................... 3,333,855
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $3,411,864
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1997* 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 78,009 $ 10,485
Net realized loss on investments and foreign currency
transactions............................................ (38,132) (1,001,126)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 3,371,987 5,263,221
----------- -----------
Net increase resulting from operations.................. 3,411,864 4,272,580
----------- -----------
Class A distributions
From net investment income................................ -- (46,722)
In excess of net investment income........................ -- (30,983)
----------- -----------
Total distributions to Class A shareholders............. -- (77,705)
----------- -----------
Class C distributions
From net investment income................................ -- (3,703)
----------- -----------
Total distributions to Class C shareholders............. -- (3,703)
----------- -----------
Fund share transactions (Note 5)
Class A................................................... 126,698 (231,044)
Class B................................................... 1,048,506 597,206
Class C................................................... 530,941 416,039
----------- -----------
Net increase resulting from Fund share transactions..... 1,706,145 782,201
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 5,118,009 4,973,373
NET ASSETS
Beginning of period....................................... 24,733,541 19,760,168
----------- -----------
END OF PERIOD............................................. $29,851,550 $24,733,541
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 78,009 $ --
=========== ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 29
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS A MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------------------------------- ----------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 10.30 $ 8.58 $ 8.61 $ 11.55 $ 10.00
------- ------- ------- ------- --------
Income (loss) from investment operations
Net investment income (loss)(a)................... .05(g) .03 .14 .05 (.01)
Net realized and unrealized gain (loss) on
investment transactions......................... 1.32(g) 1.74 (.01) (2.91) 1.57
------- ------- ------- ------- --------
Total from investment operations................ 1.37 1.77 .13 (2.86) 1.56
------- ------- ------- ------- --------
Less distributions
From net investment income........................ -- .03 .14 .05 --
In excess of net investment income................ -- .02 -- .03 --
In excess of net realized gain.................... -- -- .02 -- --
From capital paid-in.............................. -- -- -- -- .01
------- ------- ------- ------- --------
Total distributions............................. -- .05 .16 .08 .01
------- ------- ------- ------- --------
Net asset value, end of period...................... $ 11.67 $ 10.30 $ 8.58 $ 8.61 $ 11.55
======= ======= ======= ======= ========
Total return(%)..................................... 13.30(b) 20.50(c) 1.59(c) (24.88)(c) 15.65(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $17,482 $15,290 $12,855 $13,180 $ 8,371
Ratio of expenses to average net assets(d)
With expense reimbursement(%)..................... 2.37(e) 2.20 2.20 2.20 1.98(e)
Without expense reimbursement(%).................. 2.48(e) 2.48 2.73 2.76 2.45(e)
Ratio of net investment income (loss) to average net
assets(%)(a)...................................... .88(e) .32 1.61 .55 (.91)(e)
Portfolio turnover rate(%).......................... 8 22 25 4 --
Average commission rate(f).......................... $ .0069 $ .0050 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------------------------------ ----------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------ ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 10.28 $ 8.58 $ 8.61 $ 11.55 $10.00
------- ------ ------- ------- ------
Income (loss) from investment operations
Net investment income (loss)(a).................. .01(g) (.04) .08 (.02) (.02)
Net realized and unrealized gain (loss) on
investment transactions........................ 1.32(g) 1.74 (.02) (2.92) 1.57
------- ------ ------- ------- ------
Total from investment operations............... 1.33 1.70 .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..................... $ 11.61 $10.28 $ 8.58 $ 8.61 $11.55
======= ====== ======= ======= ======
Total return(%).................................... 12.94(b) 19.67(c) .83(c) (25.45)(c) 15.50(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $11,265 $8,995 $ 6,905 $ 7,336 $3,565
Ratio of expenses to average net assets(d)
With expense reimbursement(%).................... 3.08(e) 2.95 2.95 2.95 2.74(e)
Without expense reimbursement(%)................. 3.19(e) 3.23 3.48 3.51 3.20(e)
Ratio of net investment income (loss) to average
net assets(%)(a)................................. .17(e) (.43) .86 (.20) (1.66)(e)
Portfolio turnover rate(%)......................... 8 22 25 4 --
Average commission rate(f)......................... $ .0069 $.0050 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 30
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 30, 1996
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 10.24 $ 9.44
------- -------
Income from investment operations
Net investment income (loss)(a)........................... .02(g) --
Net realized and unrealized gain on investment
transactions............................................ 1.31(g) .89
------- -------
Total from investment operations........................ 1.33 .89
------- -------
Less distributions
In excess of net investment income........................ -- .09
------- -------
Total distributions..................................... -- .09
------- -------
Net asset value, end of period.............................. $ 11.57 $ 10.24
======= =======
Total return(%)(b).......................................... 12.99 9.39
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,105 $ 449
Ratio of expenses to average net assets(d)
With expense reimbursement(%)(e).......................... 2.93 2.71
Without expense reimbursement(%)(e)....................... 3.04 2.99
Ratio of net investment income (loss) to average net
assets(%)(a)(e)........................................... .32 (.19)
Portfolio turnover rate(%).................................. 8 22
Average commission rate(f).................................. $ .0069 $ .0050
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Beginning in 1995, total expenses include fees paid
indirectly through an expense offset arrangement, if any.
(e) Annualized.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding.
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy China Region Fund (the Fund), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated
December 21, 1983 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$1,500,000 as of December 31, 1996, which may be applied against any realized
net taxable capital gain of each succeeding fiscal year until fully utilized or
until the expiration date, whichever occurs first. The carryover expires
$264,000 in 2002, $203,000 in 2003 and $1,033,000 in 2004.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement with its custodian
whereby a certain percentage of quarterly cumulative credits resulting from cash
balances on deposit with the custodian are used to offset custody fees,
including transaction and out-of-pocket
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
expenses. For the period, custody fees were reduced by $20,293 under this
arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.95% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $9,564.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of
$19,659, $47,154 and $3,845, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $31,118, $16,423 and $706, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in the China
region. Therefore, the Fund is more susceptible to factors adversely affecting
securities within the China region than is an equity fund that is not
concentrated in such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,104,969 $ 11,567,490 1,537,034 $ 14,512,385
Issued on reinvestment of
distributions........... -- -- 6,616 68,426
Repurchased.............. (1,091,777) (11,440,792) (1,556,713) (14,811,855)
---------- ------------ ---------- ------------
Net increase (decrease).. 13,192 $ 126,698 (13,063) $ (231,044)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 629,930 $ 6,569,237 998,886 $ 9,546,623
Repurchased.............. (534,344) (5,520,731) (928,212) (8,949,417)
---------- ------------ ---------- ------------
Net increase............. 95,586 $ 1,048,506 70,674 $ 597,206
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
------------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 98,138 $ 1,041,952 50,214 $ 474,632
Issued on reinvestment of
distributions........... -- -- 324 3,314
Repurchased.............. (46,551) (511,011) (6,665) (61,907)
---------- ------------ ---------- ------------
Net increase............. 51,587 $ 530,941 43,873 $ 416,039
========== ============ ========== ============
</TABLE>
<PAGE> 33
IVY FUNDS(R)
June 30, 1997
Ivy
Emerging
Growth
Fund
- -------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
The spring of 1997 brought with it a dramatic recovery in the emerging
growth sector of the equity market. After bottoming out in late April,
small-company stocks staged a powerful rally that continued through the first
half of the year. If nothing else, this comeback has demonstrated that the
volatility of this sector really does work both ways.
Pundits pointed to a number of factors to explain why these stocks lagged
the broader market earlier in the year. At the top of most lists was the
popularity of indexing, a phenomenon with the characteristics of a
self-fulfilling prophecy that has provided abundant buying power for the
largest-capitalization stocks and created valuations that seem high by the
standards of recent years. We believe another factor was the upward trend in
interest rates, which finally peaked in April. According to our research,
product transition issues, particularly in the networking stocks, also had a
negative effect on investor psychology. These fundamental issues were
exacerbated by press reports of "hot money" exiting momentum funds.
For all these reasons, by late April negative investor sentiment pervaded
the small-company market as relative valuations sank to the low end of their
historical range. This set the stage for the ensuing rally, which was triggered
by evidence suggesting that in spite of very strong economic growth, there was
little threat of inflation, and the Federal Reserve Board might not have to
raise interest rates again after all. We believe another positive influence on
the sector was the balanced budget agreement, which would almost certainly
include a capital gains reduction. Such a change would be positive for all
stocks, but particularly non-dividend-paying growth stocks.
In terms of fundamentals, most of the stocks that comprise the Ivy Emerging
Growth Fund have continued to make excellent progress. As always, there have
been a few stumbles, but the vast majority of the Fund's holdings have either
met or exceeded earnings expectations, with the median comfortably in excess of
30%. However, larger-capitalization stocks, for the most part, also turned in
good earnings reports. This may have been another factor that impeded
performance in the emerging growth sector, as investors asked themselves, "If
large-capitalization stocks can offer good earnings growth plus liquidity, why
look further?"
We believe investors are continuing to pay a big premium for the liquidity
of larger-company stocks and in spite of the recent rally in the emerging growth
sector, a very modest premium for the high-growth potential of smaller-company
stocks. While there are no guarantees, this valuation disparity, combined with
the strong fundamental outlook for the portfolio companies of the Ivy Emerging
Growth Fund, encourages us to believe the catch-up phase has a lot further to
go.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 34
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 96.0% SHARES VALUE
<S> <C> <C>
- -------------------------------------------
BIOTECHNOLOGY -- 5.3%
Aastrom Biosciences, Inc.*................. 50,600 $ 360,525
Agouron Pharmaceuticals, Inc.*............. 5,000 404,375
Alkermes, Inc.*............................ 20,800 301,600
Biochem Pharma, Inc.*...................... 31,200 694,200
Connetics Corporation*..................... 12,000 84,000
Depotech Corp.*............................ 7,000 95,375
Ergo Science Corporation*.................. 24,000 264,000
Geltex Pharmaceuticals, Inc.*.............. 21,600 434,700
Gliatech, Inc.*............................ 22,200 183,150
Liposome Company Inc.*..................... 79,200 707,850
Myriad Genetics, Inc.*..................... 8,000 216,000
NeoRx Corporation*......................... 38,300 169,956
NeoRx Corporation Units*................... 23,000 17,250
Neurex Corporation*........................ 37,000 522,625
PathoGenesis Corp.*........................ 16,100 468,912
Pharmacyclics, Inc.*....................... 26,600 412,300
US Bioscience, Inc.*....................... 14,000 134,750
Vertex Pharmaceuticals Inc.*............... 6,700 256,275
ViroPharma Inc.*........................... 20,500 366,437
------------
6,094,280
------------
BUSINESS & FINANCIAL SERVICES -- 19.3%
Applied Graphics Technologies, Inc.*....... 27,300 1,085,175
Ballantyne of Omaha, Inc.*................. 33,000 594,000
BISYS Group, Inc.*......................... 17,688 738,474
Children's Comprehensive Services, Inc.*... 63,600 898,350
Cohr, Inc.*................................ 21,300 399,375
Copart, Inc.*.............................. 15,600 257,400
Cornell Corrections, Inc.*................. 40,800 673,200
Corrections Corp. of America*.............. 22,900 910,275
Cotelligent Group, Inc.*................... 25,000 343,750
Credit Acceptance Corp.*................... 21,300 274,237
Daisytek International Corporation*........ 21,700 859,863
FactSet Research Systems Inc.*............. 40,200 984,900
Fair Issac and Company Inc. ............... 13,600 606,050
Federal Agricultural Mortgage Corp. Class
C*....................................... 14,350 520,187
Gartner Group, Inc. -- Class A*............ 35,700 1,282,969
Green Tree Financial Corp.................. 15,000 534,375
Ingram Micro, Inc.*........................ 29,500 711,687
Intelligroup, Inc.*........................ 9,100 87,588
Investment Technology Group, Inc.*......... 28,000 752,500
Lason Holdings, Inc.*...................... 28,800 810,000
Lightbridge, Inc.*......................... 42,300 322,538
Litchfield Financial Corp.................. 46,727 765,155
MSC Industrial Direct Co, Inc.*............ 12,000 481,500
Maximus, Inc.*............................. 13,200 235,950
Meta Group, Inc.*.......................... 25,700 558,975
Metris Companies Inc.*..................... 3,300 108,281
PMT Services, Inc.*........................ 63,700 971,425
Profit Recovery Group International, Inc.
(The)*................................... 61,800 857,475
QuickResponse Services Inc.*............... 28,500 1,033,125
Sykes Enterprises, Inc.*(a)................ 43,500 1,131,000
United Waste Systems Inc.*................. 20,800 852,800
West TeleServices Corp.*................... 33,000 486,750
Whittman-Hart, Inc.*....................... 31,200 877,500
------------
22,006,829
------------
COMPUTER SOFTWARE -- 16.9%
Aspect Development, Inc.*.................. 23,500 612,469
Baan Company NV*(a)........................ 10,000 688,750
CBT Group PLC ADR*......................... 25,900 1,634,937
Carnegie Group, Inc.*...................... 49,200 369,000
Checkfee Corporation*...................... 40,600 715,575
Citrix Systems, Inc.*...................... 8,800 386,100
Computer Learning Centers Inc.*............ 13,300 558,600
Dendrite International, Inc.*.............. 31,400 518,100
H.T.E., Inc.*.............................. 59,500 639,625
HNC Software Inc........................... 12,700 $ 484,188
Infinity Financial Technology, Inc.*....... 32,500 530,156
Interlink Computer Sciences, Inc.*......... 82,000 625,250
IONA Technologies PLC -- ADR............... 28,100 554,975
JDA Software Group, Inc.*.................. 17,000 580,125
McAfee Associates, Inc.*................... 10,025 632,827
Optika Imaging Systems, Inc.*.............. 117,800 589,000
Oracle Corporation*........................ 4,600 231,725
Pegasystems Inc. .......................... 18,400 577,300
Peoplesoft, Inc.*.......................... 11,300 596,075
Planning Sciences International PLC*....... 36,600 210,450
Rational Software Corporation*............. 18,358 308,644
Remedy Corporation*........................ 16,200 648,000
Renaissance Solutions, Inc.*............... 13,700 506,900
Rogue Wave Software*....................... 35,000 437,500
SPSS, Inc.*................................ 10,800 313,200
Saville Systems Ireland ADR*............... 9,800 509,600
Security Dynamics Technologies, Inc.*...... 14,900 549,437
Select Software Tools ADR*................. 25,000 331,250
Siebel Systems, Inc.*...................... 21,000 677,250
Systemsoft Corporation*.................... 37,800 406,350
Tecnomatix Technologies Ltd. .............. 3,500 113,750
Template Software, Inc.*................... 44,000 638,000
Transactions Systems Architects, Inc.*..... 14,500 500,250
Veritas Software Corp.*.................... 17,600 884,400
Viasoft, Inc.*............................. 6,800 345,100
Visio Corporation*......................... 6,000 423,000
------------
19,327,858
------------
CONSUMER PRODUCTS & SERVICES -- 7.3%
Apollo Group, Inc.*........................ 14,600 514,650
Blyth Industries, Inc.*.................... 27,900 941,625
CHS Electronics, Inc.*..................... 50,200 1,330,300
Central European Media Enterprises
Ltd.*(a)................................. 12,200 317,200
CUC International, Inc.*................... 31,648 816,914
Cutter & Buck, Inc.*....................... 20,000 325,000
Dave & Buster's, Inc.*..................... 16,500 441,375
Extended Stay America, Inc.*............... 43,500 649,803
International Speedway Corp. -- Class A*... 39,000 765,375
Metro Networks, Inc.*...................... 31,700 768,725
Premier Parks, Inc.*....................... 23,000 848,125
Sitel Corporation*......................... 27,000 556,875
------------
8,275,967
------------
HEALTHCARE -- 18.2%
Advanced Health Corporation*............... 24,400 448,350
American Medserve Corp.*................... 34,500 448,500
Cambridge Heart, Inc.*..................... 15,300 109,013
Coast Dental Services, Inc.*............... 44,300 675,575
Compdent Corporation*...................... 19,400 408,612
Cytec Corporation*......................... 16,200 439,425
Digene Corporation*........................ 23,400 298,350
EP Medsystems Inc.*........................ 40,500 141,750
EPIX Medical, Inc.*........................ 52,000 416,000
Endovascular Technologies, Inc.*........... 29,800 275,650
FPA Medical Management, Inc.*.............. 32,100 760,369
First Commonwealth*........................ 26,400 488,400
Health Management Associates, Inc.*........ 24,500 698,250
Heartport, Inc.*........................... 15,000 264,375
HemaSure, Inc.*............................ 27,200 74,800
Horizon Mental Health Management, Inc.*.... 60,950 1,371,375
IDX Systems Corporation*................... 10,500 362,250
Intelligent Medical Imaging, Inc.*......... 19,700 130,513
MedQuist, Inc.*............................ 18,100 549,788
Molecular Devices Corporation*............. 47,400 829,500
NCS HealthCare, Inc. Class A*.............. 12,500 379,688
Norland Medical Systems, Inc.*............. 18,900 205,537
OccuSystems, Inc.*......................... 22,400 649,600
Omnicare, Inc. ............................ 15,100 473,763
</TABLE>
(See Notes to Financial Statements)
<PAGE> 35
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
<S> <C> <C>
- -------------------------------------------
Orthodontic Centers of America, Inc.*...... 89,500 $ 1,627,781
Pediatrix Medical Group Inc.*.............. 21,800 998,712
PhyCor, Inc.*.............................. 26,750 921,203
Renal Treatment Centers Inc.*.............. 45,100 1,212,063
Serologicals Corporation*.................. 36,600 841,800
Sunquest Information Systems, Inc.*........ 54,700 820,500
Total Renal Care Holdings, Inc.*........... 23,800 956,462
Ventana Medical Systems, Inc.*............. 39,900 493,763
VidaMed, Inc.*............................. 52,600 266,287
Vivus, Inc.*............................... 72,000 1,714,500
------------
20,752,504
------------
MISCELLANEOUS TECHNOLOGY -- 3.8%
Gemstar International Group Ltd.*.......... 58,300 1,071,263
IKOS Systems, Inc.*........................ 31,200 666,900
Periphonics Corp.*......................... 41,000 881,500
RadiSys Corporation*....................... 20,800 826,800
SeaChange International, Inc.*............. 5,000 141,250
Synopsys, Inc.*............................ 17,500 643,125
Technology Modeling Associates, Inc.*...... 10,000 136,250
------------
4,367,088
------------
NETWORK & TELECOMMUNICATION
EQUIPMENT -- 8.4%
ACT Networks, Inc.*........................ 11,800 150,450
Advanced Fibre Communications*............. 18,500 1,116,938
American Power Conversion Corp.*........... 40,000 760,000
Aware, Inc.*............................... 39,200 578,200
CIENA Corporation*......................... 10,500 494,812
Cisco Systems, Inc.*....................... 6,600 443,025
DSP Communications, Inc.*.................. 22,200 244,200
Gilat Satellite Networks Ltd. ............. 14,000 465,500
Harmonic Lightwaves, Inc.*................. 30,600 524,025
International Network Services*............ 35,000 910,000
Network Appliance, Inc.*................... 17,900 680,200
NICE-Systems Ltd. -- Sponsored ADR......... 13,000 390,000
P-COM, Inc. ............................... 20,300 669,900
Pairgain Technologies, Inc.*............... 19,600 303,800
Premisys Communications, Inc.*............. 15,600 245,700
Proxim, Inc.*.............................. 36,200 877,850
Sawtek Inc.*............................... 12,900 435,375
Xylan Corporation*......................... 19,600 333,200
------------
9,623,175
------------
PHARMACEUTICALS -- 4.7%
Anesta Corp................................ 31,100 590,900
Calypte Biomedical Corp.*.................. 26,800 120,600
ChiRex Inc.*............................... 66,500 789,688
Cima Labs Inc.*............................ 18,000 74,250
Dura Pharmaceuticals, Inc.*................ 22,300 889,212
Kos Pharmaceuticals, Inc.*................. 18,500 513,375
NABI, Inc.*................................ 31,630 209,549
Nastech Pharmaceutical Co.*................ 26,000 273,000
Penederm Inc.*............................. 28,800 388,800
Sepracor, Inc.*............................ 32,900 849,231
Sonus Pharmaceuticals, Inc.*............... 24,500 689,063
------------
5,387,668
------------
RETAIL -- 4.4%
CompUSA, Inc.*............................. 23,000 494,500
Corporate Express, Inc.*................... 44,040 635,827
Cost Plus, Inc.*........................... 21,200 556,500
Dollar Tree Stores, Inc.*.................. 11,500 579,312
Gadzooks, Inc.*............................ 13,500 263,250
Guitar Center, Inc.*....................... 40,100 676,687
Just for Feet, Inc.*....................... 19,600 341,775
Party City Corp.*.......................... 24,800 415,400
Petco Animal Supplies, Inc.*............... 17,200 516,000
West Marine Inc.*.......................... 18,700 481,525
------------
4,960,776
------------
SEMICONDUCTORS & EQUIPMENT -- 5.7%
ASM Lithography Holding NV*(a)............. 16,000 $ 936,000
Altera Corporation*........................ 10,700 540,350
ANADIGICS, Inc.*........................... 11,550 358,050
Analog Devices*............................ 28,300 751,719
Benchmarq Microelectronics, Inc.*.......... 26,500 457,125
Cymer, Inc.*............................... 13,500 658,125
Etec Systems, Inc.*........................ 8,700 373,013
GaSonics International Corporation*........ 9,600 130,800
Integrated Process Equipment Corp.*........ 10,000 253,125
Lattice Semiconductor Corporation*......... 8,000 452,000
Maxim Integrated Products, Inc.*........... 15,600 887,250
NeoMagic Corp.*............................ 8,000 179,000
Pri Automation, Inc.*...................... 5,600 212,450
Ultratech Stepper, Inc.*................... 14,300 327,113
------------
6,516,120
------------
TELECOMMUNICATION SERVICES -- 2.0%
Aerial Communications, Inc.*............... 32,000 272,000
Faxsav Incorporated*....................... 25,700 48,188
International Telecommunication Data
Systems, Inc.*........................... 26,500 649,250
Transaction Network Services, Inc.*........ 27,000 381,375
Western Wireless Corp.*.................... 40,200 638,175
WinStar Communications, Inc.*.............. 22,500 300,938
------------
2,289,926
------------
TOTAL COMMON STOCKS
(Cost -- $92,835,873)(b)................. 109,602,191
OTHER ASSETS, LESS LIABILITIES -- 4.0%..... 4,533,783
------------
NET ASSETS -- 100%......................... $114,135,974
============
ADR - American Depository Receipt
NV - Non-voting
* Non-income producing security.
(a) Foreign security.
(b) Cost is the same for Federal income tax
purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 24,249,923
Gross unrealized depreciation.................... (7,483,605)
------------
Net unrealized appreciation.................. $ 16,766,318
============
Purchases and sales of securities other than short-term obligations
aggregated $46,715,205 and $28,169,483, respectively, for the period
ended June 30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 36
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $92,835,873)...... $109,602,191
Cash........................................................ 5,216,691
Receivables -- Fund shares sold............................. 209,975
Other assets................................................ 34,329
------------
Total assets............................................ 115,063,186
------------
LIABILITIES
Payables
Investments purchased..................................... 671,262
Fund shares repurchased................................... 73,373
Management fee............................................ 78,375
12b-1 service and distribution fees....................... 53,522
Other payables to related parties......................... 39,942
Accrued expenses............................................ 10,738
------------
Total liabilities....................................... 927,212
------------
NET ASSETS.................................................. $114,135,974
============
CLASS A
Net asset value and redemption price per share
($63,260,565/2,440,468 shares outstanding)................ $ 25.92
============
Maximum offering price per share ($25.92 x 100/94.25)*...... $ 27.50
============
CLASS B
Net asset value, offering price and redemption price** per
share ($42,904,500/1,673,529 shares outstanding).......... $ 25.64
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($7,970,909/311,380 shares outstanding)............. $ 25.60
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $101,679,731
Undistributed net realized loss on investments............ (3,452,949)
Undistributed net investment loss......................... (857,126)
Net unrealized appreciation on Investments................ 16,766,318
------------
NET ASSETS.................................................. $114,135,974
============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 37
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 7,334
Interest.................................................. 166,426
-----------
173,760
-----------
EXPENSES
Management fee............................................ $426,479
Transfer agent............................................ 134,505
Administrative services fee............................... 50,174
Custodian fees............................................ 7,984
Blue Sky fees............................................. 19,637
Auditing and accounting fees.............................. 8,890
Shareholder reports....................................... 5,831
Fund accounting........................................... 47,711
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 288,189
Legal..................................................... 12,410
Other..................................................... 26,099
-----------
Total expenses.......................................... 1,030,886
-----------
NET INVESTMENT LOSS......................................... (857,126)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments.......................... (3,452,949)
Net unrealized appreciation during the period on
investments............................................. 2,568,427
-----------
Net loss on investment transactions..................... (884,522)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $(1,741,648)
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1997* 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (857,126) $(1,204,617)
Net realized gain (loss) on investments and put options... (3,452,949) 6,984,138
Net unrealized appreciation during the period on
investments............................................. 2,568,427 3,324,364
------------ -----------
Net increase (decrease) resulting from operations....... (1,741,648) 9,103,885
------------ -----------
Total distributions from net realized gain
Class A................................................... -- (4,081,929)
Class B................................................... -- (2,600,466)
Class C................................................... -- (300,431)
------------ -----------
Total distributions to shareholders..................... -- (6,982,826)
------------ -----------
Fund share transactions (Note 4)
Class A................................................... 8,273,265 13,997,698
Class B................................................... 8,336,862 21,421,702
Class C................................................... 3,985,040 4,300,951
------------ -----------
Net increase resulting from Fund share transactions..... 20,595,167 39,720,351
------------ -----------
TOTAL INCREASE IN NET ASSETS................................ 18,853,519 41,841,410
NET ASSETS
Beginning of period....................................... 95,282,455 53,441,045
------------ -----------
END OF PERIOD............................................. $114,135,974 $95,282,455
============ ===========
UNDISTRIBUTED NET INVESTMENT LOSS........................... $ (857,126) $ --
============ ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 38
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MARCH 3, 1993
CLASS A MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ ------------------------------------- ---------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 26.54 $ 24.12 $ 18.38 $ 17.93 $ 10.00
------- ------- ------- ------- -------
Income from investment operations
Net investment loss................................. (.27)(g) (.35) (.24) (.24)(a) (.07)(a)
Net realized and unrealized gain (loss) on
investment transactions........................... (.35)(g) 4.84 7.90 .82 8.29
------- ------- ------- ------- -------
Total from investment operations.................. (.62) 4.49 7.66 .58 8.22
------- ------- ------- ------- -------
Less distributions
From net realized gain.............................. -- 2.07 1.92 -- .29
From capital paid-in................................ -- -- -- .13 --
------- ------- ------- ------- -------
Total distributions............................... -- 2.07 1.92 .13 .29
------- ------- ------- ------- -------
Net asset value, end of period....................... $ 25.92 $ 26.54 $ 24.12 $ 18.38 $ 17.93
======= ======= ======= ======= =======
Total return(%)...................................... (2.34)(e) 18.52(b) 42.07(b) 3.29(b) 45.33(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $63,261 $55,944 $39,456 $21,493 $14,212
Ratio of expenses to average net assets
With expense reimbursement(%)....................... -- -- -- 2.20 1.93(d)
Without expense reimbursement(%).................... 1.73(d) 1.76 1.95 2.22 2.33(d)
Ratio of net investment loss to average net
assets(%)........................................... (1.38)(d) (1.31) (1.39) (1.72)(a) (1.30)(a)(d)
Portfolio turnover rate(%)........................... 30 68 86 67 34
Average commission rate(f)........................... $ .0642 $ .0601 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ---------------------------------- ----------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 26.33 $ 24.12 $ 18.38 $17.93 $18.21
------- ------- ------- ------ -----
Income (loss) from investment operations
Net investment loss................................. (.38)(g) (.40) (.35) (.29)(a) (.04)(a)
Net realized and unrealized gain (loss)
on investment transactions........................ (.31)(g) 4.68 7.85 .74 .03
------- ------- ------- ------ -----
Total from investment operations.................. (.69) 4.28 7.50 .45 (.01)
------- ------- ------- ------ -----
Less distributions
From net realized gain.............................. -- 2.07 1.76 -- .27
------- ------- ------- ------ -----
Total distributions............................... -- 2.07 1.76 -- .27
------- ------- ------- ------ -----
Net asset value, end of period....................... $ 25.64 $ 26.33 $ 24.12 $18.38 $17.93
======= ======= ======= ====== =====
Total return(%)...................................... (2.62)(e) 17.65(b) 41.03(b) 2.51(b) (.05)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $42,905 $35,321 $13,985 $5,015 $1,216
Ratio of expenses to average net assets
With expense reimbursement(%)....................... -- -- -- 2.95 2.68(d)
Without expense reimbursement(%).................... 2.48(d) 2.52 2.70 2.97 3.08(d)
Ratio of net investment loss to average net
assets(%)........................................... (2.13)(d) (2.07) (2.14) (2.47)(a) (2.05)(a)(d)
Portfolio turnover rate(%)........................... 30 68 86 67 34
Average commission rate(f)........................... $ .0642 $ .0601 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 30, 1996
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $26.29 $29.69
------ ------
Loss from investment operations
Net investment loss........................................ (.38)(g) (.14)
Net realized and unrealized loss on investment
transactions............................................. (.31)(g) (1.19)
------ ------
Total from investment operations......................... (.69) (1.33)
------ ------
Less distributions
From net realized gain..................................... -- 2.07
------ ------
Total distributions...................................... -- 2.07
------ ------
Net asset value, end of period.............................. $25.60 $26.29
====== ======
Total return(%)(e).......................................... (2.62) (4.48)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $7,971 $4,018
Ratio of expenses to average net assets
Without expense reimbursement(%)(d)........................ 2.45 2.52
Ratio of net investment loss to average net assets(%)(d)... (2.10) (2.07)
Portfolio turnover rate(%).................................. 30 68
Average commission rate(f).................................. $.0642 $.0601
(a) Net investment loss is net of expenses reimbursed by
manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return since April
30, 1993 (when the Fund became available for sale to the
public) and does not reflect a sales charge.
(d) Annualized.
(e) Total return represents aggregate total return and does not
reflect a sales charge.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Emerging Growth Fund (the Fund), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated
December 21, 1983 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may write (sell) put options on securities and stock
indicies, and may write (sell) covered call options on securities held in its
portfolio. When the Fund writes a call, it gives the purchaser of the call
option the right to buy the underlying security at the price specified in the
option (the "exercise price") at any time during the option period, generally
ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the
form of a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder. For
options on indices, cash settlement by the Fund will be required if the option
is exercised.
By writing a call option, the Fund forgoes, in exchange for the premium
less the commission ("net premium"), the opportunity to profit during the option
period from an increase in the market value of the underlying security or
currency above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call option is valued at the last sale price or, in the absence of a
sale, the last offering price. In addition, the Fund may purchase put options on
securities and stock indices. Exchange traded purchased options are valued at
the last sale price or, in the absence of a sale, the last bid price.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
from the characterization of such distributions determined on a Federal income
tax basis.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to certain securities sold at a
loss. As a result, Net investment income (loss) and Net realized gain (loss) on
investments and foreign currency transactions for a reporting period may differ
significantly in amount and character from distributions during such period.
Accordingly, the Fund may make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .85% of
the Fund's average net assets. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, 12b-1 fees, brokerage commissions,
interest, litigation and indemnification expenses, and other extraordinary
expenses) to an annual rate of 1.95% of its average net assets. The voluntary
expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $31,582.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of
$71,184, $186,993 and $30,012, for Class A, Class B and Class C, respectively,
are reflected as 12b-1 service and distribution fees in the Statement of
Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $75,813, $51,500 and $7,192, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,581,165 $ 39,646,736 1,862,227 $ 52,011,901
Issued on reinvestment of
distributions........... -- -- 143,930 3,817,355
Repurchased.............. (1,248,964) (31,373,471) (1,533,721) (41,831,558)
---------- ------------ ---------- ------------
Net increase............. 332,201 $ 8,273,265 472,436 $ 13,997,698
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 584,409 $ 14,482,317 1,132,341 $ 31,331,078
Issued on reinvestment of
distributions........... -- -- 87,254 2,290,484
Repurchased.............. (252,135) (6,145,455) (458,058) (12,199,860)
---------- ------------ ---------- ------------
Net increase............. 332,274 $ 8,336,862 761,537 $ 21,421,702
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
------------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 183,070 $ 4,572,670 156,680 $ 4,416,153
Issued on reinvestment of
distributions........... -- -- 6,883 180,948
Repurchased.............. (24,532) (587,630) (10,721) (296,150)
---------- ------------ ---------- ------------
Net increase............. 158,538 $ 3,985,040 152,842 $ 4,300,951
========== ============ ========== ============
</TABLE>
<PAGE> 41
June 30, 1997
IVY FUNDS(R)
Ivy
Global
Fund
- -----------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
The long-term strategy of the Ivy Global Fund is to provide shareholders
with an all-inclusive worldwide investment portfolio that includes exposure to
the high-growth areas of the world. While there are no guarantees, we believe
that in the long run, this approach should prove to yield higher returns without
substantially increasing overall portfolio risk.
It is important to recognize that our approach is substantially different
from many global funds, which tend to have very large US positions and little
exposure to emerging markets. For example, the average global fund has less than
10% of its assets invested in non-Japan Asia; the Ivy Global Fund has
approximately 37% of its holdings in non-Japan Asia. On a relative basis, as
non-Japan Asia goes, so goes the Ivy Global Fund. The Fund's 10% allocation to
Latin America also contrasts with the average global fund, which holds only 5%
of its portfolio in this region.
Many Asian markets, well below their highs of three years ago, have
significantly underperformed other areas of the world, including the United
States. Investor sentiment now is as poor as it was positive at the height of
the last bubble in 1994 making it fashionable to proclaim that the Asian miracle
is over. Our research indicates otherwise. Certainly there are problems. Slower
growth in many of the region's export markets has been a burden. Our research
concludes that this part of the world should continue to grow at double the rate
of the more mature economies. We believe this should eventually translate into
higher levels of profits and stronger relative performance for the region.
The Ivy Global Fund's 10% exposure to Latin America has partially offset
the poor performance of the Asian markets. Latin American markets are up more
than 40% on average, year-to-date. The Fund has fully participated in what has
mostly been a rally of large-capitalization stocks in the region. We still
believe reforms in Brazil and Argentina should provide many years of positive
stock market performance and that the more mature Chilean market should continue
to benefit from pragmatic policies, favorable commodity markets and a lower
interest rate environment.
Looking ahead, we believe the US market will likely go sideways for an
extended period of time as corporate earnings growth slows. This should result
from the stronger US dollar and the inability of many companies to continue to
increase earnings through aggressive cost-cutting programs. We expect economic
growth to pick up as the benefits of weaker currencies and very favorable
interest rates kick in. And just as restructuring has been an important theme in
America over the last decade, market forces are causing a similar process in
Europe.
Competitive currencies are one of the key determinants of a more
competitive Europe. Anticipating that the US dollar would strengthen relative to
the core European currencies, we made investments in US dollars to offset any
potential loss in the value of our European stocks. This strategy proved to be
successful as the US dollar rallied against most major European currencies.
We would encourage investors who recognize the importance of investing
globally to look beyond any short-term distractions and focus on what we believe
to be the positive long-term prospects for world markets.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 42
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 99.0% SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
AFRICA -- 4.1%
- ------------------------------------------
SOUTH AFRICA -- 4.1%
Anglo American Corporation of South Africa
Ltd. ADR................................ 11,400 $ 686,809
Rembrandt Group Ltd. ..................... 65,300 696,835
South African Breweries Ltd. ............. 12,072 370,634
-----------
1,754,278
-----------
ASIA/PACIFIC -- 36.5%
- ------------------------------------------
AUSTRALIA -- 0.7%
Pacific Dunlop Limited.................... 100,100 293,958
-----------
CHINA -- 1.0%
Shanghai Diesel Class B*.................. 120,000 40,800
Shenzhen Konka Electronics Group Ltd.
Class B................................. 260,000 385,606
-----------
426,406
-----------
HONG KONG -- 12.6%
Cheung Kong Holdings Ltd. ................ 99,000 977,569
Citic Pacific Ltd. ....................... 90,000 562,262
Esprit Asia Holdings Ltd. ................ 534,000 379,101
HSBC Holdings............................. 13,539 407,186
Hong Kong Telecommunications Ltd. --
Sponsored ADR........................... 11,400 266,475
Hopewell Holdings Ltd. ................... 156,833 99,194
Jardine Strategic Holdings Ltd............ 91,187 344,687
Jardine Strategic Holdings Ltd.
Warrants*............................... 4,687 1,851
Li & Fung................................. 386,000 433,468
National Mutual Asia Ltd.................. 360,000 399,624
New World Development Company Ltd. ....... 60,401 360,194
Peregrine Investment Holdings Limited..... 140,000 288,230
Peregrine Investment Holdings Limited
Warrants*............................... 14,000 6,144
Swire Pacific Ltd. ....................... 29,500 265,593
Union Bank of Hong Kong Ltd. ............. 165,333 478,034
Wharf Holdings Ltd. ...................... 16,000 69,392
-----------
5,339,004
-----------
INDIA -- 0.9%
The India Fund Incorporated*.............. 40,000 382,500
-----------
INDONESIA -- 1.3%
PT Astra International -- Foreign
Registered.............................. 77,500 320,327
PT Mulia Industrindo -- Foreign
Registered.............................. 193,200 101,308
Semen Gresik -- Foreign Registered........ 66,000 147,933
-----------
569,568
-----------
MALAYSIA -- 2.5%
Arab Malaysian Corporation*............... 59,000 219,730
Land & General Berhad..................... 103,000 118,344
London & Pacific Insurance Company
Berhad.................................. 75,600 389,381
RHB Capital Berhad........................ 60,000 190,174
Technology Resources Industries Berhad*... 83,000 142,718
-----------
1,060,347
-----------
NEW ZEALAND -- 2.8%
Brierley Investments Ltd.................. 241,800 235,980
Fletcher Challenge Building............... 21,500 64,550
Fletcher Challenge Forestry............... 10,320 14,968
Fletcher Challenge Paper.................. 43,000 104,038
Lion Nathan Ltd. ......................... 121,000 305,879
Telecom Corp. of New Zealand Ltd. ........ 42,000 213,485
Tourism Holdings Limited.................. 162,300 229,890
-----------
1,168,790
-----------
PHILIPPINES -- 2.5%
Asian Terminals, Inc. .................... 150,000 $ 27,298
Bacnotan Cement Corporation*.............. 150,000 46,633
Belle Corporation*........................ 231,000 67,436
Benpres Holdings Corporation GDR*......... 24,100 164,410
C & P Homes, Inc. ........................ 159,000 59,679
La Tondena Distillers Inc. ............... 42,000 101,115
Metro Pacific Corporation................. 609,000 131,608
Mondragon International Philippines,
Inc.*................................... 162,000 57,120
Philippine Long Distance Telephone Co. ... 2,600 84,281
Philippine National Bank*................. 15,750 106,887
SM Prime Holdings, Inc. .................. 251,000 74,227
Universal Robina Corporation.............. 360,000 131,028
-----------
1,051,722
-----------
SINGAPORE -- 4.4%
Clipsal Industries Ltd.................... 118,000 417,720
DBS Land Limited.......................... 71,000 224,443
Elec & Eltek International Co. Ltd. ...... 71,000 397,600
Fraser & Neave Ltd........................ 114,200 814,659
-----------
1,854,422
-----------
SOUTH KOREA -- 3.1%
Fidelity Advisor Korea Fund*.............. 58,000 507,500
Hyundai Motor Company Ltd. ............... 1,500 49,426
Hyundai Motor GDR......................... 5,000 50,000
Keum Kang Development Ind. Company*....... 11,600 163,288
Korea Electric Power Corporation. ........ 6,400 190,991
Korea Fund Inc. .......................... 16,000 236,000
Pohang Iron & Steel Company Ltd........... 500 50,851
Samsung Electronics Sponsored GDR*........ 241 14,279
Samsung Electronics Sponsored GDR NV...... 2,338 64,295
Samsung Electronics Sponsored GDR
Rights*................................. 39 1,223
Samsung Heavy Industries.................. 337 3,552
-----------
1,331,405
-----------
TAIWAN -- 2.6%
Acer Incorporation*....................... 50,000 179,856
Compeq Manufacturing Co. ................. 29,400 209,395
Far Eastern Department Stores Ltd. ....... 117,000 186,021
President Enterprises*.................... 100,000 197,841
Systex Corporation*....................... 66,500 147,113
Systex Corporation Rights*................ 15,176 14,466
Yung Shin Pharmaceuticals Industries
Co. .................................... 59,000 166,601
-----------
1,101,293
-----------
THAILAND -- 2.1%
Bank Of Ayudhya Public Company Limited.... 123,750 193,471
Krung Thai Bank Public Company Limited.... 90,000 93,804
Robinson Department Store Public Company
Limited -- Foreign Registered........... 377,000 138,255
Siam Cement Public Co. Ltd. (The)......... 7,600 131,434
Siam Makro Public Company Limited --
Foreign Registered...................... 41,800 112,951
Thai Airways Int'l. Public Co., Ltd. --
Foreign Registered...................... 115,000 137,618
Thai Telephone & Communication Public Co.
Ltd. -- Foreign Registered.............. 207,000 85,901
-----------
893,434
-----------
EUROPE -- 37.3%
- ------------------------------------------
AUSTRIA -- 1.5%
Creditanstalt-Bankverein.................. 5,600 225,169
Julius Meinl International AG............. 5,000 154,963
OMV AG.................................... 2,000 256,243
-----------
636,375
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 43
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
FINLAND -- 1.6%
Enso OY -- R Shares....................... 30,000 $ 277,229
Rauma OY.................................. 290 6,644
Scandinavian Broadcast System S.A.*....... 7,000 155,750
UPM -- Kymmene Corp. ..................... 10,420 240,728
-----------
680,351
-----------
FRANCE -- 9.1%
Banque Nationale De Paris................. 13,775 568,275
Compagnie Financiere de Paribas........... 7,189 497,150
Elf Gabon................................. 650 154,337
Galeries Lafayette*....................... 720 298,746
Groupe Danone............................. 1,700 281,165
Pernod-Ricard............................. 4,000 206,441
Schneider S.A............................. 8,704 463,744
Scor...................................... 7,800 314,342
Societe Generale.......................... 6,519 728,413
Suez Lyonnaise des Eaux................... 3,554 358,370
-----------
3,870,983
-----------
GERMANY -- 0.9%
Volkswagen AG............................. 500 379,333
-----------
IRELAND -- 0.9%
Bank of Ireland........................... 36,000 396,336
-----------
ITALY -- 2.8%
Banca Commerciale Italiana................ 87,800 181,637
Banca Popolare di Brescia................. 73,250 370,232
Banca Popolare di Milano.................. 32,000 191,549
Fiat S.p.A.*.............................. 121,000 435,216
-----------
1,178,634
-----------
NETHERLANDS -- 2.6%
Akzo Nobel NV............................. 1,100 151,022
Akzo Nobel NV Sponsored ADR............... 900 62,213
Fortis Amev NV............................ 5,300 236,419
Hunter Douglas NV......................... 2,400 204,561
ING Groep NV.............................. 7,422 342,818
Nedlloyd Groep NV......................... 3,300 95,497
-----------
1,092,530
-----------
NORWAY -- 0.9%
Norsk Hydro Sponsored ADR................. 3,900 211,331
Storebrand ASA*........................... 31,700 189,227
-----------
400,558
-----------
PORTUGAL -- 2.9%
Colep -- Cia. Portuguesa de Embalagens*... 8,700 139,812
Lusomundo-SGPS S.A........................ 9,400 85,022
Lusomundo-SGPS S.A. Preferred Shares...... 13,000 108,709
Portugal Telecom S.A. ADR................. 12,877 516,690
Sonae Industria E Investimentos........... 9,100 380,948
-----------
1,231,181
-----------
SPAIN -- 2.1%
Telefonica de Espana S.A. ADR............. 10,300 888,375
-----------
SWEDEN -- 5.1%
AssiDoman AB.............................. 6,600 187,782
Astra AB "B" Shares....................... 17,066 303,474
Electrolux AB............................. 5,600 404,119
Granges AB................................ 2,800 37,660
S.K.F. AB Series "B"...................... 12,400 320,729
Sandvik AB -- "B" Shares.................. 13,500 383,226
Stora Kopparbergs Bergslags Aktiebolag
(STORA)................................. 11,600 187,523
Trelleborg AB "B" Free Shares............. 21,700 356,410
-----------
2,180,923
-----------
SWITZERLAND -- 3.2%
Georg Fischer AG Bearer................... 50 $ 69,623
Holderbank Financiere Glaris AG........... 290 274,315
Nestle AG Registered...................... 276 364,630
SMH AG.................................... 400 228,830
Swiss Bank Corportation Bearer............ 1,500 401,790
-----------
1,339,188
-----------
UNITED KINGDOM -- 3.7%
Bank of Scotland.......................... 40,000 255,636
Barclays PLC ADR.......................... 1,500 118,875
Cadbury Schweppes PLC ADR................. 25,000 222,808
Imperial Chemical Industries PLC --
Sponsored ADR........................... 25,000 347,631
National Westminster Bank PLC ADR......... 2,400 194,700
Rio Tinto plc Sponsored ADR............... 3,089 218,933
Safeway plc............................... 35,000 202,420
-----------
1,561,003
-----------
NORTH AMERICA -- 11.0%
- ------------------------------------------
CANADA -- 3.1%
Alcan Aluminium Ltd. ..................... 4,472 155,123
Brascan, Ltd. ............................ 9,600 237,641
Dofasco Inc. ............................. 12,000 227,464
Inco Limited.............................. 5,350 160,834
Methanex Corporation...................... 25,000 231,958
Power Financial Corp. .................... 13,000 307,671
-----------
1,320,691
-----------
UNITED STATES -- 7.9%
Air Express International Corp. .......... 6,800 270,300
Aluminum Company of America............... 2,600 195,975
American Standard Companies, Inc.*........ 5,000 223,750
Ameron International Corp. ............... 4,200 237,825
Apria Healthcare Group, Inc.*............. 13,000 230,750
Carnival Corporation...................... 7,000 288,750
Developers Diversified Realty
Corporation............................. 3,800 152,000
Ford Motor Company........................ 7,000 264,250
Homestead Village, Inc. .................. 678 12,035
Kimco Realty Corporation.................. 4,200 133,350
Phelps Dodge Corp. ....................... 2,700 230,006
Royal Caribbean Cruises Ltd............... 9,000 314,438
Security Capital Pacific Trust............ 5,400 123,525
Semi-Tech Corporation..................... 34,000 72,951
Storage USA, Inc. ........................ 3,700 141,525
Sunglass Hut International, Inc.*......... 32,000 202,000
United Dominion Realty Trust.............. 8,700 123,431
Weingarten Realty Investors............... 3,200 135,200
-----------
3,352,061
-----------
LATIN AMERICA -- 10.1%
- ------------------------------------------
ARGENTINA -- 1.9%
CIADEA S.A.*.............................. 47,000 202,124
Perez Companc S.A.*....................... 27,881 223,912
Telefonica De Argentina S.A. ............. 3,100 107,338
YPF S.A. Sponsored ADR.................... 9,200 282,900
-----------
816,274
-----------
BRAZIL -- 4.6%
Brasmotor S.A. ........................... 240,000 53,504
Louis Dreyfus Citrus...................... 4,300 160,767
Petroleo Brasileiro S.A. (Petrobras)...... 1,700,000 472,157
Telecomunicacoes Brasileiras S.A. ADR
(Telebras).............................. 8,300 1,259,525
-----------
1,945,953
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 44
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
CHILE -- 3.6%
Genesis Chile Fund....................... 22,028 $ 1,106,907
Santa Isabel S.A. ADR.................... 7,400 238,650
Vina Concha y Toro S.A. ADR.............. 6,000 185,625
------------
1,531,182
------------
TOTAL EQUITY SECURITIES
(Cost -- $33,768,256).................. 42,029,058
------------
BONDS -- 0.8% PRINCIPAL
- ----------------------------------------- ----------
International Knife & Saw 144A, 11.375%,
11/15/06(a) (Cost -- $300,000)......... $ 300,000 321,750
------------
TOTAL INVESTMENTS -- 99.8%
(Cost -- $34,068,256)(b)............... 42,350,808
OTHER ASSETS, LESS LIABILITIES -- 0.2%... 68,338
------------
NET ASSETS -- 100%....................... $ 42,419,146
============
</TABLE>
ADR - American Depository Receipt
GDR - Global Depository Receipt
NV - Non-voting
* Non-Income producing security.
(a) Below investment grade.
(b) Cost is approximately the same for Federal income
tax purposes.
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 11,245,307
Gross unrealized depreciation.................... (2,962,755)
------------
Net unrealized appreciation.................. $ 8,282,552
============
</TABLE>
Purchases and sales of securities other than short-term obligations
aggregated $9,062,278 and $1,303,886, respectively, for the period
ended June 30, 1997.
Forward foreign currency exchange contracts at June 30, 1997 were:
<TABLE>
<CAPTION>
FORWARD CONTRACTS PRINCIPAL VALUE OF UNREALIZED
(CURRENCY/EXPIRATION/COMMITMENT) AMOUNT OBLIGATION APPRECIATION
- ------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C>
Deutsch Marks/September 97/Call...... 200,911 US $ (199,481) $ 1,430
French Francs/September 97/Call...... 1,196,452 US (1,189,008) 7,444
French Francs/September 97/Call...... 2,623,799 US (2,562,518) 61,281
Netherland Guilders/September
97/Call............................. 250,232 US (248,331) 1,901
Swiss Francs/September 97/Call....... 332,820 US (328,252) 4,568
------------ -------
Total forward foreign currency
exchange contracts sold............. $ (4,527,590) $76,624
============ =======
</TABLE>
(See Notes to Financial Statements)
<PAGE> 45
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $34,068,256)...... $42,350,808
Cash denominated in foreign currencies (at
cost -- $69,429).......................................... 68,799
Receivables
Open forward foreign currency contracts................... 76,624
Fund shares sold.......................................... 67,592
Dividends and interest.................................... 168,573
Other assets................................................ 36,933
-----------
Total assets.............................................. 42,769,329
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 10,713
Management fee............................................ 34,581
12b-1 service and distribution fees....................... 17,647
Other payables to related parties......................... 14,769
Due to custodian............................................ 255,814
Accrued expenses............................................ 16,659
-----------
Total liabilities......................................... 350,183
-----------
NET ASSETS.................................................. $42,419,146
===========
CLASS A
Net asset value and redemption price per share
($28,312,616/1,909,953 shares outstanding)................ $ 14.82
===========
Maximum offering price per share ($14.82 X 100/94.25)*...... $ 15.72
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($13,178,291/895,381 shares outstanding)............ $ 14.72
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($928,239/64,170 shares outstanding)................ $ 14.47
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $33,056,810
Undistributed net realized gain on investments and foreign
currency transactions................................... 694,020
Undistributed net investment income....................... 313,053
Net unrealized appreciation on
Investments and foreign currency transactions........... 8,278,639
Forward foreign currency contracts...................... 76,624
-----------
NET ASSETS.................................................. $42,419,146
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 46
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $59,583 foreign taxes withheld.......... $ 642,616
Interest.................................................. 81,097
----------
723,713
----------
EXPENSES
Management fee............................................ $190,413
Transfer agent............................................ 37,065
Administrative services fee............................... 19,041
Custodian fees............................................ 25,610
Blue Sky fees............................................. 10,986
Auditing and accounting fees.............................. 9,629
Shareholder reports....................................... 2,705
Fund accounting........................................... 21,513
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 91,536
Legal..................................................... 12,837
Other..................................................... 10,033
----------
Total expenses.......................................... 434,345
----------
NET INVESTMENT INCOME....................................... 289,368
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on
Investments and foreign currency transactions........... 332,620
Forward foreign currency contracts...................... 346,938
Net unrealized appreciation during the period on
Investments and foreign currency transactions........... 3,534,864
Forward foreign currency contracts...................... 100,891
----------
Net gain on investment transactions..................... 4,315,313
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $4,604,681
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 47
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ ------------
1997* 1996
------------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 289,368 $ 127,168
Net realized gain on investments and foreign currency
transactions............................................ 679,558 1,561,256
Net unrealized appreciation during the period on
Investments and foreign currency transactions........... 3,534,864 2,597,411
Forward foreign currency contracts...................... 100,891 34,667
----------- -----------
Net increase resulting from operations................ 4,604,681 4,320,502
----------- -----------
Class A distributions
From net investment income................................ -- (138,320)
In excess of net investment income........................ -- (317,957)
From net realized gain.................................... -- (832,444)
----------- -----------
Total distributions to Class A shareholders........... -- (1,288,721)
----------- -----------
Class B distributions
In excess of net investment income........................ -- (131,831)
From net realized gain.................................... -- (310,417)
----------- -----------
Total distributions to Class B shareholders........... -- (442,248)
----------- -----------
Class C distributions
In excess of net investment income........................ -- (1,191)
From net realized gain.................................... -- (1,888)
----------- -----------
Total distributions to Class C shareholders........... -- (3,079)
----------- -----------
Fund share transactions (Note 4):
Class A................................................... 955,643 730,562
Class B................................................... 2,892,375 3,726,274
Class C................................................... 774,890 73,059
----------- -----------
Net increase resulting from Fund share transactions... 4,622,908 4,529,895
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 9,227,589 7,116,349
NET ASSETS
Beginning of period....................................... 33,191,557 26,075,208
----------- -----------
END OF PERIOD............................................. $42,419,146 $33,191,557
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 313,053 $ 23,685
=========== ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 48
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
CLASS A MONTHS ENDED FOR THE YEAR ENDED MONTHS ENDED
JUNE 30, DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
------------ -------------------- ------------ --------------------------------
1997* 1996 1995 1994 1994 1993 1992
SELECTED PER SHARE DATA ------------ ------- ------- ------------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62 $ 10.55 $ 9.40
------- ------- ------- ------- ------- ------- ------
Income (loss) from investment
operations
Net investment income.............. .12(f) .08 .09(a) --(a) --(a) .03(a) .06(a)
Net realized and unrealized gain
(loss) on investment
transactions..................... 1.53(f) 1.86 1.25 (.10) 1.79 .44 1.79
------- ------- ------- ------- ------- ------- ------
Total from investment
operations................... 1.65 1.94 1.34 (.10) 1.79 .47 1.85
------- ------- ------- ------- ------- ------- ------
Less distributions
From net investment income......... -- .08 .04 -- .01 .03 .06
In excess of net investment
income........................... -- .18 -- -- -- -- --
From net realized gain............. -- .48 .49 .09 .88 .37 .62
In excess of net realized gain..... -- -- .07 -- -- -- --
From capital paid-in............... -- -- -- .10 -- -- .02
------- ------- ------- ------- ------- ------- ------
Total distributions............ -- .74 .60 .19 .89 .40 .70
------- ------- ------- ------- ------- ------- ------
Net asset value, end of period...... $ 14.82 $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62 $10.55
======= ======= ======= ======= ======= ======= ======
Total return(%)..................... 12.53(c) 16.21(b) 12.08(b) (1.00)(c) 16.71(b) 4.54(b) 19.91(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (in
thousands)......................... $28,313 $24,152 $21,264 $19,327 $17,393 $12,391 $8,780
Ratio of expenses to average net
assets
With expense reimbursement(%)...... -- -- 2.20 2.20(d) 2.20 1.95 2.02
Without expense reimbursement(%)... 2.05(d) 2.18 2.46 2.34(d) 2.42 2.76 2.97
Ratio of net investment income
(loss) to average net assets(%).... 1.75(d) .58 .71(a) (.06)(a)(d) .01(a) .38(a) .82(a)
Portfolio turnover rate(%).......... 4 43 53 12 85 67 59
Average commission rate(e).......... $ .0107 $ .0181 N/A N/A N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 49
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE SIX APRIL 1, 1994
CLASS B MONTHS ENDED ENDED MONTHS ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
---------------- ------------------ ------------ --------------
1997* 1996 1995 1994 1994
SELECTED PER SHARE DATA ---------------- ------ ------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 13.12 $11.97 $11.23 $11.52 $12.12
------- ------ ------ ------ ------
Income (loss) from investment operations
Net investment income (loss)................... .07(f) (.02) --(a) (.03)(a) (.01)(a)
Net realized and unrealized gain (loss) on
investment transactions...................... 1.53(f) 1.85 1.25 (.12) (.04)
------- ------ ------ ------ ------
Total from investment operations........... 1.60 1.83 1.25 (.15) (.05)
------- ------ ------ ------ ------
Less distributions
In excess of net investment income............. -- .20 -- -- --
From net realized gain......................... -- .48 .45 .08 .55
In excess of net realized gain................. -- -- .06 -- --
From capital paid-in........................... -- -- -- .06 --
------- ------ ------ ------ ------
Total distributions........................ -- .68 .51 .14 .55
------- ------ ------ ------ ------
Net asset value, end of period.................. $ 14.72 $13.12 $11.97 $11.23 $11.52
======= ====== ====== ====== ======
Total return(%)................................. 12.20(c) 15.30(b) 11.25(b) (1.37)(c) .38(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........ $13,178 $8,968 $4,811 $2,956 $ 376
Ratio of expenses to average net assets
With expense reimbursement(%).................. -- -- 2.95 2.95(d) 2.95(d)
Without expense reimbursement(%)............... 2.80(d) 2.94 3.21 3.09(d) 3.17(d)
Ratio of net investment income (loss) to average
net assets(%).................................. 1.00(d) (.17) (.04)(a) (.81)(a)(d) (.74)(a)(d)
Portfolio turnover rate(%)...................... 4 43 53 12 85
Average commission rate(e)...................... $ .0107 $.0181 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 50
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C FOR THE SIX MONTHS (COMMENCEMENT)
ENDED JUNE 30, TO DECEMBER 31,
------------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $12.94 $13.31
------ ------
Income from investment operations
Net investment income (loss).............................. .07(f) (.01)
Net realized and unrealized gain on investment
transactions............................................ 1.46(f) .42
------ ------
Total from investment operations........................ 1.53 .41
------ ------
Less distributions
In excess of net investment income........................ -- .30
From net realized gain.................................... -- .48
------ ------
Total distributions..................................... -- .78
------ ------
Net asset value, end of period.............................. $14.47 $12.94
====== ======
Total return(%)(c).......................................... 11.82 3.07
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 928 $ 71
Ratio of expenses to average net assets
Without expense reimbursement (%)(d)...................... 2.76 3.77
Ratio of net investment income (loss) to average net
assets(%)(d).............................................. 1.03 (1.01)
Portfolio turnover rate(%).................................. 4 43
Average commission rate(e).................................. $.0107 $.0181
</TABLE>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(f) Based on average shares outstanding.
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Global Fund (the Fund), is a diversified series of shares of Ivy Fund.
The shares of beneficial interest are assigned no par value and an unlimited
number of shares of Class A, Class B and Class C are authorized. Ivy Fund was
organized as a Massachusetts business trust under a Declaration of Trust dated
December 21, 1983 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY CONTRACTS -- Forward foreign currency 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.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
on the Fund's first $500 million of average net assets, and .75% of the Fund's
average net assets in excess of $500 million.
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.95% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $8,861.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of
$32,960, $55,104 and $3,472, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $25,756, $10,741 and $568, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 527,448 $ 7,291,555 486,908 $ 6,383,105
Issued on reinvestment of
distributions................ -- -- 96,662 1,267,635
Repurchased................... (452,044) (6,335,912) (525,829) (6,920,178)
-------- ----------- -------- -----------
Net increase.................. 75,404 $ 955,643 57,741 $ 730,562
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 285,611 $ 3,910,709 350,672 $ 4,642,668
Issued on reinvestment of
distributions................ -- -- 29,736 390,147
Repurchased................... (73,628) (1,018,334) (99,033) (1,306,541)
-------- ----------- -------- -----------
Net increase.................. 211,983 $ 2,892,375 281,375 $ 3,726,274
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
---------------------- ----------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 67,579 $ 893,243 5,866 $ 78,416
Issued on reinvestment of
distributions................ -- -- 219 2,832
Repurchased................... (8,894) (118,353) (600) (8,189)
-------- ----------- -------- -----------
Net increase.................. 58,685 $ 774,890 5,485 $ 73,059
======== =========== ======== ===========
</TABLE>
<PAGE> 53
June 30, 1997
IVY FUNDS(R)
Ivy
Global
Natural
Resources
Fund
- -----------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
MARKET COMMENTARY:
We would like to take this opportunity to welcome you as a shareholder of
the Ivy Global Natural Resources Fund. There are many potential benefits to
investing in natural resources including additional portfolio diversification
and a possible hedge against inflation.
The primary strategy of the Fund is to emphasize well-managed companies
involved in the successful exploration and development of natural resources.
This may mean taking advantage of changes in commodity prices and being
prepared to be a contrarian by emphasizing sectors that have been out of favor
but offer what we believe to be significant recovery potential over a one-to
three-year period.
The Fund provides four levels of diversification to help offset some of
the volatility inherent in investing in natural resources. These are:
diversification by commodity, country, capitalization (approximately 50% of the
Ivy Global Natural Resources Fund is invested in world-class senior companies
with the other 50% invested in small-to intermediate-sized companies that offer
the potential for higher opportunities), and security.
We believe the resource sector that is the most controversial, yet has
perhaps the greatest opportunity, is precious metals. According to our
research, the supply/demand fundamentals for precious metals are very positive.
The one exception is central bank activities (as discussed below), Platinum and
palladium advanced to multi-year highs and silver inventories are depleting
rapidly. We continue to prefer silver to gold.
European central banks, in pursuit of European Monetary Union compliance,
have been selling gold reserves. Australia, for example, recently sold most
of its reserves. The steady decline in gold prices resulting from central bank
selling, as well as forward producer selling and outright speculative short
selling, has led to a sale on gold shares. Until the downtrend is arrested,
the negative sentiment could cause share prices to drift still lower. We
believe, however, that we are in the later stages of the decline and reserves
are at the low end of past ranges. We expect to see mergers and takeovers
confirm these values. And while there are no guarantees, according to our
research, within one to three years after multi-year lows, gold stocks should
outperform significantly. The early stages of recovery usually favor the
strongest, world-class companies with low-cost assets, good balance sheets and
superior management.
According to our research, commodity prices continue to lag world growth
but strong demand and declining inventory levels suggest firming prices and
better profitability over the next year, which would support a catch-up rally
in resources.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 54
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 97.0% SHARES VALUE
<S> <C> <C>
- ------------------------------------------
AGRICULTURE -- 1.4%
Agrium, Inc............................... 5,000 $ 57,265
IBP, Inc.................................. 2,000 46,500
----------
103,765
----------
DIAMONDS -- 6.4%
Aber Resources, Ltd.*..................... 12,500 174,875
Rex Diamond Mining Co.*................... 50,000 83,360
SouthernEra Resources Ltd.*............... 40,000 226,159
----------
484,394
----------
ENERGY SERVICES -- 13.1%
ENSCO International Inc.*................. 1,000 52,750
Input/Output, Inc......................... 5,000 90,625
NQL Drilling Tools, Inc. -- Class A*...... 52,000 263,853
Noble Drilling Corporation*............... 15,000 338,438
Vaal Reefs Exploration & Mining Co. Ltd... 50,000 240,625
----------
986,291
----------
GAS PRODUCERS -- 8.3%
Barrington Petroleum Ltd.*................ 30,000 119,604
Blue Range Resource Corp.*................ 10,000 62,339
Canadian Conquest Exploration Co Ltd.*.... 75,000 73,937
Elk Point Resources, Inc.*................ 20,000 126,127
Paragon Petroleum Corp.*.................. 60,000 173,969
Penn West Petroleum Ltd.*................. 5,000 63,970
----------
619,946
----------
INDUSTRIAL -- 6.1%
Cameco Corporation........................ 5,000 187,560
International Uranium Corp................ 200,000 188,466
Romarco Minerals, Inc.*................... 30,000 82,635
----------
458,661
----------
INTERMEDIATE MINERAL
PRODUCERS/EXPLORERS -- 13.0%
Geomaque Explorations Ltd.*............... 50,000 115,979
Meridian Gold Inc......................... 75,000 203,870
Metallica Resources, Inc.*................ 20,000 44,217
Orvana Minerals Corporation*.............. 75,000 312,600
Prime Resources Group, Inc................ 10,000 72,487
Vengold Inc.*............................. 100,000 137,725
William Resources, Inc.*.................. 60,000 93,508
----------
980,386
----------
METALS & MINERALS -- 9.5%
Alumax, Inc.*............................. 1,500 56,906
Aluminum Company of America............... 2,000 150,750
Breakwater Resources, Ltd.*............... 25,000 86,984
Freeport-McMoRan Copper & Gold, Inc....... 7,500 219,375
Inco Ltd.................................. 1,000 29,901
Teck Corp. Class A........................ 8,500 166,358
----------
710,274
----------
OIL PRODUCERS -- 17.8%
Beau Canada Exploration Ltd.*............. 75,000 168,532
Canadian Occidental Petroleum............. 5,000 112,355
Dorset Exploration Ltd.*.................. 15,000 76,111
Hurricane Hydrocarbons Ltd. Series 1*..... 60,000 217,461(a)
Merchantile International Petroleum
Inc.*................................... 100,000 110,000
Nuevo Energy Company*..................... 3,000 123,000
Pacalta Resources Ltd.*................... 20,000 242,831
TransGlobe Energy Corp.*.................. 55,000 92,813
Vermilion Resources Ltd.*................. 40,000 195,715
----------
1,338,818
----------
PAPER & FOREST PRODUCTS -- 5.6%
Alliance Forest Products, Inc.*........... 3,000 73,284
Aracruz Celulose S.A.- Sponsored ADR...... 7,500 152,813
Donohue, Inc. Class A..................... 3,000 65,238
Perkins Papers Ltd........................ 10,000 49,654
Re-Con Building Products Inc.*............ 2,000 2,841
Sino-Forest Corp. Class A................. 60,000 76,111
----------
419,941
----------
SENIOR GOLD MINING -- 15.8%
Ashanti Goldfields Company Ltd............ 20,000 233,750
Barrick Gold Corporation.................. 2,000 43,565
Battle Mountain Gold Company.............. 50,000 284,375
Newmont Mining Corp....................... 7,500 292,500
Normandy Mining Ltd....................... 300,000 334,867
----------
1,189,057
----------
TOTAL EQUITY SECURITIES
(Cost -- $7,248,001).................... 7,291,533
----------
SHORT-TERM OBLIGATIONS -- 5.2% PRINCIPAL
- ------------------------------------------ --------
U.S. Treasury Bill, 5.13%, 07/03/97....... $ 25,000 24,993
U.S. Treasury Bill, 5.135%, 07/03/97...... 30,000 29,991
U.S. Treasury Bill, 5.12%, 07/10/97....... 20,000 19,974
U.S. Treasury Bill, 5.145%, 07/10/97...... 20,000 19,974
U.S. Treasury Bill, 5.05%, 07/24/97....... 25,000 24,919
U.S. Treasury Bill, 5.08%, 07/24/97....... 55,000 54,822
U.S. Treasury Bill, 4.92%, 07/31/97....... 40,000 39,836
U.S. Treasury Bill, 4.95%, 08/21/97....... 15,000 14,895
U.S. Treasury Bill, 4.98%, 08/21/97....... 50,000 49,647
U.S. Treasury Bill, 4.80%, 08/28/97....... 25,000 24,807
U.S. Treasury Bill, 4.94%, 08/28/97....... 25,000 24,801
U.S. Treasury Bill, 4.915%, 09/04/97...... 30,000 29,734
U.S. Treasury Bill, 4.925%, 09/04/97...... 15,000 14,867
U.S. Treasury Bill, 4.90%, 09/11/97....... 15,000 14,853
U.S. Treasury Bill, 4.92%, 09/18/97....... 5,000 4,946
----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost -- $393,059)...................... 393,059
----------
TOTAL INVESTMENTS -- 102.2%
(Cost -- $7,641,060)(b)................. 7,684,592
OTHER ASSETS, LESS
LIABILITIES -- (2.2%)................... (166,959)
----------
NET ASSETS -- 100%........................ $7,517,633
==========
ADR - American Depository Receipt
* Non-income producing security.
(a) Security valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
this security at June 30, 1997 aggregated
$234,736. See Note 1 of the Notes to the
Financial Statements.
(b) Cost is the same for Federal income tax
purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation................... $ 526,025
Gross unrealized depreciation................... (482,493)
----------
Net unrealized appreciation................. $ 43,532
==========
Purchases and sales of investments (excluding short-term
obligations) aggregated $9,868,754 and $2,842,484, respectively,
for the period ended June 30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 55
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $7,641,060)....... $7,684,592
Receivables
Investments sold.......................................... 357,946
Fund shares sold.......................................... 8,000
Dividends and interest.................................... 959
Manager for expense reimbursement......................... 7,585
Deferred organization expenses.............................. 43,611
Other assets................................................ 2,041
----------
Total assets.............................................. 8,104,734
----------
LIABILITIES
Payables
Investments purchased..................................... 208,516
Management and advisory fees.............................. 6,273
12b-1 service and distribution fees....................... 3,291
Other payables to related parties......................... 3,045
Due to custodian............................................ 356,145
Accrued expenses............................................ 9,831
----------
Total liabilities......................................... 587,101
----------
Net assets.................................................. $7,517,633
==========
CLASS A
Net asset value and redemption price per share
($4,930,634/423,184 shares outstanding)................... $ 11.65
==========
Maximum offering price per share ($11.65 X 100/94.25)*...... $ 12.36
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($2,483,503/213,774 shares outstanding)............. $ 11.62
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($103,496/8,910 shares outstanding)................. $ 11.62
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $7,273,794
Undistributed net realized gain on investments and foreign
currency transactions................................... 229,619
Undistributed net investment loss......................... (27,195)
Net unrealized appreciation on investments and foreign
currency transactions................................... 41,415
----------
NET ASSETS.................................................. $7,517,633
==========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 56
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $492 foreign taxes withheld............. $ 7,165
Interest.................................................. 13,414
--------
20,579
--------
EXPENSES
Management fee............................................ $10,964
Advisory fee.............................................. 10,964
Transfer agent............................................ 2,896
Administrative services fee............................... 2,193
Custodian fees............................................ 10,824
Blue Sky fees............................................. 1,021
Auditing and accounting fees.............................. 1,553
Shareholder reports....................................... 85
Amortization of organization expenses..................... 2,719
Fund accounting........................................... 8,313
Trustees' fees............................................ 435
12b-1 service and distribution fees....................... 10,536
Legal..................................................... 8,867
Other..................................................... 1,100
--------
72,470
Expenses reimbursed by manager............................ (24,696)
--------
Net expenses............................................ 47,774
--------
NET INVESTMENT LOSS......................................... (27,195)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 229,619
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 41,415
--------
Net gain on investment transactions..................... 271,034
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $243,839
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 57
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (27,195)
Net realized gain on investments and foreign currency
transactions............................................ 229,619
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 41,415
----------
Net increase resulting from operations................ 243,839
----------
Fund share transactions (Note 4)
Class A................................................. 4,692,675
Class B................................................. 2,475,270
Class C................................................. 105,849
----------
Net increase resulting from Fund share transactions... 7,273,794
----------
TOTAL INCREASE IN NET ASSETS................................ $7,517,633
==========
UNDISTRIBUTED NET INVESTMENT LOSS........................... $ (27,195)
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 58
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1997*
---------------------------
CLASS A CLASS B CLASS B
SELECTED PER SHARE DATA** ------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.00 $10.00 $10.00
------ ------ ------
Income from investment operations
Net investment loss(a).................................... (.15) (.27) (.31)
Net realized and unrealized gain on investment
transactions............................................ 1.80 1.89 1.93
------ ------ ------
Total from investment operations........................ 1.65 1.62 1.62
------ ------ ------
Net asset value, end of period.............................. $11.65 $11.62 $11.62
====== ====== ======
Total return(%)(b).......................................... 16.50 16.20 16.20
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $4,931 $2,484 $ 103
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 1.93 2.67 2.88
Without expense reimbursement(%)(c)....................... 3.04 3.78 3.99
Ratio of net investment loss to average net
assets(%)(a)(c)........................................... (1.00) (1.74) (1.95)
Portfolio turnover rate(%).................................. 66 66 66
Average commission rate(d).................................. $.0188 $.0188 $.0188
(a) Net investment loss is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Annualized.
(d) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
* Unaudited.
** Based on average shares outstanding.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Global Natural Resources Fund (the Fund), is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B and Class C are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board. As of June 30, 1997, securities valued in good faith by the Valuation
Committee of the Board amounted to $217,461 (2.89% of net assets) and have been
noted as such in the investment portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI), a wholly owned subsidiary of Mackenzie
Investment Management Inc. (MIMI), is the Manager of the Fund. For its services,
IMI receives a management fee monthly at the annual rate of .50% of the Fund's
average net assets.
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Mackenzie Financial Corporation (MFC) in Toronto, Ontario, Canada is the
Investment Adviser of the Fund. For its services, MFC receives a fee monthly at
the annual rate of .50% of the Fund's average net assets. The fee is collected
from the Fund and remitted to MFC by MIMI, a subsidiary of MFC.
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 the Fund's average net assets. The voluntary expense limitation may be
terminated or revised at any time.
MIMI also provides certain administrative, accounting and pricing services
for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $4,007.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of
$3,797, $6,435 and $304, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $1,922, $849 and $125, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions from January 1, 1997 (Commencement) to June 30,
1997, for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
------- ------- ----------
<S> <C> <C>
Sold................................................... 432,305 $4,800,095
Repurchased............................................ (9,121) (107,420)
------- ----------
Net increase........................................... 423,184 $4,692,675
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
------- ------- ----------
<S> <C> <C>
Sold................................................... 222,558 $2,577,574
Repurchased............................................ (8,784) (102,304)
------- ----------
Net increase........................................... 213,774 $2,475,270
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES AMOUNT
------- ------- ----------
<S> <C> <C>
Sold................................................... 12,805 $ 148,611
Repurchased............................................ (3,895) (42,762)
------- ----------
Net increase........................................... 8,910 $ 105,849
======= ==========
</TABLE>
<PAGE> 61
June 30, 1997
IVY FUNDS(R)
Ivy
Global
Science &
Technology
Fund
- -------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
Technology stocks, much like the broader universe of equities, experienced
a two-tier market during the first half of 1997. Most large-capitalization
stocks did well throughout the period, while investors shunned the smaller,
high-growth stocks through the first quarter and into late April. After finally
bottoming out, however, these smaller stocks, which comprise a major portion of
the Ivy Global Science & Technology Fund, staged a powerful rally that continued
through the end of the first half of the year.
Pundits pointed to a number of factors to explain why smaller growth stocks
lagged the broader market early in the year. At the top of most lists was the
popularity of indexing, a phenomenon with the characteristics of a
self-fulfilling prophecy that has provided abundant buying power for the
largest-capitalization stocks, and created valuations that seem high by the
standards of recent years. We believe another factor was the upward trend of
interest rates, which finally peaked in April. According to our research,
technology stocks were also affected by product transition issues, particularly
in the networking area. For several years, this industry, led by stalwarts
Cisco and 3Com, had delivered very high growth, with earnings comfortably
surpassing estimates quarter after quarter -- until this year. Estimate cuts in
this sector had a negative effect on investor psychology that spread to other
sectors of the technology market.
For all these reasons, by late April negative investor sentiment pervaded the
technology sector as relative valuations sank to the low end of their
historical range. This set the stage for the ensuing rally, which was triggered
by evidence suggesting that in spite of very strong economic growth, there was
little threat of inflation, and the Federal Reserve might not have to raise
interest rates after all. We believe another positive influence on the
technology sector was the balanced budget agreement, which would almost
certainly include a capital gains reduction. Such change would be positive for
all stocks but particularly for non-dividend-paying growth stocks.
In terms of fundamentals, most of the stocks that comprise the Ivy Global
Science & Technology Fund have continued to make excellent progress. As always,
there have been a few stumbles, but the vast majority of the Fund's holdings
have either met or exceeded earnings expectations. We regard the slowdown in
the networking sector as primarily a product transition issue. It is important
to remember that technology represents a huge economic sector that comprises
thousands of companies operating in many different market spaces. It is likely
that some will always be experiencing product transitions, with their growth
slowing or accelerating accordingly. In spite of these inevitable transitions,
we expect technology to remain a major driver of global economic growth and a
very fertile area for investment.
Investors continue to pay a big premium for the liquidity of large-company
stocks and a very modest premium for the high-growth potential of the
technology sector. While there are no guarantees, this valuation disparity,
combined with the strong fundamental outlook for portfolio companies of the Ivy
Global Science & Technology Fund, encourages us to believe the catch-up phase
has a lot further to go.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 62
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 96.8% SHARES VALUE
<S> <C> <C>
- ---------------------------------------------
BIOTECHNOLOGY -- 4.9%
Aastrom Biosciences, Inc.*................... 11,300 $ 80,512
Agouron Pharmaceuticals, Inc.*............... 1,200 97,050
Alkermes, Inc.*.............................. 4,600 66,700
Biochem Pharma, Inc.*........................ 5,500 122,375
Ergo Science Corporation*.................... 9,700 106,700
Geltex Pharmaceuticals, Inc.*................ 4,400 88,550
Liposome Company Inc.*....................... 7,200 64,350
Myriad Genetics, Inc.*....................... 2,000 54,000
Neurex Corporation*.......................... 7,500 105,938
PathoGenesis Corp.*.......................... 3,800 110,675
Pharmacyclics, Inc.*......................... 5,400 83,700
US Bioscience, Inc.*......................... 3,500 33,687
Vertex Pharmaceuticals Inc.*................. 1,400 53,550
ViroPharma Inc.*............................. 4,500 80,438
-----------
1,148,225
-----------
BUSINESS & FINANCIAL SERVICES -- 23.6%
Applied Graphics Technologies, Inc.*......... 5,400 214,650
BISYS Group, Inc............................. 3,000 125,250
CBT Group PLC ADR*........................... 5,800 366,125
CHS Electronics, Inc.*....................... 6,900 182,850
Claremont Technology Group, Inc.*............ 5,300 125,875
CompUSA, Inc.*............................... 5,200 111,800
Cotelligent Group, Inc.*..................... 5,500 75,625
CUC International, Inc.*..................... 7,300 188,431
Daisytek International Corporation*.......... 5,900 233,788
FactSet Research Systems Inc.*............... 9,600 235,200
Fair Issac and Company Inc. ................. 3,400 151,513
First Data Corp.............................. 8,500 373,469
Forrester Research, Inc.*.................... 3,800 111,863
Gartner Group, Inc. -- Class A*.............. 7,600 273,125
Ingram Micro Inc. -- Class A*................ 12,100 291,913
Intelligroup, Inc.*.......................... 8,400 80,850
LHS Group, Inc.*............................. 6,000 262,875
Lason Holdings, Inc.*........................ 4,600 129,375
Meta Group, Inc.*............................ 5,300 115,275
New Era of Networks, Inc.*................... 15,400 254,100
PMT Services, Inc.*.......................... 12,500 190,625
Profit Recovery Group International, Inc.
(The)*..................................... 10,200 141,525
QuickResponse Services Inc.*................. 6,800 246,500
RWD Technologies, Inc.*...................... 11,000 189,750
Renaissance Solutions, Inc.*................. 4,200 155,400
Superior Consultant Holdings Corporation*.... 4,100 151,187
Sykes Enterprises, Inc.*(a).................. 8,400 218,400
Whittman-Hart, Inc.*......................... 10,000 281,250
-----------
5,478,589
-----------
COMPUTER SOFTWARE -- 22.8%
Aspect Development, Inc.*.................... 5,300 138,131
Baan Company NV*(a).......................... 2,500 172,188
Carnegie Group, Inc.*........................ 2,300 17,250
Checkfee Corporation*........................ 7,600 133,950
Citrix Systems, Inc.*........................ 4,500 197,437
DataWorks Corporation*....................... 9,000 196,875
Deltek Systems, Inc.*........................ 22,500 382,500
Dendrite International, Inc.*................ 5,600 92,400
Forte Software, Inc.*........................ 4,100 55,094
Great Plains Software, Inc.*................. 900 24,300
H.T.E., Inc.*................................ 12,300 132,225
HNC Software Inc. ........................... 4,900 186,812
Infinity Financial Technology, Inc.*......... 7,900 128,869
Interlink Computer Sciences, Inc.*........... 11,800 89,975
IONA Technologies PLC -- ADR................. 7,900 156,025
JDA Software Group, Inc.*.................... 4,500 153,562
McAfee Associates, Inc.*..................... 2,300 145,188
Memco Software Ltd.*......................... 10,000 182,500
Microsoft Corporation*....................... 1,600 202,200
Optika Imaging Systems, Inc.*................ 20,800 104,000
Oracle Corporation*.......................... 4,800 $ 241,800
Pegasystems Inc. ............................ 5,800 181,975
Peoplesoft, Inc.*............................ 2,500 131,875
Planning Sciences International PLC*......... 7,800 44,850
Rational Software Corporation*............... 3,758 63,181
Remedy Corporation*.......................... 4,200 168,000
Rogue Wave Software*......................... 11,400 142,500
SPSS, Inc.*.................................. 3,300 95,700
Saville Systems Ireland ADR*................. 2,200 114,400
Security Dynamics Technologies, Inc.*........ 4,600 169,625
Select Software Tools ADR*................... 5,700 75,525
Siebel Systems, Inc.*........................ 5,300 170,925
Systemsoft Corporation*...................... 9,300 99,975
Tecnomatix Technologies Ltd. ................ 4,000 130,000
Template Software, Inc.*..................... 9,000 130,500
Transactions Systems Architects, Inc.*....... 2,800 96,600
Veritas Software Corp.*...................... 2,700 135,675
Viasoft, Inc.*............................... 2,000 101,500
Visio Corporation*........................... 1,800 126,900
-----------
5,312,987
-----------
HEALTHCARE -- 7.0%
Cambridge Heart Inc. ........................ 3,000 21,375
Cerus Corporation*........................... 2,300 21,275
Cytec Corporation*........................... 3,400 92,225
Endovascular Technologies, Inc.*............. 6,800 62,900
EPIX Medical, Inc.*.......................... 10,000 80,000
HBO & Company................................ 5,010 345,064
Heartport, Inc.*............................. 3,900 68,737
HemaSure, Inc.*.............................. 8,300 22,825
Intelligent Medical Imaging, Inc.*........... 9,000 59,625
MedQuist Inc.*............................... 2,800 85,050
Molecular Devices Corporation*............... 500 8,750
Serologicals Corporation*.................... 2,250 51,750
Sunquest Information Systems, Inc.*.......... 10,600 159,000
Ventana Medical Systems, Inc.*............... 8,000 99,000
VidaMed, Inc.*............................... 10,200 51,638
Vivus, Inc.*................................. 15,600 371,475
-----------
1,600,689
-----------
MISCELLANEOUS TECHNOLOGY -- 10.8%
Biacore International AB Sponsored ADR*(a)... 10,000 118,750
Discreet Logic, Inc.*........................ 15,500 255,750
Electronics for Imaging, Inc.*............... 4,300 203,175
Encad, Inc.*................................. 2,200 91,300
Gemstar International Group Ltd.*............ 11,300 207,637
IKOS Systems, Inc.*.......................... 5,700 121,838
ONTRACK Data International, Inc.*............ 11,300 259,900
Periphonics Corp.*........................... 7,600 163,400
QIAGEN NV.................................... 1,600 77,100
RadiSys Corporation*......................... 5,200 206,700
SBS Technologies, Inc.*...................... 4,500 104,062
SeaChange International, Inc.*............... 6,000 169,500
Stratasys, Inc.*............................. 4,500 72,563
Synopsys, Inc.*.............................. 4,199 154,313
Technology Modeling Associates, Inc.*........ 7,400 100,825
Viisage Technology, Inc.*.................... 11,600 201,550
-----------
2,508,363
-----------
NETWORK & TELECOMMUNICATION EQUIPMENT --
11.9%
ACT Networks, Inc.*.......................... 6,300 80,325
Advanced Fibre Communications*............... 3,800 229,425
American Power Conversion Corp.*............. 10,200 193,800
Aware, Inc.*................................. 2,400 35,400
CIENA Corporation*........................... 3,300 155,512
Cisco Systems, Inc.*......................... 8,900 597,413
DSP Communications, Inc.*.................... 9,100 100,100
Gilat Satellite Networks Ltd. ............... 5,000 166,250
Harmonic Lightwaves, Inc.*................... 5,500 94,187
International Network Services*.............. 8,400 218,400
</TABLE>
(See Notes to Financial Statements)
<PAGE> 63
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------------
<S> <C> <C>
Network Appliance, Inc.*..................... 4,900 $ 186,200
NICE-Systems Ltd. -- Sponsored ADR........... 4,000 120,000
Orckit Communications Ltd.*.................. 6,700 97,150
P-COM, Inc................................... 3,600 118,800
Pairgain Technologies, Inc.*................. 4,700 72,850
Premisys Communications, Inc.*............... 7,000 110,250
Proxim, Inc.*................................ 4,000 97,000
Sawtek Inc.*................................. 700 23,625
Xylan Corporation*........................... 4,000 68,000
-----------
2,764,687
-----------
PHARMACEUTICALS -- 4.6%
Anesta Corp.*................................ 6,100 115,900
Calypte Biomedical Corporation*.............. 900 4,050
ChiRex Inc.*................................. 13,800 163,875
Dura Pharmaceuticals, Inc.*.................. 4,900 195,388
Kos Pharmaceuticals, Inc.*................... 3,400 94,350
Nastech Pharmaceutical Co.*.................. 5,500 57,750
Penederm Inc.*............................... 12,000 162,000
Sepracor, Inc.*.............................. 6,600 170,363
Sonus Pharmaceuticals, Inc.*................. 3,500 98,438
-----------
1,062,114
-----------
SEMICONDUCTORS & EQUIPMENT -- 8.9%
3DFX Interactive, Inc.*...................... 13,500 180,562
ASM Lithography Holding NV*(a)............... 5,400 315,900
Altera Corporation*.......................... 1,400 70,700
Analog Devices*.............................. 4,766 126,597
Benchmarq Microelectronics, Inc.*............ 5,000 86,250
Cymer, Inc.*................................. 3,800 185,250
Etec Systems, Inc.*.......................... 3,900 167,213
Intel Corp. ................................. 3,300 467,981
Maxim Integrated Products, Inc.*............. 1,800 102,375
Micrel, Inc.*................................ 2,000 102,000
NeoMagic Corp.*.............................. 2,200 49,225
Pri Automation, Inc.*........................ 2,000 75,875
Sipex Corporation*........................... 4,200 152,250
-----------
2,082,178
-----------
TELECOMMUNICATION SERVICES -- 2.3%
FaxSav Incorporated*......................... 3,700 $ 6,938
International Telecommunication Data Systems,
Inc.*...................................... 10,500 257,250
Lightbridge, Inc.*........................... 13,500 102,937
Transaction Network Services, Inc.*.......... 5,500 77,687
Western Wireless Corp.*...................... 1,900 30,162
WinStar Communications, Inc.*................ 5,300 70,887
-----------
545,861
-----------
TOTAL COMMON STOCKS
(Cost -- $19,659,949)(b)................... 22,503,693
OTHER ASSETS, LESS LIABILITIES -- 3.2%....... 742,773
-----------
NET ASSETS -- 100%........................... $23,246,466
===========
ADR - American Depository Receipt
NV - Non-voting
* Non-income producing security.
(a) Foreign security.
(b) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 4,244,848
Gross unrealized depreciation.................... (1,401,104)
-----------
Net unrealized appreciation.................. $ 2,843,744
===========
</TABLE>
Purchases and sales of securities other than short-term obligations
aggregated $1,420,780 and $699,323, respectively, for the period
ended June 30, 1997.
(See Notes to Financial Statements)
<PAGE> 64
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $19,659,949)...... $22,503,693
Cash........................................................ 733,123
Receivables
Fund shares sold.......................................... 46,788
Manager for expense reimbursement......................... 46
Deferred organization expenses.............................. 48,549
Other assets................................................ 11,241
-----------
Total assets.............................................. 23,343,440
-----------
LIABILITIES
Payables
Investments purchased..................................... 29,115
Fund shares repurchased................................... 21,557
Management fee............................................ 18,894
12b-1 service and distribution fees....................... 12,269
Other payables to related parties......................... 8,277
Accrued expenses............................................ 6,862
-----------
Total liabilities......................................... 96,974
-----------
NET ASSETS.................................................. $23,246,466
===========
CLASS A
Net asset value and redemption price per share
($11,383,371/684,133 shares outstanding).................... $ 16.64
===========
Maximum offering price per share ($16.64 x 100/94.25)*...... $ 17.66
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($6,108,005/367,778 shares outstanding)............. $ 16.61
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($5,755,090/346,001 shares outstanding)............. $ 16.63
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $21,385,300
Undistributed net realized loss on investments............ (755,208)
Undistributed net investment loss......................... (227,370)
Net unrealized appreciation on investments................ 2,843,744
-----------
NET ASSETS.................................................. $23,246,466
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 65
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 931
Interest.................................................. 9,427
----------
10,358
----------
EXPENSES
Management fee............................................ $92,633
Transfer agent............................................ 18,284
Administrative services fee............................... 9,263
Custodian fees............................................ 5,467
Blue Sky fees............................................. 6,450
Auditing and accounting fees.............................. 9,262
Shareholders reports...................................... 1,402
Amortization of organization expenses..................... 5,955
Fund accounting........................................... 17,741
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 57,089
Legal..................................................... 12,625
Other..................................................... 7,191
----------
246,339
Expenses reimbursed by manager............................ (8,611)
----------
Net expenses............................................ 237,728
----------
NET INVESTMENT LOSS......................................... (227,370)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments.......................... (742,053)
Net unrealized appreciation during the period on
investments............................................. 1,835,637
----------
Net gain on investment transactions..................... 1,093,584
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 866,214
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 22, 1996
MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ----------------
1997* 1996
------------ ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (227,370) $ (50,867)
Net realized gain (loss) on investments................... (742,053) 61,918
Net unrealized appreciation during the period on
investments............................................. 1,835,637 1,008,107
----------- -----------
Net increase resulting from operations.................. 866,214 1,019,158
----------- -----------
Distributions from net realized gain
Class A................................................... -- (17,214)
Class B................................................... -- (3,926)
Class C................................................... -- (3,066)
----------- -----------
Total distributions paid to shareholders................ -- (24,206)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... 2,658,984 7,567,192
Class B................................................... 2,474,575 3,263,292
Class C................................................... 3,391,605 2,029,658
Class I................................................... -- (6)
----------- -----------
Net increase resulting from Fund share transactions..... 8,525,164 12,860,136
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 9,391,378 13,855,088
NET ASSETS
Beginning of period....................................... 13,855,088 --
----------- -----------
END OF PERIOD............................................. $23,246,466 $13,855,088
=========== ===========
UNDISTRIBUTED NET INVESTMENT LOSS........................... $ (227,370) $ --
=========== ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 66
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------------ ------------------------------ ------------------------------
FROM FROM FROM
FOR THE SIX JULY 22, 1996 FOR THE SIX JULY 22, 1996 FOR THE SIX JULY 22, 1996
MONTHS ENDED (COMMENCEMENT) MONTHS ENDED (COMMENCEMENT) MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31, JUNE 30, TO DECEMBER 31, JUNE 30, TO DECEMBER 31,
------------ --------------- ------------ --------------- ------------ ---------------
1997* 1996 1997* 1996 1997* 1996
SELECTED PER SHARE DATA ------------ --------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 16.40 $ 10.00 $16.44 $10.00 $16.46 $10.00
------- ------- ------ ------ ------ ------
Income from investment
operations
Net investment loss(a)........ (.05)(e) (.06) (.05)(e) (.06) (.05)(e) (.05)
Net realized and unrealized
gain on investment
transactions................ .29(e) 6.49 .22(e) 6.52 .22(e) 6.53
------- ------- ------ ------ ------ ------
Total from investment
operations................ .24 6.43 .17 6.46 .17 6.48
------- ------- ------ ------ ------ ------
Less distributions
From net realized gain........ -- .03 -- .02 -- .02
------- ------- ------ ------ ------ ------
Total distributions......... -- .03 -- .02 -- .02
------- ------- ------ ------ ------ ------
Net asset value, end of
period........................ $ 16.64 $ 16.40 $16.61 $16.44 $16.63 $16.46
======= ======= ====== ====== ====== ======
Total return(%)(b)............. 1.46 64.34 1.03 64.59 1.03 64.84
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).................... $11,383 $ 8,324 $6,108 $3,425 $5,755 $2,106
Ratio of expenses to average
net assets
With expense
reimbursement(%)(c)......... 2.21 2.19 2.90 2.99 2.95 2.95
Without expense
reimbursement(%)(c)......... 2.30 2.90 2.99 3.70 3.04 3.66
Ratio of net investment loss to
average net assets(%)(a)(c)... (2.10) (2.18) (2.79) (2.98) (2.84) (2.94)
Portfolio turnover rate(%)..... 4 23 4 23 4 23
Average commission rate(d)..... $ .0595 $ .0600 $.0595 $.0600 $.0595 $.0600
</TABLE>
(a) Net investment loss is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Annualized.
(d) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(e) Based on average shares outstanding.
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Global Science & Technology Fund (the Fund), is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C and Class I are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to 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 make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Funds's average 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 an-
<PAGE> 68
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
nual rate of 1.95% of its average net assets. The voluntary expense limitation
may be terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $22,725.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net assets, excluding Class I. Class B and Class C shares are also subject to an
ongoing distribution fee at an annual rate of .75% of the average net asset
value attributable to Class B and Class C shares. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$11,848, $24,325 and $20,916, for Class A, Class B and Class C, respectively,
are reflected as 12b-1 service and distribution fees in the Statement of
Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $10,435, $3,274, $4,575 and $0, for Class A, Class B, Class C and
Class I, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class I were as
follows:
<TABLE>
<CAPTION>
JULY 22, 1996
(COMMENCEMENT)
SIX MONTHS ENDED TO DECEMBER 31,
JUNE 30, 1997 1996
---------------------- --------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................ 312,988 $ 4,719,654 513,259 $7,659,940
Issued on reinvestment of
distributions.................. -- -- 995 16,325
Repurchased..................... (136,316) (2,060,670) (6,793) (109,073)
-------- ----------- ------- ----------
Net increase.................... 176,672 $ 2,658,984 507,461 $7,567,192
======== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
JULY 22, 1996
(COMMENCEMENT)
SIX MONTHS ENDED TO DECEMBER 31,
JUNE 30, 1997 1996
---------------------- --------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................ 227,876 $ 3,518,945 228,288 $3,587,953
Issued on reinvestment of
distributions.................. -- -- 228 3,741
Repurchased..................... (68,407) (1,044,370) (20,207) (328,402)
-------- ----------- ------- ----------
Net increase.................... 159,469 $ 2,474,575 208,309 $3,263,292
======== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
JULY 22, 1996
(COMMENCEMENT)
SIX MONTHS ENDED TO DECEMBER 31,
JUNE 30, 1997 1996
---------------------- --------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................ 247,726 $ 3,831,621 128,623 $2,040,762
Issued on reinvestment of
distributions.................. -- -- 178 2,937
Repurchased..................... (29,667) (440,016) (859) (14,041)
-------- ----------- ------- ----------
Net increase.................... 218,059 $ 3,391,605 127,942 $2,029,658
======== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
JULY 22, 1996
(COMMENCEMENT)
SIX MONTHS ENDED TO DECEMBER 31,
JUNE 30, 1997 1996
---------------------- --------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................ -- $ -- 1 $ 10
Repurchased..................... -- -- (1) (16)
-------- ----------- ------- ----------
Net decrease.................... -- $ -- -- $ (6)
======== =========== ======= ==========
</TABLE>
03IVTAX063097
<PAGE> 69
June 30, 1997
IVY FUNDS(R)
Ivy
Growth
Fund
- -----------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
MARKET COMMENTARY:
As it has for several quarters, the strength of the US economy and broader
stock market -- as measured by the Standard & Poor's 500 and the Dow Jones
Industrial Average -- continue to surprise most observers. With the market
seemingly fully valued by most measures, investors are paying close attention
to corporate earnings reports and tend to quickly sell stocks of companies that
fail to meet expectations. This contributes to volatility in stock prices.
The Ivy Growth Fund continues to employ a three-pronged approach,
combining emerging growth and international stocks with a more representative
"core" portfolio of mid- and large-capitalization US stocks. By employing this
approach, the Fund gains access to a wider universe of value-priced investments
and the added benefit of geographic diversification. We believe the valuations
of emerging growth and international sectors, neither of which have kept pace
with the large-capitalization US market, are particularly compelling now, and
should offer attractive returns when the stocks of large blue-chip US companies
decelerate over time.
For the core portion of the Fund, we continue to search for opportunities
using a criterion whereby long-term earnings growth for a company is projected
to exceed the price-to-earnings ratio of the stock. With large-capitalization
stocks at historically high valuations, most recent additions to the Ivy Growth
Fund have come from the mid-capitalization universe. We do, however, continue
to find value in some large-capitalization stocks in the financial services and
healthcare sectors. Both are supported by demographic trends owing to the age
of the US population and its reliance on services, and by consolidation trends
within such industries.
In the emerging growth portion of the Fund, our stock selection continues
to emphasize dynamic companies that operate in fertile sectors of the economy
that can support high rates of growth. In terms of fundamentals, most of the
Fund's portfolio companies have either met or exceeded expectations. After
bottoming out in late April, small-company stocks staged a powerful rally that
lasted through the end of the first half of the year. Nevertheless, we believe
investors are continuing to pay a big premium for the liquidity of the
large-capitalization stocks and a very modest premium for the high-growth
potential of smaller-company stocks. According to our research, emerging growth
stocks are quite attractive at today's prices.
The non-US stocks in the Fund continue to be selected using a long-term
value approach. The largest weighting is in Europe, which has performed very
well. The Fund's holdings in Latin America, which are concentrated in
larger-capitalization stocks, were another bright spot. Asia, where investor
sentiment is low, was the poorest performing of the international regions. This
has led to some very attractive valuations. We continue to favor Hong Kong, but
are finding bargains elsewhere in the region as well.
Going forward, we believe the added diversification of the Ivy Growth Fund
should help to minimize portfolio volatility while providing excellent
long-term growth prospects.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 70
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 88.3% SHARES VALUE
<S> <C> <C>
- -----------------------------------------
BASIC INDUSTRIES -- 6.5%
AKZO Nobel NV(a)......................... 12,000 $ 1,647,509
Anglo-American Corporation of South
Africa Limited (a)..................... 6,000 361,478
AssiDoman AB(a).......................... 24,200 688,533
Companhia Vale do Rio Doce -- Sponsored
ADR.................................... 30,000 668,700
Crown Cork & Seal Company, Inc........... 46,000 2,458,125
Du Pont (E.I.) De Numours & Company...... 27,000 1,697,625
Enso OY -- R Shares(a)................... 72,000 665,350
Ferro Corporation........................ 38,000 1,408,375
Fletcher Challenge Building(a)........... 183,750 551,680
Fletcher Challenge Forests(a)............ 195,716 283,855
Fletcher Challenge Paper(a).............. 184,500 446,396
Granges AB............................... 6,250 84,062
Guangdong Tannery Ltd.(a)................ 80,000 30,979
Hanson PLC Sponsored ADR(a).............. 31,000 775,000
Harsco Corporation....................... 76,000 3,078,000
Holderbank Financiere Glaris AG(a)....... 1,520 1,437,789
Imperial Chemical Industries PLC --
Sponsored ADR (a)...................... 19,000 1,080,625
Nampak Limited(a)........................ 34,400 149,416
Semen Gresik(a).......................... 110,000 246,556
Stora Kopparbergs Bergslags
Aktiebolag(a).......................... 46,200 746,859
Trelleborg AB B Free Shares(a)........... 106,300 1,745,918
Union Carbide Corporation Holding
Company................................ 19,000 894,188
UPM-Kymmene OY(a)........................ 28,840 666,275
------------
21,813,293
------------
BUSINESS SERVICES -- 3.8%
Applied Graphics Technologies, Inc.*..... 32,000 1,272,000
Banta Corporation........................ 36,000 976,500
BISYS Group, Inc.*....................... 18,000 751,500
Children's Comprehensive Services, Inc.*. 40,000 565,000
Cohr, Inc.*.............................. 15,000 281,250
Copart, Inc.*............................ 25,000 412,500
Corrections Corporation of America*...... 36,300 1,442,925
Credit Acceptance Corp. *................ 12,200 157,075
Daisytek International Corporation*...... 25,600 1,014,400
Dendrite International, Inc.*............ 20,600 339,900
Electronic Data Systems Corp. ........... 66,000 2,706,000
Gartner Group, Inc.*..................... 38,400 1,380,000
Profit Recovery Group International,
Inc.*.................................. 39,000 541,125
QuickResponse Services, Inc.*............ 24,000 870,000
------------
12,710,175
------------
CAPITAL GOODS -- 4.0%
AGCO Corporation......................... 77,000 2,767,187
American Standard Companies, Inc.*....... 29,800 1,333,550
Caterpillar, Inc......................... 6,000 644,250
Fluor Corporation........................ 15,000 827,812
Foster Wheeler Corporation............... 46,000 1,863,000
Johnson Controls, Inc.................... 32,000 1,314,000
Kaydon Corporation....................... 27,000 1,339,875
Rauma OY (a)............................. 803 18,397
S.K.F. AB Series "B" (a)................. 32,000 827,688
Schneider, S.A. (a)...................... 24,379 1,298,899
Tecumseh Products Company................ 19,000 1,137,625
------------
13,372,283
------------
CONGLOMERATES -- 2.6%
Benpres Holdings Corp. -- Sponsored
GDR*(a)................................ 57,000 388,854
Cheung Kong(a)........................... 167,000 1,649,030
Guangdong Investments(a)................. 800,000 1,203,003
Guangdong Investments Warrants*(a)....... 160,000 75,381
Jardine Matheson Holdings Ltd.(a)........ 75,200 533,920
Jardine Strategic Holdings Ltd.(a)....... 171,562 648,504
Jardine Strategic Holdings Ltd.
Warrants(a)............................ 19,062 $ 7,529
Metro Pacific Corporation(a)............. 1,552,600 335,525
New World Development Company Ltd.(a).... 248,654 1,482,819
Pacific Dunlop Ltd.(a)................... 215,000 631,379
Swire Pacific Ltd. Class (a)............. 184,000 1,656,581
------------
8,612,525
------------
CONSUMER DURABLES -- 2.5%
Brunswick Corp........................... 38,500 1,203,125
CIADEA S.A. ADR*(a)...................... 40,150 172,666
Electrolux AB (a)........................ 12,500 902,051
Fiat Sp A*(a)............................ 265,000 953,159
PT Astra International(a)................ 142,000 586,922
Perusahaan Otomobil Nasional Berhad(a)... 78,000 364,659
Peugeot Citroen(a)....................... 6,200 599,836
Volkswagen AG(a)......................... 3,600 2,731,195
Volvo AB B Shares(a)..................... 28,000 749,575
------------
8,263,188
------------
CONSUMER NON-DURABLES -- 5.2%
Allegiance Corporation*.................. 51,900 1,414,275
Cadbury Schweppes PLC(a)................. 27,000 240,633
First Commonwealth, Inc.*................ 18,000 333,000
Grand Metropolitan PLC Sponsored ADR(a).. 27,104 1,062,138
Group Danone(a).......................... 5,500 909,651
Mattel, Inc.............................. 70,000 2,371,250
Nestle AG Registered(a).................. 1,813 2,395,197
PepsiCo, Inc............................. 51,000 1,915,687
President Enterprises*(a)................ 123,000 243,345
Rembrandt Group Limited(a)............... 21,000 224,097
South African Breweries Ltd.(a).......... 5,287 162,321
South African Breweries Ltd. Sponsored
ADR(a)................................. 5,200 159,575
Time Warner, Inc. Preferred.............. 23,000 980,375
Tsingtao Brewery Series H(a)............. 1,176,000 455,386
Tupperware Corporation................... 18,500 675,250
Unilever NV ADR(a)....................... 4,700 1,024,600
Vina Concha y Toro S.A.(a)............... 13,400 414,563
Warnaco Group, Inc. Class A.............. 69,400 2,212,125
------------
17,193,468
------------
CONSUMER SERVICES -- 9.7%
ADT Limited*............................. 48,700 1,607,100
Apollo Group, Inc. -- Class A*........... 15,500 546,375
Blyth Industries, Inc.*.................. 30,750 1,037,813
CHS Electronics, Inc.*................... 20,000 530,000
Carnival Corporation Class A............. 73,000 3,011,250
CompUSA, Inc.*........................... 27,200 584,800
Corporate Express, Inc.*................. 50,850 734,147
CUC International Inc. .................. 60,250 1,555,203
Dollar Tree Stores, Inc.*................ 10,000 503,750
Extended Stay America, Inc.*............. 54,000 806,652
Far Eastern Department Stores Ltd. ...... 150,000 238,489
Federated Department Stores, Inc.*....... 30,000 1,042,500
Galeries Lafayette *(a).................. 2,060 854,746
Genting Berhad(a)........................ 70,000 335,577
Guitar Center, Inc.*..................... 7,500 126,562
Harte-Hanks Communications............... 60,000 1,770,000
International Speedway Corp. -- Class
A*..................................... 37,000 726,125
J.C. Penney Co., Inc. ................... 38,000 1,983,125
Julius Meinl International AG (a)........ 3,900 120,871
Just for Feet, Inc.*..................... 18,500 322,594
Lowe's Companies, Inc. .................. 40,000 1,485,000
Lusomundo-SGPS S.A. Preferred Shares(a).. 26,200 219,091
Metro Networks, Inc.*.................... 18,500 448,625
Petco Animal Supplies, Inc.*............. 25,000 750,000
Pier 1 Imports, Inc. .................... 44,000 1,166,000
</TABLE>
(See Notes to Financial Statements)
<PAGE> 71
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- -----------------------------------------
Premier Parks, Inc.*..................... 22,000 $ 811,250
Robinson Department Store Public Company
Limited(a)............................. 272,100 99,786
Royal Caribbean Cruises Ltd.............. 27,300 953,794
Safeway plc (a).......................... 139,000 803,899
Santa Isabel S.A. Sponsored ADR(a)....... 8,800 283,800
Scholastic Corporation*.................. 25,000 875,000
Sears, Roebuck & Co. .................... 36,000 1,935,000
Sitel Corporation*....................... 25,000 515,625
Sun International Hotels Ltd.*........... 30,000 1,108,125
Sunglass Hut International, Inc.*........ 98,500 621,781
TRM Copy Centers Corporation*............ 62,000 658,750
Tourism Holdings Limited(a).............. 421,000 596,327
Viking Office Products, Inc.*............ 10,000 190,000
West Marine Inc.*........................ 17,500 450,625
------------
32,410,157
------------
ENERGY -- 4.9%
Dresser Industries, Inc.................. 58,000 2,160,500
Elf Aquitaine S.A.(a).................... 10,000 1,079,896
Fletcher Challenge Energy(a)............. 263,750 795,442
Helmerich & Payne, Inc. ................. 30,000 1,728,750
Noble Drilling Corporation*.............. 57,000 1,286,063
Norsk Hydro A.S. Sponsored ADR(a)........ 27,800 1,506,413
Nuevo Energy Company*.................... 33,300 1,365,300
Offshore Logistics, Inc.*................ 24,146 455,756
Parker & Parsley Petroleum Company....... 25,000 884,375
Schlumberger, Ltd. ...................... 16,000 2,000,000
Shell Transport & Trading Co.(a)......... 195,000 1,328,985
Total S.A. ADR(a)........................ 20,155 1,020,347
YPF S.A. Sponsored ADR(a)................ 22,000 676,500
------------
16,288,327
------------
FINANCIAL SERVICES -- 14.8%
A.F.P. Provida S.A. Sponsored ADR(a)..... 10,300 225,312
ABN Amro Bank(a)......................... 34,800 650,062
AMBAC, Inc............................... 27,000 2,062,125
Aegon NV................................. 13,032 913,055
Arab Malaysian Corporation Berhad(a)..... 189,000 703,882
Asia Credit Company PLC(a)............... 17,000 43,312
Australia & New Zealand Banking Group
Ltd.(a)................................ 78,000 578,489
Banco Popolare di Milano(a).............. 135,000 808,096
Bangkok Bank Public Company Limited(a)... 45,000 309,207
Bank of Ireland(a)....................... 89,175 981,760
Bank of Scotland(a)...................... 180,000 1,150,364
Bankers Trust New York Corp.*............ 10,000 870,000
Banque Nationale de Paris(a)............. 13,500 556,930
Barclays PLC(a).......................... 30,500 605,073
Compagnie Financiere de Paribas(a)....... 12,455 861,316
Credit Suisse Group...................... 6,500 835,991
Dhana Siam Finance & Securities Public
Company Limited(a)....................... 55,000 29,193
Donaldson, Lufkin & Jenrette, Inc.*...... 8,000 478,000
Exel Limited............................. 51,000 2,690,250
Federal Agricultural Mortgage Corp. Class
C*..................................... 15,000 543,750
Federal Home Loan Mortgage Corp.......... 84,000 2,887,500
Federal National Mortgage Association.... 53,000 2,312,125
First Chicago NBD Corporation............ 26,000 1,573,000
First Union Corporation.................. 18,000 1,665,000
Fortis Amev NV(a)........................ 24,500 1,092,878
Green Tree Financial Corp. .............. 17,000 605,625
HSBC Holdings plc(a)..................... 47,997 1,443,513
ING Groep NV(a).......................... 28,256 1,305,129
J.P. Morgan & Company Inc................ 12,000 1,252,500
Krung Thai Bank Public Company
Limited(a)............................. 75,000 78,170
Krung Thai Thanakit PLC(a)............... 26,000 14,804
Litchfield Financial Corp................ 31,500 $ 515,813
MedQuist, Inc.*.......................... 9,500 288,562
National Australia Bank Ltd.(a).......... 42,000 596,873
National Westminster Bank PLC(a)......... 41,500 557,728
NationsBank Corporation.................. 28,600 1,844,700
Nava Finance and Securities Public
Company Limited*(a).................... 40,000 15,441
Norwest Corporation...................... 20,800 1,170,000
PMT Services, Inc.*...................... 50,000 762,500
PennCorp Financial, Inc. ................ 39,000 1,501,500
Peregrine Investment Holdings(a)......... 828,000 1,704,675
Peregrine Investment Holdings
Warrants*(a)........................... 82,800 36,338
Providian Corporation.................... 30,000 963,750
RHB Capital Berhad(a).................... 103,000 326,465
Salomon, Inc............................. 22,000 1,223,750
Signet Banking Corporation............... 44,000 1,584,000
Societe Generale......................... 4,700 525,163
Terra Nova (Bermuda) Holdings Ltd. ...... 70,000 1,470,000
Travelers, Inc........................... 32,750 2,065,297
United Waste Systems Inc.*............... 39,000 1,599,000
Westpac Banking Corp. Ltd.(a)............ 84,000 501,537
------------
49,379,503
------------
HEALTHCARE -- 11.4%
Advanced Health Corporation*............. 6,000 110,250
Agouron Pharmaceuticals, Inc.*........... 5,000 404,375
Alkermes, Inc.*.......................... 20,000 290,000
American Medserve Corp.*................. 25,000 325,000
Apria Healthcare Group, Inc.*............ 35,000 621,250
Astra AB -- B Free Shares(a)............. 88,000 1,564,848
Biochem Pharma, Inc.*.................... 51,000 1,134,750
Boston Scientific Corporation*........... 18,000 1,105,875
CIMA Labs, Inc.*......................... 21,600 89,100
Coast Dental Services, Inc.*............. 8,000 122,000
Columbia/HCA Healthcare Corp. ........... 61,500 2,417,719
Compdent Corporation*.................... 28,000 589,750
Cytec Corporation*....................... 5,000 135,625
Depotech Corporation*.................... 12,000 163,500
Dura Pharmaceuticals, Inc.*.............. 33,600 1,339,800
Elan Corp. PLC -- Sponsored ADR*(a)...... 95,000 4,298,750
FPA Medical Management, Inc.*............ 26,000 615,875
Geltex Pharmaceuticals, Inc.*............ 24,000 483,000
Health Management Associates, Inc.*...... 32,000 912,000
Heartport, Inc.*......................... 15,000 264,375
Horizon Mental Health Management, Inc.*.. 50,500 1,136,250
Integrated Living Communities, Inc.*..... 57,000 655,500
Liposome Company, Inc.*.................. 94,000 840,125
Medpartners, Inc.*....................... 76,000 1,643,500
Merck KGaA (a)........................... 24,000 1,046,751
NABI, Inc.*.............................. 50,000 331,250
NCS HealthCare, Inc. Class A*............ 7,400 224,775
Neurex Corporation*...................... 26,000 367,250
Norland Medical Systems, Inc.*........... 15,000 163,125
OccuSystems, Inc.*....................... 19,500 565,500
Omnicare, Inc. .......................... 39,200 1,229,900
Orthodontic Centers of America, Inc.*.... 110,500 2,009,719
PathoGenesis Corp.*...................... 16,000 466,000
Pediatrix Medical Group Inc. ............ 16,800 769,650
Penederm, Inc.*.......................... 5,500 74,250
Pharmacia & Upjohn, Inc. ................ 29,000 1,007,750
Pharmacyclics, Inc.*..................... 8,000 124,000
PhyCor, Inc.*............................ 34,987 1,204,865
Renal Treatment Centers Inc.*............ 44,000 1,182,500
Sepracor, Inc.*.......................... 30,000 774,375
Serologicals Corporation*................ 27,000 621,000
Sonus Pharmaceuticals, Inc.*............. 22,500 632,812
Total Renal Care Holdings, Inc.*......... 18,000 723,375
Trinity Biotech PLC ADR Warrants A*...... 60,000 45,000
Trinity Biotech PLC ADR Warrants B*...... 30,000 24,390
</TABLE>
(See Notes to Financial Statements)
<PAGE> 72
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- -----------------------------------------
US Surgical Corp.*....................... 27,000 $ 1,005,750
Ventana Medical Systems, Inc.*........... 34,000 420,750
Vertex Pharmaceuticals, Inc.*............ 7,000 267,750
VidaMed, Inc.*........................... 30,000 151,875
Vivus, Inc.*............................. 48,000 1,143,000
Yung Shin Pharmaceuticals Industries
Co.(a)................................. 75,000 211,780
------------
38,052,359
------------
INDUSTRIAL -- 1.7%
Clipsal Industries Ltd. (a).............. 252,000 892,080
General Electric Company................. 28,000 1,830,500
Hunter Douglas NV (a).................... 9,900 843,812
SMH AG Bearer (a)........................ 1,000 572,075
Suez Lyonnaise des Eaux (a).............. 9,399 947,755
Waste Management
International plc*(a).................. 51,400 469,025
------------
5,555,247
------------
MISCELLANEOUS -- 0.1%
Fidelity Advisor Korea Fund*............. 40,000 350,000
------------
PROPERTY DEVELOPERS & INVESTMENT -- 0.2%
DBS Land Limited (a)..................... 157,000 496,304
Land & General Berhad (a)................ 150,000 172,345
------------
668,649
------------
TECHNOLOGY -- 18.2%
ASM Lithography Holding NV*(a)........... 16,000 936,000
Acer Incorporation*(a)................... 55,000 197,841
Advanced Fibre Communications*........... 17,400 1,050,525
Aerial Communications, Inc.*............. 40,000 340,000
Altera Corporation*...................... 24,800 1,252,400
American Power Conversion Corp.*......... 38,000 722,000
ANADIGICS, Inc.*......................... 15,000 465,000
Analog Devices, Inc.*.................... 31,333 832,283
Baan Company NV*(a)...................... 11,000 757,625
Bell & Howell Holdings Company*.......... 84,000 2,588,250
CBT Group PLC Sponsored ADR*............. 27,500 1,735,938
Cabletron Systems, Inc.*................. 31,000 877,688
Checkfree Corporation*................... 48,000 846,000
CIENA Corporation*....................... 9,000 424,125
Cisco Systems, Inc.*..................... 71,000 4,765,875
Citrix Systems, Inc.*.................... 8,600 377,325
Compeq Manufacturing Co.(a).............. 33,600 239,309
Cymer, Inc.*............................. 8,000 390,000
DSP Communications, Inc.*................ 26,000 286,000
Elec & Eltek International Co. Ltd.(a)... 145,000 812,000
FactSet Research Systems Inc.*........... 19,400 475,300
Forte Software, Inc.*.................... 16,000 215,000
Gemstar International Group Limited*..... 52,200 959,175
Gilat Satellite Networks Ltd. ........... 15,000 498,750
HNC Software Inc......................... 15,000 571,875
Harmonic Lightwaves, Inc.*............... 6,500 111,312
Hewlett-Packard Company.................. 38,000 2,128,000
IKOS Systems, Inc.*...................... 23,000 491,625
Infinity Financial Technology, Inc.*..... 22,500 367,031
Ingram Micro, Inc.*...................... 28,000 675,500
Integrated Process Equipment
Corporation*........................... 10,000 253,125
Intel Corp. ............................. 26,000 3,687,125
Interlink Computer Sciences, Inc.*....... 69,500 529,938
International Business Machines Corp..... 25,000 2,254,687
International Network Services*.......... 20,000 520,000
International Telecommunication Data
Systems, Inc.*......................... 26,500 649,250
IONA Technologies PLC -- ADR............. 29,000 572,750
KLA Instruments Corporation.............. 20,000 $ 975,000
Komag, Inc.*............................. 15,000 245,625
Lattice Semiconductor Corp.*............. 16,000 904,000
Linear Technology Corporation............ 8,000 414,000
Maxim Integrated Products, Inc.*......... 23,800 1,353,625
McAfee Associates, Inc.*................. 14,100 890,062
Microsoft Corporation*................... 12,300 1,554,413
NeoMagic Corp.*.......................... 8,000 179,000
Network Appliance, Inc.*................. 16,500 627,000
Optika Imaging Systems, Inc.*............ 113,800 569,000
Oracle Systems Corp.*.................... 33,400 1,682,525
P-COM, Inc. ............................. 24,000 792,000
Pairgain Technologies, Inc.*............. 44,400 688,200
Pegasystems Inc.......................... 20,000 627,500
Peoplesoft, Inc.*........................ 13,000 685,750
Periphonics Corporation*................. 30,000 645,000
Philips Electronics NV (a)............... 18,600 1,334,727
Planning Sciences Int'l. plc -- Sponsored
ADR*................................... 30,000 172,500
Premisys Communications, Inc.*........... 16,000 252,000
Proxim, Inc.*............................ 38,000 921,500
RadiSys Corporation*..................... 16,900 671,775
Rational Software Corporation*........... 20,000 336,250
Remedy Corporation*...................... 16,500 660,000
Renaissance Solutions, Inc.*............. 20,000 740,000
Sawtek Inc.*............................. 11,300 381,375
SeaChange International, Inc.*........... 5,000 141,250
Security Dynamics Technologies, Inc.*.... 17,500 645,312
Siebel Systems, Inc.*.................... 17,000 548,250
Sykes Enterprises, Inc.*................. 36,300 943,800
Synopsys, Inc.*.......................... 18,000 661,500
Systemsoft Corporation*.................. 35,000 376,250
Systex Corporation*(a)................... 70,062 154,993
Systex Corporation Rights*(a)............ 15,989 15,241
Technology Modeling Associates, Inc.*.... 10,000 136,250
Tecnomatix Technologies Ltd. ............ 3,500 113,750
Transaction Network Services, Inc.*...... 63,750 900,469
Transactions Systems Architects, Inc.*... 14,500 500,250
Ultratech Stepper, Inc.*................. 10,000 228,750
Veritas Software Corporation*............ 22,000 1,105,500
Whittman-Hart, Inc.*..................... 25,000 703,125
Xylan Corporation*....................... 21,000 357,000
------------
60,691,144
------------
TELEPHONE & ELECTRIC -- 2.7%
Cia. de Telecomunicaciones de Chile
S.A.(a)................................ 10,625 350,625
Empresa Nacional de Electricidad --
ADR(a)................................. 21,900 1,862,869
Empresa Nacional de Electridad S.A.(a)... 11,800 266,238
PT Telekomunikasi Indonesia -- Foreign
Registered(a).......................... 280,000 457,742
Portugal Telecom S.A. -- ADR(a).......... 10,800 433,350
Telecomunicacoes Brasileiras S.A. ADR
(Telebras)............................. 13,400 2,033,450
Telefonica de Argentina -- ADS(a)........ 9,100 315,088
Telefonica de Espana S.A. -- ADR(a)...... 29,200 2,518,500
Western Wireless Corp.*.................. 19,000 301,625
WinStar Communications, Inc.*............ 26,500 354,437
------------
8,893,924
------------
TOTAL EQUITY SECURITIES
(Cost -- $214,460,479)................. 294,254,242
------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 73
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
REAL ESTATE INVESTMENT TRUSTS
(REITS) -- 1.7% SHARES VALUE
<S> <C> <C>
- -----------------------------------------
Amli Residential Properties Trust........ 60,000 $ 1,410,000
Apartment Investment & Management Co..... 38,000 1,073,500
Beacon Properties Corporation............ 28,000 934,500
First Industrial Realty Trust, Inc....... 40,000 1,170,000
Walden Residential Properties, Inc....... 47,000 1,204,375
------------
TOTAL REITS
(Cost -- $5,405,347)................... 5,792,375
------------
TOTAL INVESTMENTS -- 90%
(Cost -- $219,865,826)................. 300,046,617
OTHER ASSETS, LESS
LIABILITIES -- 10.0%................... 33,383,644
------------
NET ASSETS -- 100%....................... $333,430,261
============
ADR - American Depository Receipt
ADS - American Depository Share
GDR - Global Depository Receipt
NV - Non-voting
* Non-income producing security.
(a) Foreign security.
(b) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 92,150,251
Gross unrealized depreciation.................... (11,969,460)
------------
Net unrealized appreciation.................. $ 80,180,791
============
Purchases and sales of securities other than short-term obligations
aggregated $46,273,785 and $84,592,511, respectively, for the period
ended June 30, 1997.
Forward foreign currency contracts at June 30, 1997 were:
</TABLE>
<TABLE>
<CAPTION>
FORWARD CONTRACTS PRINCIPAL VALUE OF UNREALIZED
(CURRENCY/EXPIRATION/COMMITMENT) AMOUNT OBLIGATION APPRECIATION
- ------------------------------------- ------------- ------------ ------------
<S> <C> <C> <C>
Deutsch Marks/September 97/Sell...... 904,097 US $ (897,663) $ 6,434
French Francs/September 97/Sell...... 2,492,608 US (2,477,101) 15,507
French Francs/September 97/Sell...... 6,122,199 US (8,979,209) 142,990
Netherland Guilders/September
97/Sell............................. 1,901,764 US (1,887,314) 14,450
Swiss Francs/September 97/Sell....... 1,311,108 US (1,293,112) 17,996
------------ --------
Total forward foreign currency
exchange contracts sold............. $(15,534,399) $197,377
============ ========
</TABLE>
Transactions in written call options during the period ended June 30, 1997 were:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED/(PAID)
--------- ---------------
<S> <C> <C>
Outstanding at December 31, 1996.... 3,865 $ 918,726
Contracts written................. 265 68,849
Contracts sold.................... (1,865) (510,755)
Contracts expired................. (1,298) (273,605)
Contracts exercised............... (967) (203,215)
------- ---------
Outstanding at June 30, 1997........ -- $ --
======= =========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 74
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $219,865,826)..... $300,046,617
Cash........................................................ 33,546,637
Cash denominated in foreign currencies (cost -- $58,519).... 58,020
Receivables
Open forward foreign currency contracts................... 197,377
Fund shares sold.......................................... 10,000
Dividends and interest.................................... 395,644
Other assets................................................ 52,050
------------
Total assets.............................................. 334,306,345
------------
LIABILITIES
Payables
Investments purchased..................................... 486,950
Management fee............................................ 231,784
12b-1 service and distribution fees....................... 18,609
Other payables to related parties......................... 98,348
Accrued expenses............................................ 40,393
------------
Total liabilities......................................... 876,084
------------
NET ASSETS.................................................. $333,430,261
============
CLASS A
Net asset value and redemption price per share
($328,756,707/16,929,031 shares outstanding).............. $ 19.42
============
Maximum offering price per share ($19.42 X 100/94.25)*...... $ 20.60
============
CLASS B
Net asset value, offering price and redemption price per
share ($4,383,080/227,641 shares outstanding)**........... $ 19.25
============
CLASS C
Net asset value, offering price and redemption price per
share ($290,474/15,171 shares outstanding)***............. $ 19.15
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $235,083,458
Undistributed net realized gain on investments and foreign
currency transactions................................... 17,561,891
Undistributed net investment income....................... 413,455
Net unrealized appreciation on
Investments and foreign currency transactions........... 80,174,080
Forward foreign currency contracts...................... 197,377
------------
NET ASSETS.................................................. $333,430,261
============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 75
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $142,751 foreign taxes withheld......... $ 2,159,859
Interest.................................................. 426,603
-----------
2,586,462
-----------
EXPENSES
Management fee............................................ $1,337,256
Transfer agent fee........................................ 397,073
Administrative services fee............................... 157,324
Custodian fees............................................ 56,719
Blue Sky fees............................................. 12,586
Auditing and accounting fees.............................. 18,020
Shareholder reports....................................... 12,102
Fund accounting........................................... 51,991
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 102,008
Legal fees................................................ 13,303
Other..................................................... 62,362
-----------
Total expenses........................................ 2,223,721
-----------
NET INVESTMENT INCOME....................................... 362,741
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments and foreign currency transactions........... 16,759,270
Options................................................. (1,152,465)
Forward foreign currency contracts...................... 1,533,355
Net unrealized appreciation during the period on
Investments and foreign currency transactions........... 10,175,450
Options................................................. 472,707
Forward foreign currency contracts...................... 267,533
-----------
Net gain on investment transactions................... 28,055,850
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $28,418,591
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 76
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ ------------
1997* 1996
------------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 362,741 $ 362,902
Net realized gain (loss) on
Investments and foreign currency transactions........... 18,292,625 31,145,326
Options................................................. (1,152,465) (480,845)
Net unrealized appreciation (depreciation) during the
period on
Investments and foreign currency transactions........... 10,175,450 18,302,190
Options................................................. 472,707 (472,707)
Forward foreign currency contracts...................... 267,533 167,966
------------ ------------
Net increase resulting from operations................ 28,418,591 49,024,832
------------ ------------
Class A distributions
From net investment income................................ -- (389,158)
In excess of net investment income........................ -- (1,722,867)
From net realized gain.................................... -- (28,336,336)
------------ ------------
Total distributions to Class A shareholders........... -- (30,448,361)
------------ ------------
Class B distributions
From net realized gain.................................... -- (346,890)
------------ ------------
Total distributions to Class B shareholders........... -- (346,890)
------------ ------------
Class C distributions
In excess of net investment income........................ -- (395)
From net realized gain.................................... -- (8,094)
------------ ------------
Total distributions to Class C shareholders........... -- (8,489)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (14,196,268) 6,870,702
Class B................................................... 183,198 1,041,023
Class C................................................... 177,309 91,198
------------ ------------
Net increase (decrease) resulting from Fund share
transactions......................................... (13,835,761) 8,002,923
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 14,582,830 26,224,015
NET ASSETS
Beginning of period....................................... 318,847,431 292,623,416
------------ ------------
END OF PERIOD............................................. $333,430,261 $318,847,431
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 413,455 $ 50,714
============ ============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 77
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
CLASS A MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ ------------------------------------------------------------------------
1997* 1996 1995 1994 1993 1992
SELECTED PER SHARE DATA ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 17.76 $ 16.75 $ 13.91 $ 15.14 $ 14.98 $ 16.91
-------- -------- -------- -------- -------- --------
Income (loss) from investment
operations
Net investment income.............. .02(g) .02(a) .05(a) .05(a) .10(a) .17(a)
Net realized and unrealized gain
(loss) on investment
transactions..................... 1.64(g) 2.86 3.73 (.49) 1.74 .70
-------- -------- -------- -------- -------- --------
Total from investment
operations..................... 1.66 2.88 3.78 (.44) 1.84 .87
-------- -------- -------- -------- -------- --------
Less distributions
From net investment income......... -- .02 .02 .05 .10 .15
In excess of net investment
income........................... -- .11 -- -- -- --
From net realized gain............. -- 1.74 .89 .74 1.58 2.65
In excess of net realized gain..... -- -- .03 -- -- --
-------- -------- -------- -------- -------- --------
Total distributions.............. -- 1.87 .94 .79 1.68 2.80
-------- -------- -------- -------- -------- --------
Net asset value, end of period....... $ 19.42 $ 17.76 $ 16.75 $ 13.91 $ 15.14 $ 14.98
======== ======== ======== ======== ======== ========
Total return(%)...................... 9.35(c) 17.22(b) 27.33(b) (2.97)(b) 12.29(b) 5.21(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)......................... $328,757 $314,908 $289,954 $231,446 $268,533 $226,068
Ratio of expenses to average net
assets
With expense reimbursement(%)...... -- 1.45 1.59 1.38 1.33 1.32
Without expense reimbursement(%)... 1.40(d) 1.45 1.60 1.49 1.43 1.40
Ratio of net investment income to
average net assets(%).............. .24(d) .13(a) .32(a) .32(a) .64(a) .98(a)
Portfolio turnover rate(%)........... 16 72 41 39 77(e) 138
Average commission rate(f)........... $ .0451 $ .0439 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ -------------------------------- ----------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $17.69 $16.75 $13.91 $15.14 $16.42
------ ------ ------ ------ ------
Income (loss) from investment operations
Net investment loss.................................. (.06)(g) (.13)(a) (.08)(a) (.04)(a) --
Net realized and unrealized gain (loss) on investment
transactions....................................... 1.62(g) 2.81 3.71 (.54) .37
------ ------ ------ ------ ------
Total from investment operations................... 1.56 2.68 3.63 (.58) .37
------ ------ ------ ------ ------
Less distributions
From net investment income........................... -- -- -- -- .07
From net realized gain............................... -- 1.74 .73 .52 1.58
In excess of net realized gain....................... -- -- .06 .13 --
------ ------ ------ ------ ------
Total distributions................................ -- 1.74 .79 .65 1.65
------ ------ ------ ------ ------
Net asset value, end of period......................... $19.25 $17.69 $16.75 $13.91 $15.14
====== ====== ====== ====== ======
Total return(%)........................................ 8.82(c) 16.02(b) 26.13(b) (3.90)(b) 2.34(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............... $4,383 $3,850 $2,669 $1,399 $ 65
Ratio of expenses to average net assets
With expense reimbursement(%)........................ -- 2.37 2.55 2.34 2.31(d)
Without expense reimbursement(%)..................... 2.31(d) 2.37 2.56 2.45 2.44(d)
Ratio of net investment loss to average net
assets(%)............................................ (.66)(d) (.79)(a) (.64)(a) (.64)(a) (.33)(a)(d)
Portfolio turnover rate(%)............................. 16 72 41 39 77(e)
Average commission rate(f)............................. $.0451 $.0439 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 78
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 30, 1996
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $17.59 $ 18.46
------ -------
Loss from investment operations
Net investment loss....................................... (.06)(g) (.06)(a)
Net realized and unrealized gain on investment 1.62(g)
transactions............................................ 1.02
------ -------
Total from investment operations........................ 1.56 .96
------ -------
Less distributions
In excess of net investment income........................ -- .09
From net realized gain.................................... -- 1.74
------ -------
Total distributions..................................... -- 1.83
------ -------
Net asset value, end of period.............................. $19.15 $ 17.59
====== =======
Total return(%)(c).......................................... 8.87 5.20
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 290 $ 90
Ratio of expenses to average net assets
With expense reimbursement(%)(d).......................... -- 2.44
Without expense reimbursement(%)(d)....................... 2.26 2.44
Ratio of net investment loss to average net assets(%)(d).... (.62) (.86)(a)
Portfolio turnover rate(%).................................. 16 72
Average commission rate(f).................................. $.0451 $ .0439
(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) The portfolio turnover rate excludes sales of portfolio
securities made following the February 1, 1993
reorganization between the Fund and American Investors
Growth Fund, Inc. to realign the Fund's portfolio and
reflects an adjustment to the monthly average value of the
portfolio securities owned by the Fund during the year ended
December 31, 1993.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Growth Fund (the Fund), is a diversified series of shares of Ivy Fund.
The shares of beneficial interest are assigned no par value and an unlimited
number of shares of Class A, Class B and Class C are authorized. Ivy Fund was
organized as a Massachusetts business trust under a Declaration of Trust dated
December 21, 1983 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may write (sell) put options on securities and stock
indicies, and may write (sell) covered call options on securities held in its
portfolio. When the Fund writes a call, it gives the purchaser of the call
option the right to buy the underlying security at the price specified in the
option (the "exercise price") at any time during the option period, generally
ranging up to nine months. When the fund holds covered call options, the
underlying securities are held in a segregated account by the custodian.
If the option expires unexercised, the Fund will realize income, in the
form of a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder. For
options on indices, cash settlement by the Fund will be required if the option
is exercised.
By writing a call option, the Fund forgoes, in exchange for the premium
less the commission ("net premium"), the opportunity to profit during the option
period from an increase in the market value of the underlying security or
currency above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call option is valued at the last sale price or, in the absence of a
sale, the last offering price. In addition, the Fund may purchase put options on
securities and stock indices. Exchange traded purchased options are valued at
the last sale price or, in the absence of a sale, the last bid price.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. 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
<PAGE> 80
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
be treated as ordinary income or loss. Accordingly, distributions for financial
statement purposes may differ from the characterization of such distributions
determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY CONTRACTS -- Forward foreign currency 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.
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 make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .85% of
the Fund's average net assets.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly-owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $9,030.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of shares issued after December 31, 1991. Class B and Class C
shares are also subject to an ongoing distribution fee at an annual rate of .75%
of the average net asset value of Class B and Class C shares. IMDI may use such
distribution fee for purposes of advertising and marketing shares of the Fund.
Such fees of $81,628, $19,577 and $803, for Class A, Class B and Class C,
respectively, are reflected as 12b-1 service and distribution fees in the
Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $392,952, $3,991 and $130, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,629,527 $ 29,314,478 1,496,693 $ 27,187,211
Issued on reinvestment of
distributions........... -- -- 1,580,308 28,065,960
Repurchased.............. (2,431,088) (43,510,746) (2,657,170) (48,382,469)
---------- ------------ ---------- ------------
Net increase (decrease).. (801,561) $(14,196,268) 419,831 $ 6,870,702
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 34,596 $ 613,748 103,139 $ 1,850,267
Issued on reinvestment of
distributions........... -- -- 18,721 331,192
Repurchased.............. (24,582) (430,550) (63,589) (1,140,436)
---------- ------------ ---------- ------------
Net increase............. 10,014 $ 183,198 58,271 $ 1,041,023
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
------------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 20,324 $ 351,521 5,921 $ 105,632
Issued on reinvestment of
distributions........... -- -- 482 8,487
Repurchased.............. (10,277) (174,212) (1,279) (22,921)
---------- ------------ ---------- ------------
Net increase............. 10,047 $ 177,309 5,124 $ 91,198
========== ============ ========== ============
</TABLE>
03IVYFX063097
<PAGE> 81
June 30, 1997
Ivy
Growth
with Income
Fund
- -------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
As it has for several quarters, the strength of the US economy and broader
stock market -- as measured by the Standard & Poor's 500 and the Dow Jones
Industrial Average -- continue to surprise most observers. With the market
seemingly fully valued by most measures, investors are paying close attention to
corporate earnings reports and tend to quickly sell stocks of companies that
fail to meet expectations. This contributes to volatility in stock prices
We continue to search for investment opportunities using a criterion
whereby projected long-term earnings growth for a company should exceed the
price-to-earnings ratio of its stock. The universe of stocks considered for the
Ivy Growth with Income Fund is domestic mid- and large-capitalization stocks.
With large-capitalization stocks at historically high valuations, most recent
additions to the Fund were found among the mid-range companies -- although we
have found some attractively priced large-company stocks. We expect the earnings
of many blue-chip companies to decelerate over time, although we can't predict
when this will happen. When it does, large-company stocks may go sideways, at
best, giving underlying fundamentals a chance to catch up with stock prices.
Financial services and healthcare are two sectors where we continue to find
value. Both are supported by demographic trends owing to an aging population in
the United States and its reliance on services, and by consolidation trends
within the industries. We have also had the opportunity to take advantage of
stock price volatility. Companies with solid franchises that disappoint Wall
Street by missing short-term earnings expectations can find their stocks knocked
down without mercy -- and without regard to underlying value.
The Ivy Growth with Income Fund continues to hold positions in real estate
investment trusts (REITs). Because of the positive changes taking place in the
real estate industry, we believe REITs remain an attractive investment. These
companies own or finance the underlying properties of real-estate intensive
operations, and their stocks provide a liquid way to invest in real estate.
After overbuilding in the 1980s, new construction within the industry is now in
greater balance with demand. As a result, pricing is at more of an equilibrium
than in the past. We see attractive investments in the office, industrial,
apartment and self-storage sectors. REITs tend to pay attractive dividends,
which contribute significantly to the total return of these stocks and may
provide a cushion during weak markets.
The primary strategy of the Ivy Growth with Income Fund is to provide
long-term capital growth while controlling risk. We believe the more
conservative nature of the Fund should not be overlooked by investors looking to
participate in the equity market but who do not want the added volatility of a
more aggressive fund.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 82
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 75.5% SHARES VALUE
<S> <C> <C>
- ---------------------------------------------
BASIC INDUSTRIES -- 5.8%
Crown Cork & Seal Company, Inc. ............. 28,500 $ 1,522,969
Du Pont (E.I.) De Numours & Company.......... 15,700 987,138
Ferro Corporation............................ 14,000 518,875
Harsco Corporation........................... 38,000 1,539,000
Union Carbide Corporation Holding Company.... 6,000 282,375
-----------
4,850,357
-----------
CAPITAL GOODS -- 8.4%
AGCO Corporation............................. 35,000 1,257,812
American Standard Companies, Inc.*........... 13,200 590,700
Caterpillar, Inc. ........................... 3,500 375,813
Fluor Corporation............................ 6,500 358,719
Foster Wheeler Corporation................... 30,500 1,235,250
General Electric Company..................... 18,600 1,215,975
Johnson Controls, Inc. ...................... 20,000 821,250
Kaydon Corporation........................... 14,000 694,750
Tecumseh Products Company.................... 8,300 496,962
-----------
7,047,231
-----------
COMMERCIAL SERVICES -- 2.9%
Banta Corp................................... 28,000 759,500
Electronic Data Systems New.................. 40,500 1,660,500
-----------
2,420,000
-----------
CONSUMER NON-DURABLES -- 4.9%
Allegiance Corporation*...................... 26,100 711,225
Mattel, Inc. ................................ 41,000 1,388,875
PepsiCo, Inc................................. 28,000 1,051,750
Tupperware Corporation....................... 6,200 226,300
Warnaco Group, Inc. ......................... 24,600 784,125
-----------
4,162,275
-----------
CONSUMER SERVICES -- 11.9%
ADT Limited*................................. 24,300 801,900
Brunswick Corporation........................ 16,500 515,625
Carnival Corporation Class A................. 42,900 1,769,625
Federated Department Stores, Inc.*........... 13,000 451,750
Harte-Hanks Communications................... 30,000 885,000
J.C. Penney Co., Inc......................... 19,481 1,016,665
Lowe's Companies, Inc........................ 17,000 631,125
Pier 1 Imports, Inc.......................... 25,000 662,500
Royal Caribbean Cruises Ltd.................. 14,000 489,125
Scholastic Corporation*...................... 14,500 507,500
Sears, Roebuck & Co.......................... 22,000 1,182,500
Sun International Hotels Ltd................. 20,000 738,750
Sunglass Hut International, Inc.*............ 56,000 353,500
-----------
10,005,565
-----------
ENERGY -- 5.4%
Dresser Industries, Inc. .................... 17,000 633,250
Enron Corporation............................ 9,000 367,313
Helmerich & Payne, Inc. ..................... 12,000 691,500
Noble Drilling Corporation*.................. 37,000 834,812
Nuevo Energy Company*........................ 16,800 688,800
Parker & Parsley Petroleum Company........... 9,000 318,375
Schlumberger, Ltd. .......................... 8,000 1,000,000
-----------
4,534,050
-----------
FINANCIAL SERVICES -- 18.6%
Aegon NV(a).................................. 6,516 456,527
AMBAC, Inc................................... 11,600 885,950
Bankers Trust New York Corp.*................ 6,000 522,000
Donaldson, Lufkin & Jenrette, Inc............ 4,500 268,875
Exel Limited................................. 28,000 1,477,000
Federal Home Loan Mortgage Corp. ............ 45,000 1,546,875
Federal National Mortgage Association........ 33,000 1,439,625
First Chicago NBD Corporation................ 14,500 877,250
First Union Corporation...................... 11,000 1,017,500
J.P. Morgan & Company Inc. .................. 9,000 939,375
NationsBank Corporation...................... 17,400 1,122,300
Norwest Corporation.......................... 8,900 $ 500,625
Penncorp Financial Group, Inc. .............. 17,000 654,500
Providian Corporation........................ 15,000 481,875
Salomon, Inc. ............................... 13,000 723,125
Signet Banking Corporation................... 23,000 828,000
Terra Nova (Bermuda) Holdings Ltd. .......... 32,000 672,000
Travelers, Inc. ............................. 19,120 1,205,755
-----------
15,619,157
-----------
HEALTHCARE -- 7.7%
Apria Healthcare Group, Inc.*................ 17,500 310,625
Boston Scientific Corporation*............... 10,000 614,375
Columbia/HCA Healthcare Corp................. 39,000 1,533,188
Elan Corp. PLC -- Sponsored ADR*(a).......... 34,000 1,538,500
Integrated Living Communities, Inc.*......... 33,000 379,500
Medpartners, Inc.*........................... 41,000 886,625
Pharmacia & Upjohn, Inc. .................... 16,000 556,000
US Surgical Corp.*........................... 17,000 633,250
-----------
6,452,063
-----------
TECHNOLOGY -- 9.9%
Bell & Howell Company*....................... 40,000 1,232,500
Cabletron Systems, Inc.*..................... 20,000 566,250
Cisco Systems, Inc.*......................... 9,000 604,125
Hewlett-Packard Company...................... 16,500 924,000
Intel Corp. ................................. 10,000 1,418,125
International Business Machines
Corporation................................ 14,600 1,316,737
KLA Instruments Corporation*................. 14,000 682,500
Microsoft Corporation*....................... 8,000 1,011,000
Oracle Corporation*.......................... 12,300 619,612
-----------
8,374,849
-----------
TOTAL COMMON STOCKS
(Cost -- $48,291,574)...................... 63,465,547
-----------
PREFERRED STOCK -- 0.4%
- ---------------------------------------------
Time Warner, Inc. (Cost -- $268,212)......... 7,000 298,375
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) --
13.8%
- ---------------------------------------------
Amli Residential Properties Trust............ 27,000 634,500
Apartment Investment & Management Co. ....... 37,000 1,045,250
Arden Realty Group, Inc...................... 27,000 702,000
Beacon Properties Corporation................ 13,800 460,575
Boykin Lodging Company*...................... 40,000 957,500
Developers Diversified Realty Corporation.... 14,000 560,000
Duke Realty Investments, Inc. ............... 30,000 1,215,000
Equity Residential Properties Trust.......... 15,000 712,500
Essex Property Trust......................... 26,000 835,250
First Industrial Realty Trust, Inc. ......... 22,000 643,500
Spieker Properties, Inc. .................... 24,000 844,500
Storage Trust Realty......................... 36,000 954,000
Storage USA, Inc. ........................... 16,000 612,000
Sunstone Hotel Investors, Inc. .............. 61,000 884,500
Walden Residential Properties, Inc. ......... 21,000 538,125
-----------
TOTAL REITS
(Cost -- $9,573,219)....................... 11,599,200
-----------
TOTAL INVESTMENTS -- 89.7%
(Cost -- $58,133,005)(b)................... 75,363,122
OTHER ASSETS, LESS LIABILITIES -- 10.3%...... 8,643,191
-----------
NET ASSETS -- 100%........................... $84,006,313
===========
</TABLE>
ADR - American Depository Receipt
NV - Non-voting
* Non-income producing security.
(a) Foreign security.
(b) Cost is the same for Federal income tax purposes.
(See Notes to Financial Statements)
<PAGE> 83
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation.................... $18,050,563
Gross unrealized depreciation.................... (820,446)
-----------
Net unrealized appreciation.................. $17,230,117
===========
</TABLE>
Purchases and sales of securities (other than short-term
obligations) aggregated $10,732,047 and $19,070,445, respectively,
for the period ended June 30, 1997.
Transactions in written call options during the period ended June
30, 1997 were:
<TABLE>
<CAPTION>
PREMIUMS
NUMBER OF RECEIVED/
CONTRACTS (PAID)
--------- -----------
<S> <C> <C>
Outstanding at December 31, 1996......... 1,490 $ 352,241
Contracts written...................... 135 36,790
Contracts sold......................... (652) (188,460)
Contracts expired...................... (537) (109,857)
Contracts exercised.................... (436) (90,714)
------ -----------
Outstanding at June 30, 1997............. -- $ --
====== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 84
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $58,133,005)...... $75,363,122
Cash........................................................ 8,778,295
Dividends and interest receivable........................... 124,927
Other assets................................................ 23,195
-----------
Total assets.............................................. 84,289,539
-----------
LIABILITIES
Payables
Dividends to shareholders................................. 4,434
Investments purchased..................................... 135,956
Fund shares repurchased................................... 25,018
Management fee............................................ 51,356
12b-1 service and distribution fees....................... 25,352
Other payables to related parties......................... 31,215
Accrued expenses............................................ 9,895
-----------
Total liabilities......................................... 283,226
-----------
NET ASSETS.................................................. $84,006,313
===========
CLASS A
Net asset value and redemption price per share
($66,893,402/5,232,202 shares outstanding)................ $ 12.78
===========
Maximum offering price per share ($12.78 x 100/94.25)*...... $ 13.56
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($16,176,197/1,272,294 shares outstanding).......... $ 12.71
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($203,064/15,951 shares outstanding)................ $ 12.73
===========
CLASS D
Net asset value and redemption price per share
($733,650/57,515 shares outstanding)...................... $ 12.76
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $70,002,929
Undistributed net realized loss on investments............ (3,158,413)
Undistributed net investment loss......................... (68,320)
Net unrealized appreciation on investments................ 17,230,117
-----------
NET ASSETS.................................................. $84,006,313
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 85
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $2,322 foreign taxes withheld........... $ 794,288
Interest.................................................. 72,329
----------
866,617
----------
EXPENSES
Management fee............................................ $293,729
Transfer agent............................................ 108,389
Administrative services fee............................... 39,164
Custodian fees............................................ 4,615
Blue Sky fees............................................. 12,637
Auditing and accounting fees.............................. 8,890
Shareholder reports....................................... 5,481
Fund accounting........................................... 44,834
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 139,996
Legal..................................................... 11,568
Other..................................................... 34,211
----------
Total expenses.......................................... 706,491
----------
NET INVESTMENT INCOME....................................... 160,126
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments............................................. 4,652,866
Options................................................. (553,067)
Net unrealized appreciation during the period on
Investments............................................. 5,063,255
Options................................................. 223,772
----------
Net gain on investment transactions..................... 9,386,826
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $9,546,952
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 86
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1997* 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 160,126 $ 409,831
Net realized gain (loss) on
Investments............................................. 4,652,866 12,587,897
Options................................................. (553,067) (136,689)
Net unrealized appreciation (depreciation) during the
period on
Investments............................................. 5,063,255 1,131,380
Options................................................. 223,772 (223,772)
----------- -----------
Net increase resulting from operations................ 9,546,952 13,768,647
----------- -----------
Class A distributions
From net investment income................................ (173,011) (409,831)
In excess of net investment income........................ (47,059) (170,374)
From net realized gain.................................... -- (8,490,622)
----------- -----------
Total distributions to Class A shareholders........... (220,070) (9,070,827)
----------- -----------
Class B distributions
In excess of net investment income........................ (54,473) (84,427)
From net realized gain.................................... -- (1,738,301)
----------- -----------
Total distributions to Class B shareholders........... (54,473) (1,822,728)
----------- -----------
Class C distributions
In excess of net investment income........................ (434) (39)
From net realized gain.................................... -- (3,730)
----------- -----------
Total distributions to Class C shareholders........... (434) (3,769)
----------- -----------
Class D distributions
In excess of net investment income........................ (2,058) (7,039)
From net realized gain.................................... -- (103,094)
----------- -----------
Total distributions to Class D shareholders........... (2,058) (110,133)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (3,810,970) 1,711,001
Class B................................................... 1,024,368 4,351,868
Class C................................................... 153,993 29,562
Class D................................................... (172,369) (476,754)
----------- -----------
Net increase (decrease) resulting from Fund share
transactions......................................... (2,804,978) 5,615,677
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 6,464,939 8,376,867
NET ASSETS
Beginning of period....................................... 77,541,374 69,164,507
----------- -----------
END OF PERIOD............................................. $84,006,313 $77,541,374
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS).................. $ (68,320) $ 48,589
=========== ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 87
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
CLASS A MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ -------------------------------------------------------------------
1997* 1996 1995 1994 1993 1992
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 11.38 $ 10.98 $ 9.08 $ 9.70 $ 9.21 $ 9.74
------- ------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income................... .03 .08 .11 .17 .08 .07
Net realized and unrealized gain (loss)
on investment transactions............ 1.41 2.16 2.13 (.36) 1.30 .18
------- ------- ------- ------- ------- -------
Total from investment operations...... 1.44 2.24 2.24 (.19) 1.38 .25
------- ------- ------- ------- ------- -------
Less distributions
From net investment income.............. .03 .08 .08 .17 .06 .07
In excess of net investment income...... .01 .03 -- .01 -- --
From net realized gain.................. -- 1.73 .26 .25 .83 .71
------- ------- ------- ------- ------- -------
Total distributions................... .04 1.84 .34 .43 .89 .78
------- ------- ------- ------- ------- -------
Net asset value, end of period............ $ 12.78 $ 11.38 $ 10.98 $ 9.08 $ 9.70 $ 9.21
======= ======= ======= ======= ======= =======
Total return(%)........................... 12.71(b) 20.46(a) 24.93(a) (2.03)(a) 15.07(a) 2.61(a)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).............................. $66,893 $63,219 $59,054 $26,017 $22,669 $19,045
Ratio of expenses to average net
assets(%)............................... 1.66(c) 1.81 1.96 1.84 2.14 1.94
Ratio of net investment income to average
net assets(%)........................... .55(c) .68 1.06 1.83 .88 .73
Portfolio turnover rate(%)................ 15 138 81 36 85 163
Average commission rate(e)................ $ .0646 $ .0580 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ----------------------------------- ----------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 11.36 $ 10.98 $ 9.08 $ 9.70 $10.43
------- ------- ------ ------ ------
Income (loss) from investment operations
Net investment income (loss)...................... (.01) (.01) .03 .09 --
Net realized and unrealized gain (loss) on
investment transactions......................... 1.40 2.15 2.13 (.36) .05
------- ------- ------ ------ ------
Total from investment operations................ 1.39 2.14 2.16 (.27) .05
------- ------- ------ ------ ------
Less distributions
From net investment income........................ -- -- .01 .09 .01
In excess of net investment income................ .04 .08 -- .01 --
From net realized gain............................ -- 1.68 .25 .25 .77
------- ------- ------ ------ ------
Total distributions............................. .04 1.76 .26 .35 .78
------- ------- ------ ------ ------
Net asset value, end of period...................... $ 12.71 $ 11.36 $10.98 $ 9.08 $ 9.70
======= ======= ====== ====== ======
Total return(%)..................................... 12.29(b) 19.59(a) 23.94(a) (2.88)(a) .61(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $16,176 $13,473 $8,868 $5,849 $ 888
Ratio of expenses to average net assets(%).......... 2.38(c) 2.55 2.75 2.70 3.09(c)
Ratio of net investment income (loss) to average net
assets(%)......................................... (.17)(c) (.06) .27 .97 (.07)(c)
Portfolio turnover rate(%).......................... 15 138 81 36 85
Average commission rate(e).......................... $ .0646 $ .0580 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 88
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 30, 1996
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------- ---------------
1997* 1996
SELECTED PER SHARE DATA ------------- ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $11.37 $ 11.73
------ -------
Income from investment operations
Net investment loss....................................... (.01) (.08)
Net realized and unrealized gain on investment
transactions............................................ 1.41 1.53
------ -------
Total from investment operations........................ 1.40 1.45
------ -------
Less distributions
In excess of net investment income........................ .04 .08
From net realized gain.................................... -- 1.73
------ -------
Total distributions..................................... .04 1.81
------ -------
Net asset value, end of period.............................. $12.73 $ 11.37
====== =======
Total return(%)(b).......................................... 12.37 12.37
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 203 $ 28
Ratio of expenses to average net assets(%)(c)............... 2.39 3.02
Ratio of net investment loss to average net assets(%)(c).... (.18) (.53)
Portfolio turnover rate(%).................................. 15 138
Average commission rate(e).................................. $.0646 $ .0580
</TABLE>
(See Notes to Financial Statements)
<PAGE> 89
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX AUGUST 16, 1993
CLASS D(D) MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ----------------------------------- ----------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 11.39 $ 10.98 $ 9.08 $ 9.70 $ 9.83
------- ------- ------ ------ ------
Income (loss) from investment operations
Net investment income (loss)...................... (.02) (.02) .03 .09 --
Net realized and unrealized gain (loss) on
investment transactions......................... 1.43 2.14 2.13 (.36) .73
------- ------- ------ ------ ------
Total from investment operations................ 1.41 2.12 2.16 (.27) .73
------- ------- ------ ------ ------
Less distributions
From net investment income........................ -- -- .01 .09 .06
In excess of net investment income................ .04 .08 -- .01 --
From net realized gain............................ -- 1.63 .25 .25 .80
------- ------- ------ ------ ------
Total distributions............................. .04 1.71 .26 .35 .86
------- ------- ------ ------ ------
Net asset value, end of period...................... $ 12.76 $ 11.39 $10.98 $ 9.08 $ 9.70
======= ======= ====== ====== ======
Total return(%)..................................... 12.43(b) 19.41(a) 23.94(a) (2.88)(a) 7.59(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 734 $ 821 $1,242 $3,004 $5,185
Ratio of expenses to average net assets(%).......... 2.46(c) 2.63 2.75 2.70 3.09(c)
Ratio of net investment income (loss) to average net
assets(%)......................................... (.25)(c) (.14) .27 .97 (.07)(c)
Portfolio turnover rate(%).......................... 15 138 81 36 85
Average commission rate(e).......................... $ .0646 $ .0580 N/A N/A N/A
</TABLE>
(a) Total return does not reflect a sales charge.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Annualized.
(d) On April 30, 1996, Class C shares outstanding were
redesignated Class D shares. Class D shares are not
available for sale.
(e) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 90
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Growth with Income Fund (the Fund), is a diversified series of shares
of Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized;
638,129 Class D shares were authorized in connection with the acquisition of
Mackenzie Growth & Income Fund on August 16, 1993. Ivy Fund was organized as a
Massachusetts business trust under a Declaration of Trust dated December 21,
1983 and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may write (sell) put options on securities and stock
indicies, and may write (sell) covered call options on securities held in its
portfolio. When the Fund writes a call, it gives the purchaser of the call
option the right to buy the underlying security at the price specified in the
option (the "exercise price") at any time during the option period, generally
ranging up to nine months. When the Fund holds covered call options, the
underlying securities are held in a segregated account by the custodian.
If the option expires unexercised, the Fund will realize income, in the
form of a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder. For
options on indices, cash settlement by the Fund will be required if the option
is exercised.
By writing a call option, the Fund forgoes, in exchange for the premium
less the commission ("net premium"), the opportunity to profit during the option
period from an increase in the market value of the underlying security or
currency above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call option is valued at the last sale price or, in the absence of a
sale, the last offering price. In addition, the Fund may purchase put options on
securities and stock indices. Exchange traded purchased options are valued at
the last sale price or, in the absence of a sale, the last bid price.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax basis capital loss carryforward of approximately
$7,460,000 as of December 31, 1996, 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. The carryforward expires
$1,808,000 in 1997, $3,616,000 in 1999 and $2,036,000 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily. Distributions are paid at the earlier of redemption or the
last business day of the quarter. An additional distribution in December will
include any remaining undistributed net invest-
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
ment income and net capital gain realized during the year.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY CONTRACTS -- Forward foreign currency 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.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, foreign forward currency contracts, passive foreign
investment companies, and certain securities sold at a loss. As a result, Net
investment income (loss) and Net realized gain (loss) on investments and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accordingly, the Fund may
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .75% of
the Fund's average net assets.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $5,074.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of shares issued after December 31, 1991. Class B, Class C and
Class D shares are also subject to an ongoing distribution fee at an annual rate
of .75% of the average net asset value attributable to Class B, Class C and
Class D shares. IMDI may use such distribution fee for purposes of advertising
and marketing shares of the Fund. Such fees of $64,256, $71,521, $535 and
$3,684, for Class A, Class B, Class C and Class D, respectively, are reflected
as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $93,012, $14,188, $119 and $1,070, for Class A, Class B, Class C and
Class D, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class D were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 257,610 $ 3,052,282 771,160 $ 8,920,002
Issued on reinvestment of
distributions............. 16,057 191,968 673,234 7,657,806
Repurchased................ (597,291) (7,055,220) (1,266,282) (14,866,807)
-------- ----------- ---------- ------------
Net increase (decrease).... (323,624) $(3,810,970) 178,112 $ 1,711,001
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 210,055 $ 2,467,420 554,493 $ 6,504,150
Issued on reinvestment of
distributions............. 4,202 50,016 160,600 1,737,755
Repurchased................ (127,801) (1,493,068) (337,018) (3,890,037)
-------- ----------- ---------- ------------
Net increase............... 86,456 $ 1,024,368 378,075 $ 4,351,868
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
---------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 18,049 $ 211,496 3,952 $ 46,287
Issued on reinvestment of
distributions............. 27 323 335 3,810
Repurchased................ (4,616) (57,826) (1,796) (20,535)
-------- ----------- ---------- ------------
Net increase............... 13,460 $ 153,993 2,491 $ 29,562
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- -------------------------
CLASS D* SHARES AMOUNT SHARES AMOUNT
-------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Issued on reinvestment of
distributions............. 175 $ 2,100 9,114 $ 103,727
Repurchased................ (14,707) (174,469) (50,213) (580,481)
-------- ----------- ---------- ------------
Net decrease............... (14,532) $ (172,369) (41,099) $ (476,754)
======== =========== ========== ============
</TABLE>
* Class D shares are not available for sale.
<PAGE> 93
IVY FUNDS(R)
June 30, 1997
Ivy
International
Fund
- ------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
On April 18, 1997, Ivy International Fund was closed to new investors. This
measure was taken in an effort to provide shareholders with the level of
performance they have experienced in the past. Current investors of the Fund,
who recognize the importance of diversifying their portfolios internationally,
can continue to add to their holdings without limitation.
Recent elections in both the United Kingdom and France have signaled a
drift to the left as voters dramatically stated an aversion to full-blown,
right-wing conservatism. We believe today's left is very different from the left
of yore as topics such as nationalization and confiscatory taxes are not on the
agenda and we do not expect this shift to undermine the basic economic systems
in place.
We believe the vote in France is particularly interesting in that it may
signal the beginning of the end for the European Monetary Union (EMU) and the
single currency for Europe. The fiscal requirements to join the union are
stringent and compel governments to sacrifice job creation for reduced
government deficits. The West German leveraged buy out of East Germany in 1989
required high interest rates to attract the necessary capital to support the
one-to-one West German to East German deutschemark swap and the ensuing bailout
of East Germany. The result is the French have had to endure high unemployment.
However, their current vote seems to say, "Enough!" According to our research,
should the EMU fail, we would expect to see rate cuts and spending boosts by the
French government to create an atmosphere for job stimulation. This should
trigger a weakening of the French franc, which should stimulate exports.
The United Kingdom has absorbed the Labour victory rather well, and there
appears to be few changes expected in the running of the economy. In fact, the
government's ceding of the power to set rates to the Bank of England appears to
be a sensible step and bodes well for the future. Ivy International Fund has 58%
of its assets invested in Europe, with 10% allocated to France and 13% to the
UK.
South America, led by Brazil, has been buoyant, as investors reentered
those markets with gusto. Seven percent of the Fund has been allocated to South
America (3% in Argentina and 4% in Brazil).
In the Far East, moderating growth rates, concerns about bank lending to
real estate and fear of a Thailand spillover have hurt the Malaysian and
Singapore markets. (Malaysia and Singapore each represent approximately 3% of
the portfolio.) Hong Kong, which represents 5% of the Ivy International Fund,
kept its head up as the march to the July 1, 1997 turnover to China continued.
We believe the handover was more of a media event than a cause for concern about
the future economic well being of Hong Kong.
Japan is beginning to deal with its extreme banking problem as banks now
appear prepared to state losses and deal with their problem loans. Quick
analysis implies that the system is technically bankrupt and unable to meet the
Bank for International Settlement capital requirements. The Ivy International
Fund has an 8% allocation to Japan.
We remain optimistic about the longer-term prospects for international
markets and encourage investors to stay the course.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 94
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 92.5% SHARES VALUE
<S> <C> <C>
- --------------------------------------
AFRICA -- 3.6%
- --------------------------------------
SOUTH AFRICA -- 3.6%
Anglo American Corporation of South
Africa Ltd. ........................ 26,900 $ 1,620,628
Anglo American Corporation of South
Africa Ltd. ADR..................... 450,000 27,168,750
Gencor Limited........................ 476,400 2,195,276
Gencor Limited ADR.................... 6,000,000 27,750,000
Pepkor Limited ADR 144A REGD.......... 320,251 3,742,261
South African Breweries Limited....... 261,554 8,030,222
South African Breweries Limited ADR... 628,378 19,283,350
--------------
89,790,487
--------------
ASIA -- 23.7%
- --------------------------------------
HONG KONG -- 5.3%
China Light & Power................... 5,750,000 32,582,399
Hong Kong Land Holdings Ltd. ......... 10,000,000 26,600,000
Hong Kong Telecommunications Ltd. .... 15,167,301 36,218,522
Swire Pacific Class A................. 2,600,000 23,408,213
Television Broadcasting Ltd. ......... 3,321,000 14,917,595
--------------
133,726,729
--------------
JAPAN -- 8.3%
Bridgestone Corp...................... 1,200,000 27,894,776
Canon Inc. ........................... 1,200,000 32,718,684
Fuji Photo Film ORD................... 850,000 34,243,633
Komatsu Ltd. ......................... 3,100,000 25,194,435
Matsushita Electric Industrial Co..... 1,700,000 34,317,915
Nintendo Corp Ltd. ................... 20,000 1,677,881
Sega Enterprises...................... 18,000 597,745
Sharp Corp. .......................... 2,000,000 27,615,129
Sony Corp. ........................... 275,000 24,008,121
--------------
208,268,319
--------------
MALAYSIA -- 2.3%
Malayan Banking Berhad................ 2,000,000 20,998,382
Sime Darby Berhad..................... 5,000,000 16,640,227
Telekom Malaysia Berhad............... 4,125,000 19,284,835
--------------
56,923,444
--------------
RUSSIA -- 5.1%
LUKoil Oil Co. Sponsored ADR 144A..... 819,644 63,965,018
Mosenergo Sponsored ADR 144A.......... 655,000 27,428,125
Unified Energy System................. 100,000,000 36,190,000
--------------
127,583,143
--------------
SINGAPORE -- 2.7%
Fraser & Neave Ltd. ORD............... 3,300,000 23,540,931
Jardine Matheson Holdings Ltd. ....... 2,000,000 14,200,000
Keppel Corporation Ltd. .............. 3,000,000 13,323,076
Keppel Corporation Ltd. -- A.......... 750,000 3,252,089
United Overseas Bank Foreign
Registered.......................... 1,307,920 13,446,462
--------------
67,762,558
--------------
AUSTRALIA -- 1.2%
- --------------------------------------
AUSTRALIA -- 1.2%
News Corp. Ltd. ADR................... 1,000,000 19,250,000
Rio Tinto Limited..................... 322,500 5,455,304
Western Mining Corporation Holdings... 409,124 2,559,215
Western Mining Corporation Holdings
ADR................................. 82,812 2,122,058
--------------
29,386,577
--------------
EUROPE -- 57.6%
- --------------------------------------
DENMARK -- 1.9%
ISS International Service Systems B... 700,000 25,125,496
Novo Nordisk AS -- Class B............ 220,000 24,021,542
--------------
49,147,038
--------------
FRANCE -- 10.0%
AXA-UAP............................... 300,000 $ 18,676,749
Banque Nationale de Paris............. 502,521 20,731,036
BIC................................... 70,000 11,458,139
Compagnie Financiere de Paribas....... 267,257 18,481,949
Elf Aquitaine S.A. ................... 250,000 26,997,399
Eurotunnel S.A.*...................... 10,000,000 10,986,323
Michelin Class B REGD................. 350,000 21,038,383
Rhone Poulenc S.A. ................... 557,968 22,809,365
Schneider S.A. ....................... 500,000 26,639,704
Suez Lyonnaise des Eaux............... 222,611 22,447,138
Thomson CSF........................... 750,000 19,341,039
Total S.A. ........................... 307,995 31,161,816
--------------
250,769,040
--------------
NETHERLANDS -- 3.8%
ABN Amro Holdings NV.................. 1,422,948 26,580,571
Hunter Douglas NV..................... 73,533 6,267,480
ING Groep NV.......................... 625,470 28,890,114
Royal Dutch Petroleum ADR............. 640,000 34,800,000
--------------
96,538,165
--------------
NORWAY -- 4.2%
Bergesen.............................. 1,150,000 27,254,554
Kvaerner Industrier Series A.......... 500,000 30,290,426
Norsk Hydro Sponsored ADR............. 500,000 27,093,750
Saga Petroleum Series A Free.......... 1,100,000 20,885,710
--------------
105,524,440
--------------
PORTUGAL -- 1.1%
Banco Commercial Portugues Preferred.. 400,000 27,400,000
--------------
SPAIN -- 1.9%
Banco Bilboa Vizcaya REGD............. 100,000 8,138,978
Banco Intercontinental................ 130,000 22,982,244
Repsol S.A. .......................... 400,000 16,944,305
--------------
48,065,527
--------------
SWEDEN -- 9.0%
AGA AB Series B Free.................. 2,500,000 33,301,523
Autoliv, Inc. SDR*.................... 750,000 28,855,932
Ericsson L.M. Telephone Series B Free. 600,000 23,627,916
Kinnevik AB B Free.................... 230,870 6,419,376
Nobel Biocare AB...................... 916,346 12,917,333
Pharmacia & Upjohn SDS................ 700,000 23,627,916
Skandia Forsakrings AB................ 1,000,000 36,857,997
Swedish Match AB Fuerer............... 9,000,000 30,262,355
Trelleborg AB B Free.................. 300,000 4,927,332
Volvo AB B Free....................... 1,010,000 27,038,250
--------------
227,835,930
--------------
SWITZERLAND -- 12.3%
Ciba Specialty Chemicals AG........... 300,000 27,780,636
Clariant AG REGD...................... 40,000 25,928,593
Compagnie Financiere Michelin......... 45,000 23,644,408
Compagnie Financiere Richemont AG..... 20,500 29,670,405
Credit Suisse Group REGD.............. 177,035 22,769,189
Electrowatt AG Bearer................. 35,000 12,988,305
Nestle AG REGD........................ 20,000 26,422,471
Novartis AG REGD...................... 13,796 22,087,227
SCHW Ruckversicher REGD............... 20,655 29,257,177
SGS Holdings Bearer................... 9,000 19,261,241
Sulzer AG REGD........................ 10,775 9,238,776
Swiss Bank Corporation REGD*.......... 102,121 27,354,152
Swiss Bank Corporation Warrants*...... 5,605 54,595
Von Roll AG REGD*..................... 11,200 245,841
Zurich Versicherungsgesellschaft REGD. 80,000 31,882,567
--------------
308,585,583
--------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 95
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- --------------------------------------
UNITED KINGDOM -- 13.4%
B.A.T. Industries plc................. 3,043,075 $ 27,222,170
Barclay's Bank ORD.................... 479,301 9,508,592
BG plc................................ 7,000,000 25,746,721
British Petroleum ORD................. 2,313,375 28,741,370
Cadbury Schweppes plc ADR............. 455,081 16,667,341
Guinness plc.......................... 2,500,000 24,465,210
Imperial Tobacco Group plc............ 4,500,000 28,946,338
National Westminster Bank............. 2,000,000 26,878,445
Reed International plc................ 2,600,000 25,184,188
Rio Tinto plc Sponsored ADR........... 1,670,228 29,090,193
Rolls-Royce........................... 4,300,228 16,425,015
Royal Bank Scotland Group ORD......... 781,369 7,275,919
Smithkline Beecham plc ADR............ 400,000 36,650,000
Waste Management International plc
ADR................................. 1,809,000 16,507,125
Whitbread PLC......................... 1,500,000 18,935,573
--------------
338,244,200
--------------
SOUTH AMERICA -- 6.4%
- --------------------------------------
ARGENTINA -- 2.7%
Telecom de Argentina S.A. Class B..... 3,300,000 17,228,085
Telefonica de Argentina S.A. Class
B................................... 6,000,000 20,702,505
YPF ADR Class D....................... 1,000,000 30,750,000
--------------
68,680,590
--------------
BRAZIL -- 3.7%
Centrais Electricas Brasileiras
S.A.(Electrobras)................... 50,000,000 29,724,638
Petrobras Registered NV............... 115,000,000 31,940,053
Telebras Registered NV................ 200,000,000 30,430,599
--------------
92,095,290
--------------
TOTAL EQUITY SECURITIES
(Cost -- $1,795,958,875)............ 2,326,327,060
--------------
CONVERTIBLE BONDS -- 0.8% PRINCIPAL
- -------------------------------------- -----------
Liberty Life International 144A
Registered, 6.50%, 09/30/04
(Cost -- $20,159,305)............... $16,500,000 20,521,875
--------------
American Express, 6.15%, 07/01/97..... $ 9,923,000 $ 9,923,000
American Express, 5.53%, 07/09/97..... 13,779,000 13,779,000
American Express, 5.54%, 07/14/97..... 12,297,000 12,297,000
American Express, 5.55%, 07/15/97..... 13,154,000 13,154,000
Exxon Credit Corp., 5.50%, 07/07/97... 11,000,000 11,000,000
General Electric Capital, 5.53%,
07/08/97............................ 11,466,000 11,466,000
General Electric Capital, 5.57%,
07/10/97............................ 19,095,000 19,095,000
Prudential Funding, 5.49%, 07/01/97... 14,178,000 14,178,000
Prudential Funding, 5.48%, 07/02/97... 17,188,000 17,188,000
Prudential Funding, 5.42%, 07/03/97... 12,600,000 12,600,000
Prudential Funding, 5.56%, 07/11/97... 15,300,000 15,300,000
--------------
TOTAL COMMERCIAL PAPER
(Cost -- $149,980,000).............. 149,980,000
--------------
TOTAL INVESTMENTS -- 99.3%
(Cost -- $1,966,098,180)(a)......... 2,496,828,935
OTHER ASSETS, LESS LIABILITIES-- 0.7%. 16,831,284
--------------
NET ASSETS -- 100%.................... $2,513,660,219
==============
ADR - American Depository Receipt
NV - Non-voting
ORD - Ordinary
REGD - Registered
SDR - Swedish Depository Receipt
SDS - Swedish Depository Shares
* Non-income producing security.
(a) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................. $ 576,234,842
Gross unrealized depreciation.................. (45,504,087)
--------------
Net unrealized appreciation................ $ 530,730,755
==============
Purchases and sales of securities other than short-term obligations
aggregated $830,356,278 and $41,581,593, respectively, for the
period ended June 30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 96
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $1,966,098,180)... $2,496,828,935
Cash........................................................ 12,059,326
Receivables
Fund shares sold.......................................... 6,266,820
Dividends and interest.................................... 12,635,961
Other assets................................................ 89,183
--------------
Total assets.............................................. 2,527,880,225
--------------
LIABILITIES
Payables
Investments purchased..................................... 9,935,551
Fund shares repurchased................................... 448,810
Management fee............................................ 2,002,298
12b-1 service and distribution fees....................... 940,173
Other payables to related parties......................... 456,278
Accrued expenses............................................ 436,896
--------------
Total liabilities......................................... 14,220,006
--------------
NET ASSETS.................................................. $2,513,660,219
==============
CLASS A
Net asset value and redemption price per share
($1,655,141,492/39,901,259 shares outstanding)............ $ 41.48
==============
Maximum offering price per share ($41.48 X 100/94.25)*...... $ 44.01
==============
CLASS B
Net asset value, offering price and redemption price** per
share ($589,816,419/14,340,709 shares outstanding)........ $ 41.13
==============
CLASS C
Net asset value, offering price and redemption price*** per
share ($176,294,839/4,304,128 shares outstanding)......... $ 40.96
==============
CLASS I
Net asset value, offering price, and redemption price per
share ($92,407,469/2,222,957 shares outstanding).......... $ 41.57
==============
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,970,711,276
Undistributed net realized loss on investments and foreign
currency transactions................................... (2,435,994)
Undistributed net investment income....................... 14,680,242
Net unrealized appreciation on investments and foreign
currency transactions................................... 530,704,695
--------------
NET ASSETS.................................................. $2,513,660,219
==============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 97
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $2,684,331 foreign taxes withheld....... $ 27,294,035
Interest.................................................. 5,135,032
------------
32,429,067
------------
EXPENSES
Management fee............................................ $9,717,330
Transfer agent............................................ 1,378,936
Administrative services fee............................... 942,385
Custodian fees............................................ 886,084
Blue Sky fees............................................. 32,924
Auditing and accounting fees.............................. 20,741
Shareholder reports....................................... 13,561
Fund accounting........................................... 82,217
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 4,314,337
Legal..................................................... 37,653
Other..................................................... 319,680
------------
Total expenses.......................................... 17,748,825
------------
NET INVESTMENT INCOME....................................... 14,680,242
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (2,435,994)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 296,567,551
------------
Net gain on investment transactions..................... 294,131,557
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $308,811,799
============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 98
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ --------------
1997* 1996
------------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 14,680,242 $ 5,658,391
Net realized gain (loss) on investments and foreign
currency transactions................................... (2,435,994) 25,065,630
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 296,567,551 140,672,710
-------------- --------------
Net increase resulting from operations.................. 308,811,799 171,396,731
-------------- --------------
Class A distributions
From net investment income................................ -- (4,882,162)
From net realized gain.................................... -- (17,087,565)
-------------- --------------
Total distributions to Class A shareholders............. -- (21,969,727)
-------------- --------------
Class B distributions
In excess of net investment income........................ -- (430,044)
From net realized gain.................................... -- (5,538,963)
-------------- --------------
Total distributions to Class B shareholders............. -- (5,969,007)
-------------- --------------
Class C distributions
In excess of net investment income........................ -- (243,273)
In excess of net realized gain............................ -- (791,253)
-------------- --------------
Total distributions to Class C shareholders............. -- (1,034,526)
-------------- --------------
Class I distributions
From net investment income................................ -- (395,163)
In excess of net investment income........................ -- (23,513)
From net realized gain.................................... -- (932,968)
-------------- --------------
Total distributions to Class I shareholders............. -- (1,351,644)
-------------- --------------
Fund share transactions (Note 4)
Class A................................................... 458,726,178 404,645,714
Class B................................................... 205,997,305 211,044,612
Class C................................................... 111,985,877 42,991,790
Class I................................................... 28,929,111 35,796,386
-------------- --------------
Net increase resulting from
Fund share transactions............................... 805,638,471 694,478,502
-------------- --------------
TOTAL INCREASE IN NET ASSETS................................ 1,114,450,270 835,550,329
NET ASSETS
Beginning of period....................................... 1,399,209,949 563,659,620
-------------- --------------
END OF PERIOD............................................. $2,513,660,219 $1,399,209,949
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 14,680,242 $ --
============== ==============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 99
FINANCIAL HIGHLIGHTS(A)
<TABLE>
<CAPTION>
CLASS A FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------ --------------------------------------------------------
1997* 1996 1995 1994 1993 1992
SELECTED PER SHARE DATA ------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 35.89 $ 30.67 $ 27.60 $ 27.71 $ 18.88 $ 19.37
---------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income.......................... .30(h) .20 .25 .07 .12 .27(b)
Net realized and unrealized gain (loss) on
investment transactions...................... 5.29(h) 5.85 3.22 1.01 9.01 (.26)
---------- -------- -------- -------- -------- --------
Total from investment operations............. 5.59 6.05 3.47 1.08 9.13 .01
---------- -------- -------- -------- -------- --------
Less distributions
From net investment income..................... -- .19 .25 .07 .08 .27
From net realized gain......................... -- .64 .12 1.11 .22 .23
In excess of net realized gain................. -- -- .03 -- -- --
From capital paid-in........................... -- -- -- .01 -- --
---------- -------- -------- -------- -------- --------
Total distributions.......................... -- .83 .40 1.19 .30 .50
---------- -------- -------- -------- -------- --------
Net asset value, end of period................... $ 41.48 $ 35.89 $ 30.67 $ 27.60 $ 27.71 $ 18.88
========== ======== ======== ======== ======== ========
Total return(%).................................. 15.58(d) 19.72(c) 12.65(c) 3.92(c) 48.37(c) .07(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......... $1,655,141 $989,254 $475,989 $229,586 $172,539 $109,637
Ratio of expenses to average net assets(%)....... 1.59(f) 1.65 1.52 1.58 1.61 1.71(e)
Ratio of net investment income to average net
assets(%)...................................... 1.74(f) .76 .97 .30 .56 1.36(b)
Portfolio turnover rate(%)....................... 2 14 6 7 19 20
Average commission rate(g)....................... $ .0086 $ .0092 N/A N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 100
FINANCIAL HIGHLIGHTS(A) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
CLASS B FOR THE SIX MONTHS FOR THE YEAR ENDED (COMMENCEMENT)
ENDED JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------------ ------------------------------ ----------------
1997* 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------------ -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 35.73 $ 30.67 $ 27.60 $ 27.71 $25.86
-------- -------- ------- ------- ------
Income from investment operations
Net investment income (loss)......................... .16(h) (.01) .01 (.10) (.01)
Net realized and unrealized gain on investment
transactions....................................... 5.24(h) 5.76 3.20 .91 2.12
-------- -------- ------- ------- ------
Total from investment operations................... 5.40 5.75 3.21 .81 2.11
-------- -------- ------- ------- ------
Less distributions
From net investment income........................... -- -- .01 -- .04
In excess of net investment income................... -- .05 -- -- --
From net realized gain............................... -- .64 .10 .90 .22
In excess of net realized gain....................... -- -- .03 -- --
From capital paid-in................................. -- -- -- .02 --
-------- -------- ------- ------- ------
Total distributions................................ -- .69 .14 .92 .26
-------- -------- ------- ------- ------
Net asset value, end of period......................... $ 41.13 $ 35.73 $ 30.67 $ 27.60 $27.71
======== ======== ======= ======= ======
Total return(%)........................................ 15.11(d) 18.76(c) 11.62(c) 2.96(c) 7.65(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............... $589,816 $312,161 $74,650 $30,143 $2,846
Ratio of expenses to average net assets(%)............. 2.43(f) 2.45 2.44 2.50 2.59(f)
Ratio of net investment income (loss) to average net
assets(%)............................................ .90(f) (.04) .05 (.62) (.42)(f)
Portfolio turnover rate(%)............................. 2 14 6 7 19
Average commission rate(g)............................. $ .0086 $ .0092 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 101
FINANCIAL HIGHLIGHTS(A) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C FOR THE SIX MONTHS (COMMENCEMENT)
ENDED JUNE 30, TO DECEMBER 31,
------------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 35.58 $ 32.68
---------- --------
Income from investment operations
Net investment income..................................... .16(h) --
Net realized and unrealized gain on investment
transactions............................................ 5.22(h) 3.74
---------- --------
Total from investment operations........................ 5.38 3.74
---------- --------
Less distributions
In excess of net investment income........................ -- .20
From net realized gain.................................... -- .64
---------- --------
Total distributions..................................... -- .84
---------- --------
Net asset value, end of period.............................. $ 40.96 $ 35.58
========== ========
Total return(%)(d).......................................... 15.12 11.45
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 176,295 $ 44,450
Ratio of expenses to average net assets(%)(f)............. 2.41 2.44
Ratio of net investment income (loss) to average net
assets(%)(f)............................................ .91 (.03)
Portfolio turnover rate(%).................................. 2 14
Average commission rate(g).................................. $ .0086 $ .0092
</TABLE>
(See Notes to Financial Statements)
<PAGE> 102
FINANCIAL HIGHLIGHTS(A) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 6, 1994
CLASS I MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
---------------- -------------------- ---------------
1997* 1996 1995 1994
SELECTED PER SHARE DATA ---------------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 35.89 $ 30.67 $ 27.60 $ 29.06
---------- -------- -------- --------
Income (loss) from investment operations
Net investment income..................................... .38(h) .27 .30 .03
Net realized and unrealized gain (loss) on investment
transactions............................................ 5.30(h) 5.88 3.22 (.49)
---------- -------- -------- --------
Total from investment operations........................ 5.68 6.15 3.52 (.46)
---------- -------- -------- --------
Less distributions
From net investment income................................ -- .27 .30 .03
In excess of net investment income........................ -- .02 -- --
From net realized gain.................................... -- .64 .12 .92
In excess of net realized gain............................ -- -- .03 --
From capital paid-in...................................... -- -- -- .05
---------- -------- -------- --------
Total distributions..................................... -- .93 .45 1.00
---------- -------- -------- --------
Net asset value, end of period.............................. $ 41.57 $ 35.89 $ 30.67 $ 27.60
========== ======== ======== ========
Total return(%)............................................. 15.83(d) 20.06(c) 12.85(c) (1.64)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 92,407 $ 53,344 $ 13,020 $ 4,921
Ratio of expenses to average net assets(%).................. 1.19(f) 1.25 1.35 1.41(f)
Ratio of net investment income to average net assets(%)..... 2.14(f) 1.16 1.14 .47(f)
Portfolio turnover rate(%).................................. 2 14 6 7
Average commission rate(g).................................. $ .0086 $ .0092 N/A N/A
(a) Effective April 1, 1993, the subadviser is Northern Cross
Investments Limited. Boston Overseas Investors Inc. was the
subadviser from July 1, 1990 through March 31, 1993.
(b) Net investment income is net of expenses reimbursed by
manager.
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not
reflect a sales charge.
(e) The ratio of expenses to average net assets is net of
expenses reimbursed by manager. Without the expense
reimbursement the ratio of expenses to average net assets
would have been 1.80%.
(f) Annualized.
(g) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(h) Based on average shares outstanding.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Fund (the Fund), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Class I are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets. Northern Cross Investments Limited is the
subadviser of the Fund. IMI, not the Fund, is obligated to compensate the
subadviser.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and ex-
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
penses are reflected as Administrative services fee and Fund accounting in the
Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $459,352.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of shares issued after December 31, 1991, excluding Class I.
Class B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net asset value attributable to Class B and
Class C shares. IMDI may use such distribution fee for purposes of advertising
and marketing shares of the Fund. Such fees of $1,451,799, $2,281,203 and
$581,335, for Class A, Class B and Class C, respectively, are reflected as 12b-1
service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $794,145, $469,492, $112,606 and $2,693, for Class A, Class B, Class
C and Class I, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class I were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 16,478,890 $615,801,735 16,070,230 $537,452,973
Issued on reinvestment of
distributions........... -- -- 534,854 19,195,195
Repurchased.............. (4,140,981) (157,075,557) (4,561,167) (152,002,454)
---------- ------------ ---------- ------------
Net increase............. 12,337,909 $458,726,178 12,043,917 $404,645,714
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 6,212,248 $229,009,596 6,659,639 $222,635,747
Issued on reinvestment of
distributions........... -- -- 91,688 3,275,938
Repurchased.............. (608,370) (23,012,291) (448,268) (14,867,073)
---------- ------------ ---------- ------------
Net increase............. 5,603,878 $205,997,305 6,303,059 $211,044,612
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
------------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 3,169,639 $116,353,074 1,260,097 $ 43,344,404
Issued on reinvestment of
distributions........... -- -- 9,696 344,991
Repurchased.............. (114,979) (4,367,197) (20,325) (697,605)
---------- ------------ ---------- ------------
Net increase............. 3,054,660 $111,985,877 1,249,468 $ 42,991,790
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 781,127 $ 30,601,069 1,105,814 $ 37,145,203
Issued on reinvestment of
distributions........... -- -- 35,847 1,286,548
Repurchased.............. (44,396) (1,671,958) (79,940) (2,635,365)
---------- ------------ ---------- ------------
Net increase............. 736,731 $ 28,929,111 1,061,721 $ 35,796,386
========== ============ ========== ============
</TABLE>
Effective April 18, 1997, Ivy International Fund suspended the offer of its
shares to new investors. Shares of Ivy International Fund are available for
purchase only by existing shareholders of Ivy International Fund. Once a
shareholder's account is liquidated, the shareholder may not invest in Ivy
International Fund at a later date.
<PAGE> 105
June 30, 1997
IVY FUNDS(R)
Ivy
International
Fund II
- ------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
We would like to take this opportunity to welcome you as a shareholder of
the new Ivy International Fund II. There are many potential benefits to
investing internationally including additional diversification, minimizing risk
and maximizing returns.
Since the inception of the Ivy International Fund II on May 13, 1997,
European equity markets have performed well. We believe investors anticipated an
economic recovery on the Continent and as a result, portfolio companies such as
Volkswagen, Banque National de Paris and Trelleborg outperformed their
respective home markets.
Looking ahead, we believe European companies should benefit from improved
economic activity, more competitive currencies, lower interest rates and ongoing
corporate restructuring. The Fund's investments are heavily biased toward
cyclical companies (Volvo, Galleries Lafayette and Holderbank), companies that
should benefit from restructuring (Philips Electronics, Unilever and Schneider)
and financial services (ING, Credit Suisse and Bank of Ireland) that should do
well in a declining interest rate environment.
Latin America has been another bright spot in the Ivy International Fund II.
The strong equity performance in Latin America has been primarily in the
larger-capitalization stocks and accordingly the Fund's concentrated holdings in
companies like Telebras, Telefonica de Argentina and CTC have performed very
well. Fundamentals in Latin America continue to improve and perceived risk is
falling. We expect smaller-capitalization issues to participate in the rally in
Latin American stocks in the months to come.
Asia is clearly the dark cloud in an otherwise good environment for
international equities. On the surface it would appear that the Hong Kong market
has performed reasonably well. But if the performance of dominant HSBC Holdings
is taken out of the index, it is apparent that most stocks comprising the Hang
Seng index have actually declined since the beginning of 1997. The situation
elsewhere in Asia is not much better. Investor sentiment is at an all time low
which leads us to believe that there is tremendous upside potential for stock
markets in the region. We continue to favor Hong Kong, but we are finding
tremendous bargains in the rest of East Asia. While there are no guarantees, our
research indicates this region could provide big surprises.
On the currency front, according to our research, the deutschemark was
approaching fair value in the 1.70 range. However, the surprise result of the
French election caused us to rethink this view. With the socialist party far
less committed to the European Monetary Union (EMU) than its predecessor, there
could be far more pressure on the entire currency system. We believe that in an
effort to save jobs (a key feature of the French socialist platform) the
Maastricht rules could be relaxed. This would make it easier for "weaker"
countries such as Italy, Spain and Portugal to join the EMU, thereby placing
additional downward pressure on the core European currencies.
We are optimistic about the longer-term prospects for international markets
and would encourage investors who recognize the benefits of international
diversification to look beyond any short-term distractions.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 106
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 93.7% SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
AFRICA -- 2.1%
- --------------------------------------------------------------------
SOUTH AFRICA -- 2.1%
Anglo American Corporation of South Africa
Ltd. ADR................................ 3,755 $ 226,225
Nampak Limited............................ 35,948 156,139
Rembrandt Group Ltd. ..................... 13,484 143,892
South African Breweries Ltd. ............. 4,841 148,628
-----------
674,884
-----------
ASIA/PACIFIC -- 29.0%
- ------------------------------------------
AUSTRALIA -- 4.0%
Australia & New Zealand Banking Group
Ltd. ................................... 34,902 258,852
National Australia Bank Ltd. ............. 12,674 180,113
Pacific Dunlop Limited.................... 195,120 572,998
Westpac Banking Corp. Ltd. ............... 43,239 258,166
-----------
1,270,129
-----------
HONG KONG -- 9.0%
Cheung Kong Holdings Ltd. ................ 50,000 493,722
Guangdong Investments..................... 138,000 207,518
Guangdong Investments Warrants*........... 13,800 6,501
HSBC Holdings............................. 15,800 475,186
Jardine Strategic Holdings Ltd. .......... 96,000 362,880
New World Development Company Ltd. ....... 52,000 310,096
Peregrine Investment Holdings Limited..... 179,000 368,525
Swire Pacific Ltd. ....................... 32,000 288,101
Tsingtao Brewery Co. Ltd. Series H........ 92,000 35,625
Wheelock & Company, Ltd. ................. 135,000 331,955
-----------
2,880,109
-----------
INDONESIA -- 1.5%
PT Astra International -- Foreign
Registered.............................. 67,500 278,994
PT Telekomunikasi Indonesia -- Foreign
Registered.............................. 50,000 81,740
Semen Gresik -- Foreign Registered........ 54,500 122,157
-----------
482,891
-----------
MALAYSIA -- 3.5%
Arab Malaysian Corporation*............... 59,000 219,730
Genting Berhad............................ 75,000 359,548
Land & General Berhad..................... 115,000 132,131
Perusahaan Otomobil Nasional Berhad....... 34,000 158,954
RHB Capital Berhad........................ 81,000 256,735
-----------
1,127,098
-----------
NEW ZEALAND -- 4.4%
Fletcher Challenge Building............... 97,123 291,596
Fletcher Challenge Energy................. 85,488 257,823
Fletcher Challenge Forests................ 55,007 79,779
Fletcher Challenge Paper.................. 60,540 146,476
Telecom Corp. of New Zealand Ltd. ........ 80,000 406,637
Tourism Holdings Limited.................. 171,089 242,340
-----------
1,424,651
-----------
PHILIPPINES -- 1.6%
Benpres Holdings Corporation GDR*......... 44,900 306,308
Metro Pacific Corporation................. 888,950 192,107
-----------
498,415
-----------
SINGAPORE -- 4.2%
Clipsal Industries Ltd. .................. 97,000 343,380
DBS Land Limited.......................... 72,000 227,604
Elec & Eltek International Co. Ltd. ...... 48,000 268,800
Jardine Matheson Holdings Ltd. ........... 69,600 494,160
-----------
1,333,944
-----------
THAILAND -- 0.8%
Asia Credit Company PLC................... 2,300 $ 5,860
Bankok Bank Public Company Limited........ 16,600 114,063
Dhana Siam Finance & Secs. Public Co.
Ltd. ................................... 6,800 3,609
Krung Thai Bank Public Company Limited.... 8,300 8,651
Krung Thai Thanakit PLC................... 3,600 2,050
Nava Finance and Securities Public Company
Limited*................................ 7,300 2,818
Robinson Department Store Public Company
Limited -- Foreign Registered........... 330,800 121,312
-----------
258,363
-----------
EUROPE -- 55.3%
- ------------------------------------------
FINLAND -- 2.2%
Enso OY -- R Shares....................... 18,474 170,718
Rauma OY.................................. 9,691 222,020
UPM -- Kymmene Corp....................... 14,179 327,570
-----------
720,308
-----------
FRANCE -- 10.5%
Banque Nationale de Paris................. 12,916 532,837
Compagnie Financiere de Paribas........... 2,880 199,164
Elf Aquitaine S.A......................... 1,852 199,997
Galeries Lafayette*....................... 527 218,665
Groupe Danone............................. 1,804 298,365
Pernod-Ricard............................. 10,000 516,102
Peugeot Citroen........................... 2,761 267,121
Schneider S.A............................. 6,427 342,427
Societe Generale.......................... 1,609 179,785
Suez Lyonnaise des Eaux................... 3,015 304,020
Total S.A. ADR............................ 5,800 293,625
-----------
3,352,108
-----------
GERMANY -- 3.9%
Merck KGaA................................ 12,729 555,171
Volkswagen AG............................. 903 685,075
-----------
1,240,246
-----------
IRELAND -- 1.3%
Bank of Ireland........................... 37,326 410,935
-----------
ITALY -- 3.1%
Banco Popolare di Milano.................. 85,000 508,801
Fiat S.p.A.*.............................. 138,000 496,362
-----------
1,005,163
-----------
NETHERLANDS -- 8.1%
ABN Amro Bank............................. 13,685 255,635
Akzo Nobel NV............................. 2,601 357,098
Fortis Amev NV............................ 10,945 488,227
Hunter Douglas NV......................... 5,686 484,638
ING Groep NV.............................. 6,446 297,737
Philips Electronics NV.................... 4,308 309,140
Unilever NV ADR........................... 1,800 392,400
-----------
2,584,875
-----------
NORWAY -- 2.0%
Norsk Hydro Sponsored ADR................. 11,600 628,575
-----------
PORTUGAL -- 2.1%
Lusomundo-SGPS S.A. Preferred Shares...... 30,021 251,043
Portugal Telecom S.A. ADR................. 10,900 437,362
-----------
688,405
-----------
SPAIN -- 3.5%
Empresa Nacional de Electricidad -- ADR... 5,000 425,312
Telefonica de Espana S.A. ADR............. 8,235 710,269
-----------
1,135,581
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 107
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
SWEDEN -- 6.1%
AssiDoman AB.............................. 5,749 $ 163,569
Astra AB "B" Shares....................... 10,669 189,720
Electrolux AB............................. 3,441 248,317
Granges AB................................ 149 2,004
S.K.F. AB Series "B"...................... 11,500 297,450
Stora Kopparbergs Bergslags Aktiebolag
(STORA)................................. 12,673 206,508
Trelleborg AB "B" Free Shares............. 33,759 554,473
Volvo AB B Shares......................... 10,983 294,021
-----------
1,956,062
-----------
SWITZERLAND -- 4.3%
Credit Suisse Group....................... 2,266 291,439
Holderbank Financiere Glaris AG........... 374 353,772
Nestle AG Registered...................... 299 395,016
SMH AG Bearer............................. 569 325,511
-----------
1,365,738
-----------
UNITED KINGDOM -- 8.2%
Bank of Scotland.......................... 60,346 385,666
Barclays PLC ADR.......................... 12,506 248,100
Cadbury Schweppes PLC ADR................. 18,135 161,625
Grand Metropolitan PLC ADR................ 21,601 209,052
Hanson PLC ADR............................ 8,600 215,000
Imperial Chemical Industries PLC --
Sponsored ADR........................... 30,383 422,482
National Westminster Bank PLC ADR......... 12,662 170,167
Safeway plc............................... 51,000 294,956
Shell Transport & Trading Co. ............ 44,040 300,146
Waste Management International plc*....... 25,700 234,512
-----------
2,641,706
-----------
LATIN AMERICA -- 7.3%
- ------------------------------------------
ARGENTINA -- 1.5%
CIADEA S.A.*.............................. 14,400 61,927
Telecom Argentina S.A. Sponsored ADR...... 2,000 105,000
Telefonica De Argentina S.A. ............. 3,700 128,113
YPF S.A. Sponsored ADR.................... 6,000 184,500
-----------
479,540
-----------
BRAZIL -- 2.4%
Companhia Vale do Rio Doce Preferred...... 15,000 334,402
Telecomunicacoes Brasileiras S.A. ADR
(Telebras).............................. 2,800 424,900
-----------
759,302
-----------
CHILE -- 2.9%
A.F.P Provida S.A. Sponsored ADR.......... 12,000 $ 262,500
Cia de Telecomunicaciones de Chile S.A.
Sponsored ADR*.......................... 6,200 204,600
Empresa Nacional de Electricidad S.A...... 5,900 133,119
Santa Isabel S.A. ADR..................... 5,300 170,925
Vina Concha y Toro S.A. ADR............... 5,400 167,062
-----------
938,206
-----------
MEXICO -- 0.5%
Sanluis Corporacion S.A. de C.V. ......... 12,130 89,513
Tubos de Acero de Mexico S.A. -- Sponsored
ADR..................................... 3,300 60,844
-----------
150,357
-----------
TOTAL EQUITY SECURITIES
(Cost -- $29,608,253)(a)................ 30,007,591
OTHER ASSETS, LESS LIABILITIES -- 6.3%.... 2,031,938
-----------
NET ASSETS -- 100%........................ $32,039,529
===========
ADR - American Depository Receipt
GDR - Global Depository Receipt
NV - Non-voting
* Non-Income producing security.
(a) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 961,878
Gross unrealized depreciation..................... (562,540)
-----------
Net unrealized appreciation................... $ 399,338
===========
Purchases and sales of securities other than short-term obligations
aggregated $29,608,253 and $0, respectively, for the period ended
June 30, 1997.
Forward foreign currency exchange contracts at June 30, 1997 were:
FORWARD CONTRACTS PRINCIPAL VALUE OF UNREALIZED
(CURRENCY/EXPIRATION/COMMITMENT) AMOUNT OBLIGATION APPRECIATION
- -------------------------------------- ------------- ----------- ------------
Deutsch Marks/September 97/Sell....... 100,455 US $ (99,740) $ 715
French Francs/September 97/Sell....... 1,224,440 US (1,195,842) 28,598
French Francs/September 97/Sell....... 1,296,156 US (1,288,093) 8,063
Netherland Guilders/September
97/Sell.............................. 400,371 US (397,329) 3,042
Swiss Francs/September 97/Sell........ 252,136 US (248,675) 3,461
----------- -------
Total forward foreign currency
exchange contracts sold.............. $(3,229,679) $43,879
=========== =======
</TABLE>
(See Notes to Financial Statements)
<PAGE> 108
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $29,608,253)...... $30,007,591
Cash........................................................ 4,949,130
Cash denominated in foreign currencies (cost -- $101)....... 102
Receivables
Open forward foreign currency contracts................... 43,879
Fund shares sold.......................................... 1,719,435
Dividends and interest.................................... 47,062
Deferred organization expense............................... 61,106
-----------
Total assets............................................ 36,828,305
-----------
LIABILITIES
Payables
Investments purchased..................................... 4,731,154
Fund shares repurchased................................... 11,346
Management fee............................................ 17,743
12b-1 service and distribution fees....................... 15,004
Other payables to related parties......................... 7,113
Accrued expenses............................................ 6,416
-----------
Total liabilities....................................... 4,788,776
-----------
NET ASSETS.................................................. $32,039,529
===========
CLASS A
Net asset value and redemption price per share
($6,508,007/634,226 shares outstanding)................... $ 10.26
===========
Maximum offering price per share ($10.26 X 100/94.25)*...... $ 10.89
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($16,697,672/1,628,643 shares outstanding).......... $ 10.25
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($8,833,850/861,718 shares outstanding)............. $ 10.25
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $31,551,918
Undistributed net realized loss on investments and foreign
currency transactions................................... (395)
Undistributed net investment income....................... 45,186
Net unrealized appreciation on
Investments and foreign currency transactions........... 398,941
Forward foreign currency contracts...................... 43,879
-----------
NET ASSETS.................................................. $32,039,529
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 109
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 13, 1997 (COMMENCEMENT) TO JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $9,349 foreign taxes withheld........... $ 80,999
Interest.................................................. 16,795
----------
97,794
----------
EXPENSES
Management fee............................................ $ 20,952
Transfer agent............................................ 2,408
Administrative services fee............................... 2,095
Custodian fees............................................ 1,046
Auditing and accounting fees.............................. 1,500
Amortization of organization expenses..................... 243
Fund accounting........................................... 2,925
12b-1 service and distribution fees....................... 17,524
Legal..................................................... 3,000
Other..................................................... 915
----------
Total expenses........................................ 52,608
----------
NET INVESTMENT INCOME....................................... 45,186
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (395)
Net unrealized appreciation during the period on
Investments and foreign currency transactions........... 398,941
Forward foreign currency contracts...................... 43,879
----------
Net gain on investment transactions................... 442,425
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 487,611
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 13, 1997 (COMMENCEMENT) TO JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 45,186
Net realized loss on investments and foreign currency
transactions............................................ (395)
Net unrealized appreciation during the period on
Investments and foreign currency transactions........... 398,941
Forward foreign currency contracts...................... 43,879
-----------
Net increase resulting from operations................ 487,611
-----------
Fund share transactions (Note 4)
Class A................................................... 6,396,705
Class B................................................... 16,447,037
Class C................................................... 8,708,176
Class I................................................... --
-----------
Net increase resulting from Fund share transactions... 31,551,918
-----------
TOTAL INCREASE IN NET ASSETS................................ $32,039,529
===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 45,186
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 110
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD MAY 13, 1997
(COMMENCEMENT)
TO JUNE 30, 1997*
---------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SELECTED PER SHARE DATA**
Net asset value, beginning of period........................ $10.01 $10.01 $10.01
------ ------- ------
Income from investment operations
Net investment income..................................... .03 .02 .02
Net realized and unrealized gain on investment
transactions............................................ .22 .22 .22
------ ------- ------
Total from investment operations........................ .25 .24 .24
------ ------- ------
Net asset value, end of period.............................. $10.26 $10.25 $10.25
====== ======= ======
Total return(%)(a).......................................... 2.50 2.40 2.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $6,508 $16,698 $8,834
Ratio of expenses to average net assets(%)(b)............. 1.82 2.58 2.56
Ratio of net investment income to average net
assets(%)(b)............................................ 2.66 1.90 1.92
Portfolio turnover rate(%).................................. 0 0 0
Average commission rate(c).................................. $.0228 $.0228 $.0228
(a) Total return represents aggregate total return and does not
reflect a sales charge.
(b) Annualized.
(c) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
* Unaudited.
** Based on average shares outstanding.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 111
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Fund II (the Fund), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Class I are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY CONTRACTS -- Forward foreign currency contracts
may be entered into for purposes of hedging specific securities denominated in
foreign currencies. Forward contracts are marked to market daily, and the change
in market value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. The Fund could be exposed to risk if the
counter parties are unable to meet the terms of the contracts.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may
<PAGE> 112
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
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). The voluntary
expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. From May 13, 1997 (Commencement) to June 30, 1997, the net amount of
underwriting discount retained by IMDI was $22,796.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net assets, excluding Class I. Class B and Class C shares are also subject to an
ongoing distribution fee at an annual rate of .75% of the average net asset
value attributable to Class B and Class C shares. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$1,143, $10,678 and $5,703, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $372, $1,421, $615 and $0, for Class A, Class B, Class C and Class
I, respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions from May 13, 1997 (Commencement) to June 30, 1997,
for Class A, Class B, Class C and Class I were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
------- --------- -----------
<S> <C> <C>
Sold.............................................. 639,057 $ 6,445,931
Repurchased....................................... (4,831) (49,226)
--------- -----------
Net increase...................................... 634,226 $ 6,396,705
========= ===========
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
------- --------- -----------
<S> <C> <C>
Sold.............................................. 1,637,376 $16,535,345
Repurchased....................................... (8,733) (88,308)
--------- -----------
Net increase...................................... 1,628,643 $16,447,037
========= ===========
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES AMOUNT
------- --------- -----------
<S> <C> <C>
Sold.............................................. 870,370 $ 8,796,077
Repurchased....................................... (8,652) (87,901)
--------- -----------
Net increase...................................... 861,718 $ 8,708,176
========= ===========
</TABLE>
<TABLE>
<CAPTION>
CLASS I SHARES AMOUNT
------- --------- -----------
<S> <C> <C>
Sold.............................................. 1 $ 10
Repurchased....................................... (1) (10)
--------- -----------
Net increase...................................... -- $ --
========= ===========
</TABLE>
03IVIAX063097
<PAGE> 113
June 30, 1997
IVY FUNDS(R)
Ivy
International
Small
Companies
Fund
- -----------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
MARKET COMMENTARY:
We would like to take this opportunity to welcome you as a shareholder of
the new Ivy International Small Companies Fund. There are many potential
benefits to investing internationally including additional diversification,
minimizing risk and maximizing returns.
The development of international small-capitalization stocks as an asset
class is still in its early days. According to our research, however, Europe is
on the right track. After several years of underperformance due to weak
economies, we believe domestically focused small companies in Europe should
begin to show signs of strength. In addition, the trend toward
entrepreneurship, increased access to capital markets, and perhaps the most
important -- attractive valuations -- should provide strong support for this
asset class in the coming years. We believe 2the combination of strong profit
growth as European economies pick up and the current low valuations in
small-capitalization European stocks make this an attractive area for
investment.
Approximately 50% of the Ivy International Small Companies Fund is
invested in Europe, 24% in Asia, 6% in Latin America and 2% in Canada. Many of
the Fund's European stocks are invested in small-capitalization consumer
cyclicals and industrial holdings, which we believe should benefit from the
European recovery that our research indicates is underway. These holdings
include Dyckerhoff, a German cement manufacturer, Edipresse, a Swiss publisher,
and the German-based manufacturer of high-quality cameras, Leica Camera. These
stocks have performed reasonably well in local currency terms, although not as
well as their large-capitalization counterparts. Large-capitalization stocks in
Europe, as in other markets, have outperformed smaller-company stocks
significantly since the beginning of 1997.
The Fund's Asian investments have suffered along with the region's general
investment climate. However, we continue to believe there is tremendous value
in many of these issues. The Fund is invested in niche manufacturers like Elec
& Eltek and retailers such as Robinson Stores and Tourism Holdings, a tour
operator in New Zealand. Our research confirms that these stocks are selling at
very reasonable valuations and offer superior long-term growth.
The Fund's Latin American investments have performed well on the back of
strong overall markets in the region. Latin American markets are dominated by
large utilities, banks and conglomerates, and the quality and number of
smaller-capitalization companies are limited. However, the Fund is invested in
some well-managed, small-capitalization stocks like the Brazilian airline TAM,
and Bansud, one of the largest Argentine banks.
For the most part, international small-capitalization stocks have been
largely ignored by international investors and are not as widely covered by
research analysts as are large-capitalization stocks. Neglected and
under-researched stocks often present excellent values.
Overall, we are optimistic about the longer-term prospects for
international markets, and small-company stocks, in particular. We believe
investors who recognize the importance of diversifying their investment
portfolios overseas should benefit.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 114
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 81.2% SHARES VALUE
<S> <C> <C>
- -------------------------------------------
ASIA/PACIFIC -- 23.9%
- -------------------------------------------
AUSTRALIA -- 1.1%
Pacific Dunlop Limited..................... 12,400 $ 36,414
----------
HONG KONG -- 7.8%
CDL Hotels International Ltd............... 44,000 17,890
Li & Fung.................................. 50,000 56,149
National Mutual Asia Ltd................... 44,000 48,843
Peregrine Investment Holdings Limited...... 26,000 53,529
Union Bank of Hong Kong Ltd................ 31,000 89,631
----------
266,042
----------
MALAYSIA -- 3.7%
KFC Holdings (Malaysia) Berhad............. 20,300 76,406
Malayan Cement Berhad...................... 28,750 48,068
----------
124,474
----------
NEW ZEALAND -- 7.2%
Fisher & Paykel Industries................. 20,800 81,056
Fletcher Challenge Building................ 23,000 69,054
Fletcher Challenge Forestry................ 5,200 7,542
Tourism Holdings Limited................... 61,200 86,687
----------
244,339
----------
PHILIPPINES -- 1.0%
Metro Pacific Corp......................... 162,700 35,160
----------
SINGAPORE -- 1.7%
Elec & Eltek International Co. Ltd......... 10,000 56,000
----------
THAILAND -- 1.4%
Asia Credit Company PLC.................... 4,500 11,465
Dhana Siam Finance & Securities Public
Company Limited.......................... 48,400 25,690
Robinson Department Store Public Company
Limited -- Foreign Registered............ 30,200 11,075
----------
48,230
----------
EUROPE -- 50.0%
- -------------------------------------------
AUSTRIA -- 4.2%
BWT AG..................................... 560 86,779
Creditanstalt-Bankverein................... 1,390 55,890
----------
142,669
----------
FINLAND -- 1.8%
Metsa-Serla OY -- Class B.................. 7,300 59,448
----------
FRANCE -- 5.1%
Bongrain S.A............................... 175 68,528
Scor....................................... 1,810 72,944
Societe Generale........................... 300 33,521
----------
174,993
----------
GERMANY -- 6.7%
Dyckerhoff AG.............................. 115 41,709
Gerresheimer Glas AG....................... 3,800 63,787
Leica Camera AG............................ 2,420 59,718
Merck KGaA................................. 1,440 62,805
----------
228,019
----------
HUNGARY -- 1.1%
Danubius Hotel & Spa Rt.................... 500 14,787
Pick Szeged Rt............................. 300 23,083
----------
37,870
----------
ITALY -- 7.7%
Banca Popolare Di Milano................... 7,950 47,588
Fiat S.p.A.*............................... 15,950 57,369
Industrie Natuzzi Spa -- Sponsored ADR..... 2,400 61,500
Safilo S.p.A............................... 4,060 94,252
----------
260,709
----------
NETHERLANDS -- 1.0%
Fortis Amev NV............................. 700 31,225
----------
NORWAY -- 1.7%
Norske Skogindustrier ASA.................. 910 31,573
Nycomed ASA................................ 1,830 26,997
----------
58,570
----------
PORTUGAL -- 4.5%
Colep -- Cia. Portuguesa de Embalagens*.... 1,800 28,927
Companhia de Seguros Mundial Confianca
S.A.*.................................... 4,850 71,457
Lusomundo-SGPS S.A......................... 5,610 50,742
----------
151,126
----------
SPAIN -- 2.2%
Grupo Anaya S.A............................ 3,900 76,372
----------
SWEDEN -- 1.2%
S.K.F. AB Series "B"....................... 1,510 39,057
----------
SWITZERLAND -- 5.1%
Edipresse S.A.............................. 315 74,545
Fotolabo S.A............................... 310 98,879
----------
173,424
----------
UNITED KINGDOM -- 7.7%
Care U.K. PLC.............................. 36,780 75,598
Corporate Services Group PLC............... 20,380 63,936
Jarvis Hotels PLC.......................... 26,770 62,598
Kiln Capital PLC........................... 34,650 59,686
----------
261,818
----------
LATIN AMERICA -- 5.6%
- -------------------------------------------
ARGENTINA -- 2.8%
Bansud S.A.*............................... 3,340 51,776
Quilmes Industrial S.A.*................... 3,830 44,524
----------
96,300
----------
BRAZIL -- 1.7%
Elevadores Atlas S.A. 144A................. 1,600 20,844
OSA S.A. Preferred......................... 2,800,000 13,005
Tam Transport Aeros Preferred.............. 460,000 25,424
----------
59,273
----------
CHILE -- 1.1%
Genesis Chile Fund......................... 760 38,190
----------
NORTH AMERICA -- 1.7%
- -------------------------------------------
CANADA -- 1.7%
Methanex Corporation....................... 5,870 54,464
Semi-Tech Corporation...................... 1,560 3,347
----------
57,811
----------
TOTAL EQUITY SECURITIES
(Cost -- $2,679,690)(a).................. 2,757,533
OTHER ASSETS, LESS LIABILITIES -- 18.8%.... 639,468
----------
NET ASSETS -- 100%......................... $3,397,001
==========
ADR -- American Depository Receipt
NV -- Non-voting
* Non-Income producing security.
(a) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $ 239,238
Gross unrealized depreciation...................... (161,395)
----------
Net unrealized appreciation.................... $ 77,843
==========
Purchases and sales of securities other than short-term obligations
aggregated $2,682,230 and $3,575, respectively, for the period ended
June 30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 115
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $2,679,690)....... $ 2,757,533
Cash........................................................ 813,837
Receivables
Fund shares sold.......................................... 54,475
Dividends and interest.................................... 7,449
Manager for expense reimbursement......................... 17,958
Deferred organization expenses.............................. 44,183
Other assets................................................ 3,040
-----------
Total assets.............................................. 3,698,475
-----------
LIABILITIES
Payables
Investments purchased..................................... 279,562
Fund shares repurchased................................... 311
Management fee............................................ 2,698
12b-1 service and distribution fees....................... 2,088
Other payables to related parties......................... 2,803
Accrued expenses............................................ 14,012
-----------
Total liabilities......................................... 301,474
-----------
NET ASSETS.................................................. $ 3,397,001
===========
CLASS A
Net asset value and redemption price per share
($1,117,011/107,585 shares outstanding)................... $ 10.38
===========
Maximum offering price per share ($10.38 X 100/94.25)*...... $ 11.01
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($694,639/67,153 shares outstanding)................ $ 10.34
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,585,351/153,106 shares outstanding)............. $ 10.35
===========
NET ASSETS CONSIST OF
Capital paid-in............................................. $ 3,307,922
Undistributed net realized gain on investments and foreign
currency transactions..................................... 1,125
Undistributed net investment income......................... 10,151
Net unrealized appreciation on investments and foreign
currency transactions..................................... 77,803
-----------
NET ASSETS.................................................. $ 3,397,001
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 116
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $3,347 foreign taxes withheld........... $ 35,469
--------
EXPENSES
Management fee............................................ $ 9,644
Transfer agent............................................ 2,127
Administrative services fee............................... 964
Custodian fees............................................ 23,407
Blue Sky fees............................................. 1,520
Auditing and accounting fees.............................. 1,553
Shareholder reports....................................... 50
Amortization of organization expenses..................... 2,754
Fund accounting........................................... 8,275
Trustees' fees............................................ 435
12b-1 service and distribution fees....................... 7,219
Legal..................................................... 7,764
Other..................................................... 1,033
--------
66,745
Expenses reimbursed by manager............................ (41,427)
--------
Net expenses............................................ 25,318
--------
NET INVESTMENT INCOME....................................... 10,151
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 1,125
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 77,803
--------
Net gain on investment transactions..................... 78,928
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 89,079
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 117
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 10,151
Net realized gain on investments and foreign currency
transactions............................................ 1,125
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 77,803
-----------
Net increase resulting from operations.................. 89,079
-----------
Fund share transactions (Note 4)
Class A................................................. 1,081,212
Class B................................................. 679,618
Class C................................................. 1,547,092
Class I................................................. --
-----------
Net increase resulting from Fund share transactions..... 3,307,922
-----------
TOTAL INCREASE IN NET ASSETS................................ $ 3,397,001
===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 10,151
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 118
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1997*
---------------------------------
CLASS A CLASS B CLASS C
SELECTED PER SHARE DATA** ------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.00 $10.00 $10.00
------ ------ ------
Income from investment operations
Net investment income(a).................................. .06 .03 .03
Net realized and unrealized gain on investment
transactions............................................ .32 .31 .32
------ ------ ------
Total from investment operations........................ .38 .34 .35
------ ------ ------
Net asset value, end of period.............................. $10.38 $10.34 $10.35
====== ====== ======
Total return(%)(b).......................................... 3.80 3.40 3.50
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,117 $ 695 $1,585
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 2.11 2.91 2.82
Without expense reimbursement(%)(c)....................... 6.37 7.17 7.08
Ratio of net investment income to average net
assets(%)(a)(c)........................................... 1.53 .73 .83
Portfolio turnover rate(%).................................. 0 0 0
Average commission rate(d).................................. $.0026 $.0026 $.0026
</TABLE>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Annualized.
(d) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
* Unaudited.
** Based on average shares outstanding.
(See Notes to Financial Statements)
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Small Companies Fund (the Fund), is a diversified series
of shares of Ivy Fund. The shares of beneficial interest are assigned no par
value and an unlimited number of shares of Class A, Class B, Class C and Class I
are authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.95% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $4,070.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net assets, excluding Class I. Class B and Class C shares are also subject to an
ongoing distribution fee at an annual rate of .75% of the average net asset
value attributable to Class B and Class C shares. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$808, $1,958 and $4,453, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $742, $579, $806 and $0, for Class A, Class B, Class C and Class I,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions from January 1, 1997 (Commencement) to June 30,
1997, for Class A, Class B, Class C and Class I were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
------- ------- ----------
<S> <C> <C>
Sold................................................... 112,024 1,126,132
Repurchased............................................ (4,439) (44,920)
------- ----------
Net increase........................................... 107,585 1,081,212
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
------- ------- ----------
<S> <C> <C>
Sold................................................... 78,553 $ 794,248
Repurchased............................................ (11,400) (114,630)
------- ----------
Net increase........................................... 67,153 $ 679,618
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES AMOUNT
------- ------- ----------
<S> <C> <C>
Sold................................................... 176,674 $1,787,192
Repurchased............................................ (23,568) (240,100)
------- ----------
Net increase........................................... 153,106 $1,547,092
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS I SHARES AMOUNT
------- ------- ----------
<S> <C> <C>
Sold................................................... 1 $ 10
Repurchased............................................ (1) (10)
------- ----------
Net increase........................................... -- $ --
======= ==========
</TABLE>
03IISCF063097
<PAGE> 121
IVY FUNDS(R)
June 30, 1997
Ivy
Latin America
Strategy
Fund
- -------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
Since the beginning of 1997, strong capital flows into Latin America have
helped fuel one of the best regional performances among stock markets around the
world. However, investments in Latin America continue to be relatively
concentrated in the stocks of larger-capitalization companies, particularly
telecommunication stocks (and in some cases, electric utilities). These stocks
dominate most of the local indices and serve as proxies for many of the markets
in the region. This has been the case in both Argentina and Brazil, for example,
where telecommunication stocks have gained more than twice the returns of the
indices.
Holdings in the Ivy Latin America Strategy Fund tend to be more diversified
than the indices (as well as many funds in its peer group). As a result, the
Fund is well positioned to take advantage of a broader-based rally that our
research indicates should result as investors become more selective and start
looking for values beyond large-capitalization stocks.
Since the beginning of 1997, the Ivy Latin America Strategy Fund has been
overweight in Brazil (45% of net assets), the best performing market in Latin
America, and significantly underweight in Mexico (7% of net assets), which has
underperformed other regional markets. We increased the Fund's exposure to
Mexico, however, from approximately 4% of the Fund's assets to its current
weighting. Although this does not reflect a dramatic shift in portfolio
allocation and the Fund remains an outlier among its peers with respect to
Mexico, it does mark the Fund's first new investment in the country in the last
12 months. While we continue to have concerns regarding Mexico's macroeconomic
(and political) environment over the longer term, we feel that valuations for
some companies now reflect these uncertainties better than they have over the
last year. The companies we have added are either operationally or financially
hedged to a decline in the peso, which we continue to believe is overvalued.
The successful privatization of a strategic stake in the iron-ore exporter,
Cia Vale do Rio Doce (CVRD) -- the largest sale of state assets in Latin America
to date -- provides further evidence of Brazil's steady progress toward market
reform. Economic releases coming out of Argentina indicate a strong recovery
from the "tequila"-induced recession of 1995. According to our research, this
should translate into further gains for the market. Investments in Argentina
currently account for 15% of the Ivy Latin America Strategy Fund. In Chile (15%
of the Fund), attractive valuations, interest rate cuts and increasing equity
allocations from local pension funds have contributed to strong market
performance.
We feel the underlying story regarding Latin America is strengthening. Our
research suggests that improving fundamentals are decreasing the risks of
investing in the region and are translating into strong corporate profit growth
for those companies positioned to benefit from structural changes.
Going forward, we believe the Ivy Latin America Strategy Fund is well
positioned to benefit from continued growth in the region. We would encourage
investors who recognize the benefits of international diversification to look
beyond any short-term distractions and focus on the long-term prospects for
Latin America.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 122
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 90.0% SHARES VALUE
<S> <C> <C>
- ---------------------------------------
ARGENTINA -- 14.6%
Acindar Industria Argentina S.A.*...... 54,000 $ 138,257
Astra Cia Argentina de Petro
(C.A.P.S.A.)......................... 51,130 108,409
Banco de Galicia y Buenos Aries S.A. de
C.V.................................. 14,600 97,102
Banco Frances del Rio de la Plata
S.A.................................. 8,900 96,399
Bansud S.A.*........................... 7,200 111,614
Cia Naviera Perez Compancciones 'B'.... 13,055 104,844
CIADEA S.A.*........................... 17,113 73,596
Comercial del Plata S.A.*.............. 11,800 38,473
Disco S.A. ADR*........................ 2,000 79,250
Inversiones y Representaciones S.A.
(IRSA)............................... 28,107 122,842
Quilmes Industrial S.A.*............... 13,850 161,006
Telecom Argentina...................... 1,500 78,750
Telefonica de Argentina S.A. ADR....... 3,000 103,875
Transportadora de Gas Sur.............. 49,400 119,562
YPF S.A. Sponsored ADR................. 3,900 119,925
-----------
1,553,904
-----------
BRAZIL -- 44.6%
Aracruz Celulose S.A. ADR.............. 5,850 119,194
Banco Bradesco S.A. Preferred.......... 14,936,032 150,533
Banco Nacional S.A..................... 1,600,000 --(a)
Brasmotor S.A. Preferred............... 280,000 62,422
Casa Anglo Brasileiras S.A.*........... 650,000 30,793
Centrais Electricas Brasileiras
S.A.(Electrobras).................... 160,000 89,471
Centrais Electricas Brasileiras
S.A.(Electrobras) Preferred B........ 457,000 271,683
Centrais Electricas de Santa Catarina
S.A. (CELESC)........................ 83,201 115,155
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar Preferred........ 8,000,000 182,063
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar Sponsored
ADR.................................. 993 22,591
Companhia Cervejaria Brahma
Preferred............................ 206,551 157,329
Companhia Cimento Portland Itau........ 320,000 109,984
Companhia Energetica de Minas Gerais
(CEMIG).............................. 1,480,000 76,299
Companhia Paranaense de Energia --
Copel................................ 6,800,000 116,855
Companhia Paulista de Forca e Luz
(CPFL)............................... 500,000 84,065
Companhia Paulista de Forca e Luz
(CPFL) Preferred..................... 2,905 483
Companhia Saneamento Basico............ 300,030 91,412
Companhia Siderurgica de Tubarao....... 6,900,000 96,077
Companhia Vale do Rio Doce Preferred... 8,300 185,036
Electricidade de Sao Paulo S.A.
(Eletropaulo)........................ 500,000 146,296
Electrolux do Brasil S.A............... 37,100,000 58,930
Elevadores Atlas S.A. 144A............. 12,400 161,544
Iochpe-Maxion S.A. Sponsored ADR....... 3,000 8,625
Iparanga Brasileira de Petroleo........ 4,700,000 76,445
Itaubanco.............................. 326,000 184,114
Light Servicos de Eletricidade S.A..... 170,000 84,600
Louis Dreyfus Citrus S.A............... 1,300 48,604
Marco Polo S.A......................... 610,000 109,075
OSA S.A................................ 17,400,000 80,814
Petroleo Brasileiro S.A. (Petrobras)... 1,184,000 328,844
Tam Transport Aereos Regionais S.A.
Preferred............................ 2,450,000 135,410
Telecomunicacoes Brasileiras S.A. ADR
(Telebras)........................... 2,900 440,075
Telecomunicacoes de Minas Gerais
(Telemig)............................ 4,921 841
Telecomunicacoes de Minas Gerais
(Telemig) Preferred B................ 870,666 154,068
Telecomunicacoes de Sao Paulo S.A.
(Telesp)............................. 7,154 2,183
Telecomunicacoes de Sao Paulo S.A.
(Telesp) Preferred................... 323,509 105,778
Telecomunicacoes do Parana (Telepar)... 216,690 161,026
Telecomunicacoes do Rio de Janeiro S.A.
(Telerj)*............................ 1,116,013 172,085
Uniao de Bancos Brasileiros............ 4,959,694 181,932
Usinas Siderurgicas de Minas Gerais
S.A. (USIMINAS)...................... 13,010 144,898
-----------
4,747,632
-----------
CHILE -- 14.9%
A.F.P. Provida S.A. ADR................ 4,100 89,688
Antofagasta Holdings PLC............... 9,900 75,545
Banco de Santiago...................... 1,700 43,350
Banco Santander Chile Sponsored ADR.... 4,200 61,950
Chilgener S.A. Sponsored ADR........... 1,300 36,400
Chilgener S.A. Sponsored ADR
Rights*.............................. 429 1,014
Companhia de Telecomunicaciones de
Chile S.A. ADR*...................... 2,975 98,175
Cristalerias de Chile Sponsored ADR.... 4,500 107,438
Empresa Nacional Electricidad S.A...... 6,500 146,656
Genesis Chile Fund..................... 5,582 280,495
Laboratorio Chile S.A. ADR............. 6,400 183,200
Madeco S.A. ADR........................ 1,700 41,650
Maderas y Sinteticos Sociedad Anonima
S.A. Sponsored ADR................... 4,300 71,487
Quimica Minera Chile S.A. Sponsored
ADR.................................. 2,200 145,475
Santa Isabel S.A. ADR.................. 2,700 87,075
Vina Concha y Toro S.A. ADR............ 3,600 111,375
-----------
1,580,973
-----------
COLOMBIA -- 2.5%
Banco Ganadero S.A. Sponsored ADR...... 2,400 86,400
Banco Industrial Colombiano ADR........ 6,900 124,200
Cememtos Diamante ADR 144A............. 4,100 54,837
-----------
265,437
-----------
MEXICO -- 6.5%
Banacci Series 'B'*.................... 4,000 10,459
Banacci Series 'L'*.................... 326 766
Cementos de Mexico S.A. 'B'............ 19,800 95,335
Corporacion GEO, S.A. 'B'*............. 22,912 130,769
Grupo Elektra, S.A. de C.V............. 1,000 10,874
Grupo Minsa S.A. de C.V................ 63,500 82,224
Grupo Posadas S.A. -- Series A*........ 193,500 116,764
Hylsamex ADR 144A...................... 1,000 31,125
Sanluis Corporacion S.A. de C.V........ 13,000 95,933
Tubos de Acero de Mexico -- Sponsored
ADR.................................. 4,800 88,500
Vitro Sociedad Anonima ADR............. 2,400 27,000
-----------
689,749
-----------
PANAMA -- 2.2%
Banco Latinamericano de Exportaciones
S.A. -- E*........................... 1,700 73,313
Panamerican Beverages Inc.............. 5,000 164,375
-----------
237,688
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 123
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- -----------------------------------------
PERU -- 4.7%
Banco Wiese ADR.......................... 20,200 $ 131,300
CPT Telefonica del Peru S.A.- B*......... 42,500 111,677
Credicorp Limited........................ 6,194 136,268
Southern Peru Copper Corp................ 6,100 118,950
-----------
498,195
-----------
TOTAL EQUITY SECURITIES
(Cost -- $7,245,010)................... 9,573,578
-----------
BONDS -- 0.4% PRINCIPAL
- ----------------------------------------- -----------
Inversiones y Representaciones S.A.
"Parcks" 144A Floating Rate, 4.50%,
07/04/03. (Cost -- $40,000)............ $ 40,000 45,600
-----------
TOTAL INVESTMENTS -- 90.4% (Cost --
$7,285,010)(a)......................... 9,619,178
OTHER ASSETS, LESS LIABILITIES -- 9.6%... 1,026,135
-----------
NET ASSETS -- 100%....................... $10,645,313
===========
ADR - American Depository Receipt
* Non-income producing security.
(a) Security valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
this security at June 30, 1997 aggregated $39,649.
See Note 1 of the Notes to Financial Statements.
(b) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 2,609,949
Gross unrealized depreciation..................... (275,781)
-----------
Net unrealized appreciation................... $ 2,334,168
===========
Purchases and sales of securities other than short-term obligations
aggregated $15,413,487 and $278,750, respectively, for the period
ended June 30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 124
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $7,285,010)....... $ 9,619,178
Cash........................................................ 947,988
Receivables
Investments sold.......................................... 163,012
Fund shares sold.......................................... 11,398
Dividends and interest.................................... 44,489
Manager for expense reimbursement......................... 1,324
Deferred organization expenses.............................. 29,012
Other assets................................................ 13,491
-----------
Total assets.............................................. 10,829,892
-----------
LIABILITIES
Payables
Investments purchased..................................... 153,310
Management fee............................................ 8,532
12b-1 service and distribution fees....................... 4,965
Other payables to related parties......................... 4,369
Accrued expenses............................................ 13,403
-----------
Total liabilities......................................... 184,579
-----------
NET ASSETS.................................................. $10,645,313
===========
CLASS A
Net asset value and redemption price per share
($6,162,863/568,724 shares outstanding)................... $ 10.84
===========
Maximum offering price per share ($10.84 X 100/94.25)*...... $ 11.50
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($3,974,766/369,609 shares outstanding)............. $ 10.75
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($507,684/47,355 shares outstanding)................ $ 10.72
===========
NET ASSETS CONSIST OF
Capital paid-in............................................. $ 8,161,579
Undistributed net realized gain on investments and foreign
currency transactions................................... 91,978
Undistributed net investment income....................... 57,974
Net unrealized appreciation on investments and foreign
currency transactions................................... 2,333,782
-----------
NET ASSETS.................................................. $10,645,313
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 125
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $11,150 foreign taxes withheld.......... $ 164,798
Interest.................................................. 1,036
----------
165,834
----------
EXPENSES
Management fee............................................ $43,316
Transfer agent............................................ 9,949
Administrative services fee............................... 4,332
Custodian fees............................................ 20,413
Blue Sky fee.............................................. 10,743
Auditing and accounting fees.............................. 8,029
Shareholder reports....................................... 1,208
Amortization of organization expenses..................... 6,176
Fund accounting........................................... 9,759
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 23,857
Legal..................................................... 13,570
Other..................................................... 2,836
----------
157,165
Expenses reimbursed by manager............................ (35,932)
Fees paid indirectly...................................... (13,373)
----------
Net expenses............................................ 107,860
----------
NET INVESTMENT INCOME....................................... 57,974
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 92,556
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 1,844,235
----------
Net gain on investment transactions..................... 1,936,791
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $1,994,765
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 126
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1997* 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 57,974 $ (487)
Net realized gain on investments and foreign currency
transactions............................................ 92,556 58,873
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 1,844,235 660,305
----------- -----------
Net increase resulting from operations.................. 1,994,765 718,691
----------- -----------
Distributions from net realized gain
Class A................................................... -- (17,179)
Class C................................................... -- (370)
----------- -----------
Total distributions to shareholders..................... -- (17,549)
----------- -----------
Fund share transactions (Note 5)
Class A................................................... 926,495 1,503,651
Class B................................................... 1,245,283 1,138,431
Class C................................................... 327,001 109,902
----------- -----------
Net increase resulting from Fund share transactions..... 2,498,779 2,751,984
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 4,493,544 3,453,126
NET ASSETS
Beginning of period....................................... 6,151,769 2,698,643
----------- -----------
END OF PERIOD............................................. $10,645,313 $ 6,151,769
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 57,974 $ --
=========== ===========
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 127
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 1, 1994
CLASS A FOR THE SIX MONTHS FOR THE YEAR ENDED (COMMENCEMENT)
ENDED JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------------ ---------------------- ----------------
1997* 1996 1995 1994
SELECTED PER SHARE DATA ------------------ -------- -------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 8.51 $ 6.88 $ 8.37 $ 10.00
-------- -------- -------- --------
Income (loss) from investment operations
Net investment income (loss)(a).......................... .08(g) .01 .01 --
Net realized and unrealized gain (loss) on investment
transactions........................................... 2.25(g) 1.66 (1.45) (1.63)
-------- -------- -------- --------
Total from investment operations....................... 2.33 1.67 (1.44) (1.63)
-------- -------- -------- --------
Less distributions
From net realized gain................................... -- .04 -- --
From capital paid-in..................................... -- -- .05 --
-------- -------- -------- --------
Total distributions.................................... -- .04 .05 --
-------- -------- -------- --------
Net asset value, end of period............................. $ 10.84 $ 8.51 $ 6.88 $ 8.37
======== ======== ======== ========
Total return(%)............................................ 27.38(b) 24.22(c) (17.28)(c) (16.10)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 6,163 $ 4,016 $ 2,015 $ 571
Ratio of expenses to average net assets(e)
With expense reimbursement(%)............................ 2.48(d) 2.55 2.61 2.20(d)
Without expense reimbursement(%)......................... 3.31(d) 4.89 9.26 16.22(d)
Ratio of net investment income (loss) to average net
assets(%)(a)............................................. 1.65(d) .24 .22 .21(d)
Portfolio turnover rate(%)................................. 4 20 45 14
Average commission rate(f)................................. $ .0002 $ .0002 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 128
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 1,
1994
CLASS B FOR THE SIX MONTHS FOR THE YEAR ENDED (COMMENCEMENT)
ENDED JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------------ ---------------------- ---------------
1997* 1996 1995 1994
SELECTED PER SHARE DATA ------------------ -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value,beginning of period......................... $ 8.48 $ 6.88 $ 8.37 $ 10.00
-------- -------- -------- -------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .04(g) (.03)(a) (.02)(a) (.01)(a)
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.23(g) 1.63 (1.47) (1.62)
-------- -------- -------- -------
Total from investment operations............................ 2.27 1.60 (1.49) (1.63)
-------- -------- -------- -------
Net asset value,end of period............................... $ 10.75 $ 8.48 $ 6.88 $ 8.37
======== ======== ======== =======
Total return(%)............................................. 26.77(b) 23.26(c) (17.90)(c) (16.20)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 3,975 $ 2,025 $ 684 $ 122
Ratio of expenses to average net assets(e)
With expense reimbursement(%)............................. 3.25(d) 3.33 3.36 2.95(d)
Without expense reimbursement(%).......................... 4.08(d) 5.67 10.01 16.97(d)
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .88(d) (.54) (.53) (.54)(d)
Portfolio turnover rate(%).................................. 4 20 45 14
Average commission rate(f).................................. $ .0002 $ .0002 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 129
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C FOR THE SIX MONTHS (COMMENCEMENT)
ENDED JUNE 30, TO DECEMBER 31,
------------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.46 $ 7.96
-------- --------
Income from investment operations
Net investment income (loss)(a)........................... .04(g) (.02)
Net realized and unrealized gain on investment
transactions............................................ 2.22(g) .55
-------- --------
Total from investment operations........................ 2.26 .53
-------- --------
Less distributions
From net realized gain.................................... -- .03
-------- --------
Total distributions..................................... -- .03
-------- --------
Net asset value, end of period.............................. $ 10.72 $ 8.46
======== ========
Total return(%)(b).......................................... 26.71 6.66
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 508 $ 111
Ratio of expenses to average net assets(e)
With expense reimbursement(%)(d).......................... 3.32 3.46
Without expense reimbursement(%)(d)....................... 4.15 5.80
Ratio of net investment income (loss) to average net
assets(%)(a)(d)........................................... .81 (.68)
Portfolio turnover rate(%).................................. 4 20
Average commission rate(f).................................. $ .0002 $ .0002
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Annualized.
(e) Beginning in 1995, total expenses include fees paid
indirectly through an expense offset arrangement, if any.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 130
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Latin America Strategy Fund (the Fund), is a non-diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B and Class C are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board. As of June 30, 1997, securities valued in good faith by the Valuation
Committee of the Board were determined to have no market value, and have been
noted as such in the investment portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities 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
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement whereby a certain
percentage of quarterly cumulative credits resulting from cash balances on
deposit with the custodian are used to offset custody fees, including
transaction and out of pocket expenses. For the period, custody fees were
reduced by $13,373 under this arrangement.
<PAGE> 131
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.95% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $3,544.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of
$6,486, $15,726 and $1,645, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $5,587, $3,823 and $539, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in Latin
America. Therefore, the Fund is more susceptible to factors adversely affecting
securities in Latin America than is an equity fund that is not concentrated in
such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTH ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
-------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold............................ 144,134 $1,385,832 321,787 $ 2,648,064
Issued on reinvestment of
distributions.................. -- -- 1,568 13,506
Repurchased..................... (47,201) (459,337) (144,190) (1,157,919)
------- ---------- -------- -----------
Net increase.................... 96,933 $ 926,495 179,165 $ 1,503,651
======= ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTH ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
-------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold............................ 150,948 $1,446,182 164,935 $ 1,349,112
Repurchased..................... (20,120) (200,899) (25,510) (210,681)
------- ---------- -------- -----------
Net increase.................... 130,828 $1,245,283 139,425 $ 1,138,431
======= ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTH ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
-------------------- ----------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold............................ 34,753 $ 332,485 13,400 $ 111,758
Issued on reinvestment of
distributions.................. -- -- 5 42
Repurchased..................... (567) (5,484) (236) (1,898)
------- ---------- -------- -----------
Net increase.................... 34,186 $ 327,001 13,169 $ 109,902
======= ========== ======== ===========
</TABLE>
<PAGE> 132
June 30, 1997
IVY FUNDS(R)
Ivy
Money
Market
Fund
- -------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
After the Federal Reserve Board raised interest rates 0.25% in March,
investors became wary of future rate hikes, as the Federal Reserve has
historically continued to raise rates after an initial increase. Additionally,
after the first quarter surge of the US dollar versus the Japanese yen,
investors were concerned that a subsequent depreciation in the value of the
dollar could put upward pressure on US interest rates.
However, the second quarter of the year was reminiscent of the last half of
1996 -- economic expansion with few signs of inflation or wage pressures.
Foreign purchases of US Treasury securities were at record levels, up 181% from
1996 levels, which pushed bond prices even higher. This was primarily due to
higher yields in the US compared to yields in Europe, and in particular, Japan.
The foreign purchases led to increased demand for US dollars, which pushed the
dollar higher versus foreign currencies. For US consumers, a strong dollar
spurred demand for cheaper foreign goods, which may be attributed to the fact
that there has been little domestic price pressure.
By the end of the second quarter, consumer spending had dramatically slowed
- -- evidenced by a modest rise in retail sales of 0.3% in March, followed by a
decline of 0.1% in May. In addition, the unemployment rate increased to 5% in
June, up from 4.8%. As a result, anxiety over additional interest rate hikes
abated and, as we expected, there have been no further rate hikes.
With expectations for moderate economic growth, we continue to believe that
inflation will be contained and that interest rates will remain relatively low.
As always, we stand committed to providing the best yield opportunities for the
Ivy Money Market Fund.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 133
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMERCIAL PAPER -- 35.4% PRINCIPAL VALUE
<S> <C> <C>
- ------------------------------------------
Associates Corp. of North America, 5.52%,
07/16/97................................ $ 900,000 $ 897,930
Cargill Inc., 5.47%, 08/25/97............. 1,000,000 991,643
Duke Power, 5.45%, 07/11/97............... 1,000,000 998,486
General Electric Capital Corp., 5.53%,
07/21/97................................ 950,000 947,081
Kellogg Co., 5.45%, 07/24/97.............. 900,000 896,866
National Rural Utilities, 5.50%,
09/05/97................................ 900,000 890,925
Paccar Financial Corp., 5.50%, 07/07/97... 900,000 899,175
Prudential Funding Corp., 5.52%,
07/18/97................................ 1,000,000 997,394
-----------
TOTAL COMMERCIAL PAPER
(Cost -- $7,519,500).................... 7,519,500
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS --
52.2%
- ------------------------------------------
Federal Home Loan Bank, 5.49%, 07/02/97 3,500,000 3,499,466
Federal Home Loan Bank, 5.37%, 07/29/97 750,000 746,867
Federal Home Loan Bank, 5.40%, 08/04/97 1,640,000 1,631,636
Federal Home Loan Bank, 5.38%, 08/07/97 900,000 895,024
Federal Home Loan Mortgage Corp., 5.38%,
07/09/97................................ $1,900,000 $ 1,897,729
Federal Home Loan Mortgage Corp., 5.40%,
07/14/97................................ 600,000 598,830
Federal National Mortgage Association,
5.40%, 07/29/97......................... 790,000 786,682
Student Loan Marketing Association, 5.29%,
07/02/97(a)............................. 1,000,000 1,008,261
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost -- $11,064,495)................... 11,064,495
-----------
TOTAL INVESTMENTS -- 87.6%
(Cost -- $18,583,995)(b)................ 18,583,995
OTHER ASSETS, LESS LIABILITIES -- 12.4%... 2,621,962
-----------
NET ASSETS -- 100%........................ $21,205,957
===========
</TABLE>
(a) Floating rate note; reflects variable rate as of the latest
reset date, June 25, 1997.
(b) Cost is the same for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $18,583,995)...... $18,583,995
Cash........................................................ 4,243,593
Receivable -- Manager for expense reimbursement............. 10,676
Other assets................................................ 28,367
-----------
Total assets.............................................. 22,866,631
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 2,332
Investments purchased..................................... 1,631,390
Management fee............................................ 6,404
Other payables to related parties......................... 11,456
Accrued expenses............................................ 9,092
-----------
Total liabilities......................................... 1,660,674
-----------
NET ASSETS.................................................. $21,205,957
===========
CLASS A
Net asset value, offering price and redemption price per
share ($17,241,771/17,241,771 shares outstanding)......... $ 1.00
===========
CLASS B
Net asset value, offering price and redemption price* per
share ($3,589,407/3,589,407 shares outstanding)........... $ 1.00
===========
CLASS C
Net asset value, offering price and redemption price* per
share ($374,779/374,779 shares outstanding)............... $ 1.00
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $21,205,957
-----------
NET ASSETS.................................................. $21,205,957
===========
* Subject to any applicable contingent deferred sales charge.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 134
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $587,707
--------
EXPENSES
Management fee............................................ $43,475
Transfer agent............................................ 43,342
Administrative services fee............................... 10,869
Custodian fees............................................ 7,573
Blue Sky fees............................................. 12,166
Auditing and accounting fees.............................. 5,917
Shareholder reports....................................... 4,517
Fund accounting........................................... 13,261
Trustees' fees............................................ 2,977
Legal..................................................... 10,834
Other..................................................... 10,703
--------
165,634
Expenses reimbursed by manager............................ (72,393)
--------
Net expenses............................................ 93,241
--------
NET INVESTMENT INCOME AND INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................................... $494,466
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 135
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ ------------
1997* 1996
------------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income and increase resulting from
operations................................................ $ 494,466 $ 894,987
------------ ------------
Distributions to shareholders from net investment income
Class A................................................... (414,366) (794,505)
Class B................................................... (76,302) (95,901)
Class C................................................... (3,798) (4,581)
------------ ------------
Total distributions to shareholders..................... (494,466) (894,987)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (4,117,296) (3,249,695)
Class B................................................... 115,034 3,474,373
Class C................................................... 301,168 73,611
------------ ------------
Net increase (decrease) resulting from fund share
transactions........................................... (3,701,094) 298,289
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... (3,701,094) 298,289
NET ASSETS
Beginning of period....................................... 24,907,051 24,608,762
------------ ------------
End of period............................................. $ 21,205,957 $ 24,907,051
============ ============
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 136
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------ -----------------------------------------------------------
1997* 1996 1995 1994 1993 1992
SELECTED PER SHARE DATA ------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income(a).................. .02 .04 .05 .04 .02 .03
Less distributions
From net investment income................ (.02) (.04) (.05) (.04) (.02) (.03)
-------- ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= =======
Total return(%)............................. 2.22(b) 4.47 4.80 4.21 2.42 2.81
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $17,242 $21,359 $24,609 $26,827 $25,782 $18,839
Ratio of expenses to average net assets
With expense reimbursement(%)............. .88(c) .86 .85 .85 .85 .85
Without expense reimbursement(%).......... 1.54(c) 1.86 1.39 1.24 1.56 1.45
Ratio of net investment income to average
net assets(%)(a).......................... 4.48(c) 4.47 4.91 3.29 2.22 2.75
</TABLE>
(See Notes to Financial Statements)
<PAGE> 137
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR
CLASS B FOR THE SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ ------------
1997* 1996
SELECTED PER SHARE DATA ------------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00
-------- -------
Income from investment operations
Net investment income(a).................................. .02 .05
Less distributions
From net investment income................................ (.02) (.05)
-------- -------
Net asset value, end of period.............................. $ 1.00 $ 1.00
======== =======
Total return(%)............................................. 2.33(b) 4.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)
Ratio of expenses to average net assets..................... $ 3,589 $ 3,474
With expense reimbursement(%)............................. .68(c) .77
Without expense reimbursement(%).......................... 1.34(c) 1.77
Ratio of net investment income to average net
assets(%)(a).............................................. 4.68(c) 4.57
</TABLE>
(See Notes to Financial Statements)
<PAGE> 138
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FROM
APRIL 30, 1996
CLASS C FOR THE SIX MONTHS (COMMENCEMENT)
ENDED JUNE 30, TO DECEMBER 31,
------------------- ---------------
1997* 1996
SELECTED PER SHARE DATA ------------------- ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $1.00 $1.00
----- -----
Income from investment operations
Net investment income(a).................................. .02 .03
Less distributions
From net investment income................................ (.02) (.03)
----- -----
Net asset value, end of period.............................. $1.00 $1.00
===== =====
Total return(%)(b).......................................... 2.35 4.78
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)
Ratio of expenses to average net assets..................... $ 375 $ 74
With expense reimbursement(%)(c).......................... .73 .56
Without expense reimbursement(%)(c)....................... 1.39 1.56
Ratio of net investment income to average net
assets(%)(a)(c)........................................... 4.63 4.78
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return.
(c) Annualized.
* Unaudited.
</TABLE>
Note: The seven day yield as of June 30, 1997 was 4.58%. The thirty day yield as
of June 30, 1997 was 4.65%.
(See Notes to Financial Statements)
<PAGE> 139
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Money Market Fund (the Fund), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Short-term obligations and commercial paper are
valued at amortized cost, which approximates market.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions of net investment income are
declared daily, and are paid at the earlier of redemption or the last business
day of the month.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .40% of
the Fund's average net assets.
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
.85% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $40,060, $3,080 and $202, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions and equivalent dollar amounts for Class A, Class B
and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
CLASS A JUNE 30, 1997 DECEMBER 31, 1996
------- ---------------- --------------------
<S> <C> <C>
Sold........................... 66,962,595 67,870,418
Issued on reinvestment of
distributions................. 339,842 682,663
Repurchased.................... (71,419,733) (71,802,776)
----------- -----------
Net decrease................... (4,117,296) (3,249,695)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM JANUARY 1, 1996
SIX MONTHS ENDED (COMMENCEMENT) TO
CLASS B JUNE 30, 1997 DECEMBER 31, 1996
------- ---------------- --------------------
<S> <C> <C>
Sold........................... 9,327,819 24,768,901
Issued on reinvestment of
distributions................. 60,031 68,338
Repurchased.................... (9,272,816) (21,362,866)
----------- -----------
Net increase................... 115,034 3,474,373
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT) TO
CLASS C JUNE 30, 1997 DECEMBER 31, 1996
------- ---------------- --------------------
<S> <C> <C>
Sold........................... 1,328,469 668,573
Issued on reinvestment of
distributions................. 3,107 2,270
Repurchased.................... (1,030,408) (597,232)
----------- -----------
Net increase................... 301,168 73,611
=========== ===========
</TABLE>
<PAGE> 140
June 30, 1997
IVY FUNDS(R)
Ivy
New
Century
Fund
- ------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Market Commentary:
A three-year bear market in high-growth economies seems to be coming to an
end. Attracted by compelling valuations, above average economic growth and
recovering earnings, investors seem to have once again rediscovered emerging
markets, which have posted strong (but not extreme) earnings since the beginning
of 1997.
According to our research, this year's emerging-market rally has been
largely concentrated in the larger-capitalization, more liquid "market proxies,"
which have attracted global flows as investors have started to redirect funds to
the high-growth nations. Holdings in the Ivy New Century Fund are well
diversified to provide broad exposure to the underlying economies. We believe
valuations for the less liquid, smaller companies tend to reflect fundamental
value better than the larger-company names. As a result, we have positioned the
Fund to take advantage of a broader-based rally as increasingly selective
investors start looking for second-tier names. Perhaps even more importantly,
the added diversification of these companies may provide downside protection in
the event of a sudden reversal in capital flows (such as the one started by the
Mexico debacle in late 1994).
In the Pacific Rim, a number of countries such as Thailand, the
Philippines, Malaysia, and Singapore have performed poorly. We believe, however,
that negative sentiment toward these markets has provided an excellent buying
opportunity, as many markets' price-to-earnings to growth ratios in this part of
the world are the most compelling they've been in years. Despite concerns that
many economies in the region are facing structural challenges, our research
suggests that non-Japan Asia should continue to grow at double the rate of the
more mature economies. We believe investors can ill-afford to indefinitely
ignore markets with such attractive valuations and above average growth rates.
As the focus of investors returns to the Pacific Rim, we believe that these
markets -- and the Ivy New Century Fund -- should perform well.
The Fund continues to benefit from its exposure to Latin America (25% of
holdings), which has turned in one of the best regional year-to-date
performances. Almost 9% of the Fund's assets are allocated to Brazil, where
preparations for a second wave of privatization continue to provide momentum in
the public sector. Additionally, corporate restructuring should boost
profitability for select private sector companies. In Argentina (6% of Fund
assets), the market is beginning to see the benefits of economic reforms that
should contribute to robust economic growth into the next century. The Chilean
market remains attractive for a number of reasons -- from low historical
valuations to a good hedge against concerns about US interest rates (which may
spook the region's other markets).
We remain positive but cautious on the long-term prospects for Central
Europe (which represents almost 5% of Fund assets), as it is unclear which of
the transition economies will move to the next level. According to our research,
however, valuations seem to imply they all will.
Overall, we would encourage investors who recognize the importance of
investing internationally to look beyond any short-term distractions and focus
on what we believe to be the positive long-term prospects for the world's
high-growth economies.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 141
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 95.6% SHARES VALUE
<S> <C> <C>
- ---------------------------------------
AFRICA -- 6.1%
- ---------------------------------------
SOUTH AFRICA -- 6.1%
Anglo American Corporation S.A......... 13,900 $ 837,425
Nampak Ltd............................. 28,700 124,658
Rembrandt Group Ltd.................... 65,000 693,633
South African Breweries Ltd............ 14,735 452,393
-----------
2,108,109
-----------
ASIA/PACIFIC -- 55.0%
- ---------------------------------------
CHINA -- 1.2%
Huaneng Power International, Inc.
ADR*................................. 1,200 30,600
Inner Mongolia Erdos Cashmere Products
Co. 'B'.............................. 64,000 53,760
Qingling Motors Company Ltd............ 67,000 34,593
Shanghai Dazhong Taxi Company 'B'...... 112,800 100,166
Shanghai Diesel Engine Co. Ltd. 'B'*... 81,200 27,608
Shanghai Post & Telecommunications
Equipment 'B'........................ 43,000 22,532
Shanghai Shangling Electric Appliances
Co. Ltd. 'B'......................... 101,600 20,930
Shenzen Konka Electronic Group Limited
- 'B'................................ 42,900 63,625
Tingyi (Cayman Islands) Holding Co.*... 128,000 31,887
Zhenhai Refining and Chemical Co.
Limited.............................. 100,000 36,142
-----------
421,843
-----------
HONG KONG -- 22.9%
C.P. Pokphand.......................... 400,000 123,914
Cheung Kong Holdings Ltd............... 47,000 464,098
Citic Pacific.......................... 89,000 556,014
Esprit Asia Holdings Ltd............... 700,000 496,949
Gold Peak Industries................... 456,000 294,297
Guangdong Investments.................. 302,000 454,134
Guangdong Investments Warrants......... 30,200 14,228
Guangdong Tannery Ltd.................. 9,600 3,717
HSBC Holdings.......................... 22,241 668,900
Hong Kong Telecommunications Ltd....... 11,700 273,488
Jardine Strategic...................... 109,062 412,254
Jardine Strategic Warrants*............ 562 222
Li & Fung.............................. 576,000 646,833
National Mutual Asia Ltd............... 428,000 475,109
New World Development Company Ltd...... 100,502 599,332
Peregrine Investment Holdings Ltd...... 246,000 506,462
Peregrine Investment Holdings Ltd.
Warrants*............................ 14,900 6,539
Swire Pacific Ltd. Class A............. 74,000 666,234
Union Bank of Hong Kong Ltd............ 328,600 950,093
Wharf Holdings Ltd..................... 82,000 355,634
-----------
7,968,451
-----------
INDIA -- 2.1%
Tata Engineering and Locomotive Co.
Ltd. - Sponsored GDR................. 1,500 23,025
Tata Engineering and Locomotive Co.
Ltd. - Sponsored GDR Reg 'S'......... 46,000 706,100
-----------
729,125
-----------
INDONESIA -- 2.9%
Astra International -- Foreign
Registered........................... 29,000 119,864
PT Bank Bali -- Foreign Registered..... 45,000 120,296
PT Bank Dagang Nasional -- Foreign
Registered........................... 301,876 214,162
PT Bank Dagang Nasional Warrants....... 43,126 17,736
PT Citatah -- Foreign Registered*...... 65,000 60,816
PT Matahari Putra Prima -- Foreign
Registered........................... 73,000 147,111
PT Mulia Industrindo -- Foreign
Registered........................... 239,900 125,796
PT Telekomunikasi Indonesia -- Foreign
Registered........................... 46,000 75,201
PT Tempo Scan Pacific -- Foreign
Registered........................... 46,000 103,105
Semen Gresik -- Foreign Registered..... 12,000 26,897
-----------
1,010,984
-----------
ISRAEL -- 1.0%
Koor Industries Ltd. -- Sponsored ADR.. 20,200 356,025
-----------
MALAYSIA -- 6.8%
Arab Malaysian Corporation Berhad*..... 30,000 111,727
Arab Malaysian Finance Foreign......... 58,000 122,940
Genting Berhad......................... 101,000 484,191
KFC Holdings (Malaysia) Berhad......... 67,000 252,179
Land & General Berhad.................. 72,000 82,726
Lion Land Berhad*...................... 200,000 185,420
London & Pacific Insurance Company
Berhad............................... 7,200 37,084
Malayan Banking Berhad................. 16,000 167,987
Malaysia British Assurance Berhad...... 26,000 116,402
Perusahaan Otomobil Nasional Berhad.... 33,000 154,279
Public Bank Berhad..................... 116,000 165,451
RHB Capital Berhad..................... 52,400 166,085
Resorts World Berhad................... 51,000 153,566
Technology Resources Industries
Berhad*.............................. 64,000 110,047
Tenaga Nasional Berhad................. 14,000 68,225
-----------
2,378,309
-----------
PHILIPPINES -- 3.8%
Asian Terminals, Inc................... 477,500 86,897
Bacnotan Cement Corporation*........... 180,000 55,960
Belle Corporation*..................... 307,000 89,623
Benpres Holdings Corp. GDR*............ 15,000 102,330
C & P Homes, Inc....................... 210,500 79,009
La Tondena Distillers Inc.............. 70,000 168,524
Metropolitan Bank & Trust Company...... 5,645 119,851
Mondragon International Philippines,
Inc.*................................ 260,500 91,850
Philippine Long Distance Telephone
Co................................... 4,200 136,146
Philippine National Bank............... 24,237 164,484
SM Prime Holdings, Inc................. 339,000 100,250
Southeast Asia Cement Holdings, Inc.*.. 992,000 48,141
Universal Robina Corporation........... 201,000 73,157
-----------
1,316,222
-----------
SINGAPORE -- 3.3%
Clipsal Industries Limited............. 56,000 198,240
DBS Land Limited....................... 26,000 82,190
Elec & Eltek International Co. Ltd..... 23,000 128,800
Fraser & Neave Ltd. ORD................ 90,000 642,025
Jardine Matheson Holdings Ltd.......... 13,500 95,850
-----------
1,147,105
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 142
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- ---------------------------------------
SOUTH KOREA -- 4.1%
Hana Bank.............................. 1,770 $ 21,926
Hyundai Motor Company Ltd. GDR......... 8,362 83,620
Hyundai Motor Company Ltd. GDR 144A.... 500 5,000
Keum Kang Development Ind. Company*.... 3,800 53,491
Korea Electric Power Corp. Sponsored
ADR.................................. 12,400 231,725
Pohang Iron & Steel Ltd. ADR........... 11,800 377,600
Samsumg Electronics.................... 3,500 389,020
Samsumg Electronics Rights*............ 57 2,157
Samsung Electronics Co. GDR*........... 31 1,837
Samsung Electronics Co. GDR Rights*.... 10 313
Samsung Electronics Co. GDR 144A
Registered........................... 662 18,205
Shinhan Bank........................... 11,270 164,735
Ssangyong Oil Refining Co. Ltd......... 3,600 72,973
-----------
1,422,602
-----------
TAIWAN -- 3.3%
Acer Incorporation*.................... 48,000 172,662
Compeq Manufacturing Co................ 29,400 209,395
Far Eastern Department Stores Ltd...... 131,000 208,280
President Enterprises*................. 108,000 213,669
Systex Corporation*.................... 60,562 133,977
Systex Corporation Rights*............. 13,821 13,175
Yung Shin Pharmaceuticals Industries
Co................................... 65,000 183,543
-----------
1,134,701
-----------
THAILAND -- 3.5%
Asia Credit Company PLC................ 57,100 145,478
Bangkok Bank Public Company Ltd........ 16,000 109,940
Bank of Ayudhya Ltd.................... 93,450 146,100
Dhana Siam Finance & Securities Public
Company Ltd.......................... 89,000 47,240
Krung Thai Bank Public Company
Limited.............................. 54,300 56,595
Krung Thai Thanakit PLC................ 24,000 13,665
Nava Finance & Securities Public
Company Limited...................... 45,000 17,371
Robinson Department Store Public
Company Limited -- Foreign
Registered........................... 437,200 160,332
Siam Cement Public Co. Ltd. (The)...... 9,300 160,834
Siam Makro Public Company
Limited -- Foreign Registered........ 43,800 118,356
Thai Airways Int'l. Public Co.,
Ltd. -- Foreign Registered........... 121,300 145,157
Thai Telephone & Communication Public
Co. Ltd. -- Foreign Registered....... 245,000 101,670
-----------
1,222,738
-----------
VIETNAM -- 0.1%
Beta Vietnam Fund*..................... 1,850 13,875
Beta Vietnam Fund Warrants*............ 370 832
The Vietnam Fund Limited*.............. 1,100 8,938
-----------
23,645
-----------
EUROPE -- 9.0%
- ---------------------------------------
AUSTRIA -- 0.5%
Julius Meinl International AG.......... 6,000 185,955
-----------
CZECH REPUBLIC -- 0.9%
CKD Praha Holding a.s.*................ 4,600 125,214
Komercni Banka I.F.*................... 1,300 19,338
Restitucni Invest Fund*................ 1,200 29,072
SPT Telekom a.s........................ 200 20,986
Skoda Plzen a.s.*...................... 2,000 59,873
Zivnobanka -- Investicni Fond.......... 5,300 69,354
-----------
323,837
-----------
FRANCE -- 0.5%
Lyonnaise Des Eaux S.A................. 1,549 156,195
Schneider S.A.*........................ 609 32,447
-----------
188,642
-----------
GERMANY -- 0.1%
Volkswagen AG.......................... 40 30,347
-----------
HUNGARY -- 0.7%
Pick Szeged Rt......................... 3,200 246,213
-----------
POLAND -- 0.1%
Bank Rozwoju Eksportu S.A.............. 1,550 32,545
-----------
PORTUGAL -- 1.9%
Colep -- Cia. Portuguesa de
Embalagens*.......................... 9,500 152,668
Companhia de Seguros Mundial Confianca
S.A.*................................ 8,000 117,868
Investec-Consultoria Internacional
S.A.*................................ 2,100 71,664
Lusomundo SGPS S.A.*................... 5,800 52,460
Lusomundo SGPS S.A. Preferred Shares... 800 6,690
Portugal Telecom S.A. ADR.............. 4,200 168,525
Sonae Industria e Investimentos........ 2,400 100,470
-----------
670,345
-----------
RUSSIA -- 2.1%
LUKoil Holding Sponsored ADR........... 6,500 509,844
Mosenergo Sponsored ADR 144A........... 5,200 217,750
-----------
727,594
-----------
SPAIN -- 0.6%
Telefonica de Espana ADR............... 2,200 189,750
-----------
SWITZERLAND -- 1.2%
Holderbank Financiere Glarus AG
Bearer............................... 383 362,285
Nestle AG Registered................... 49 64,735
-----------
427,020
-----------
TURKEY -- 0.4%
Cimentas A.S........................... 224,690 29,892
Otokar Otobus Karoseri................. 1,137,500 39,078
Turkiye Garanti Bankasi A.S............ 2,041,675 77,016
-----------
145,986
-----------
NORTH AMERICA -- 0.8%
- ---------------------------------------
MEXICO -- 0.4%
Banacci Series 'B'*.................... 7,200 18,827
Banacci Series 'L'*.................... 587 1,380
Cementos de Mexico S.A. 'B'............ 3,600 17,334
Grupo Mexicano Series 'L' ADS*......... 1,400 2,363
Grupo Posadas S.A. -- 'A'*............. 83,785 50,558
Telefonos de Mexico S.A. ADR Class L... 1,000 47,750
-----------
138,212
-----------
UNITED STATES -- 0.4%
Amway Asia Pacific Ltd................. 1,700 24,700
Semi-Tech Corporation.................. 18,000 38,621
The Singer Company NV.................. 1,300 74,162
-----------
137,483
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 143
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
- ---------------------------------------
SOUTH AND CENTRAL AMERICA -- 24.7%
- ---------------------------------------
ARGENTINA -- 5.8%
Acindar Industria Argentina S.A.*...... 60,000 $ 153,619
Bansud S.A.*........................... 29,200 452,655
Cia Naviera Perez Compancciones 'B'.... 32,252 259,015
CIADEA S.A.*........................... 57,960 249,258
Disco S.A. ADR*........................ 3,100 122,838
Inversiones y Representaciones S.A.
(IRSA)............................... 52,000 227,268
Quilmes Industrial S.A................. 27,400 318,525
YPF S.A. Sponsored ADR................. 7,100 218,325
-----------
2,001,503
-----------
BRAZIL -- 8.7%
Aracruz Celulose S.A. ADR.............. 3,850 78,444
Banco Bradesco S.A. Preferred.......... 8,400,000 84,660
Banco Nacional S.A..................... 2,100,000 --(a)
Brasmotor S.A. Preferred............... 360,000 80,257
Casa Anglo Brasileiras S.A.*........... 8,700,000 412,151
Centrais Electricas Brasileiras S.A.
(Electrobras)........................ 500,000 279,598
Centrais Electricas Brasileiras S.A.
(Electrobras) -- Preferred B......... 138,000 82,040
Centrais Electricas de Santa Catarina
S.A. (CELESC)........................ 25,000 34,601
Companhia Cimento Portland Itau........ 380,000 130,606
Companhia Energetica de Minas Gerais
(CEMIG).............................. 800,000 41,243
Companhia Energetica de Sao Paulo
(CESP)............................... 900,000 60,192
Companhia Paranaense de Energia
(Copel).............................. 2,200,000 37,806
Companhia Paulista de Forca e Luz
(CPFL)............................... 270,000 45,395
Companhia Paulista de Forca e Luz
(CPFL) Rights*....................... 1,568 261
Companhia Siderurgica de Tubarao....... 9,900,000 137,849
Companhia Vale do Rio Doce Preferred
Shares............................... 7,000 156,054
Electricidade de Sao Paulo S.A.
(Eletropaulo)........................ 250,000 73,148
Electrolux do Brasil S.A............... 24,000,000 38,122
Elevadores Atlas S.A. 144A............. 9,200 119,855
Itaubanco.............................. 266,000 150,228
Marcopolo S.A. -- B.................... 400,000 71,525
OSA S.A................................ 5,200,000 24,151
Petroleo Brasileiro S.A. (Petrobras)... 610,000 169,421
Tam Transport Aereos................... 3,500,000 193,442
Telecomunicacoes Brasileiras S.A.
(Telebras) ADR....................... 2,900 440,075
Uniao de Bancos Brasileiros............ 2,100,000 77,032
-----------
3,018,156
-----------
CHILE -- 7.0%
A.F.P Provida S.A. ADR................. 2,000 43,750
Antofagasta Holdings PLC............... 20,700 157,958
Banco Santander Chile Sponsored ADR.... 6,000 88,500
Chilgener S.A. Sponsored ADR........... 2,700 75,600
Chilgener S.A. Sponsored ADR Rights*... 891 2,107
Embotelladora Andina S.A. Sponsored ADR
(Class A)............................ 3,400 72,888
Embotelladora Andina S.A. Sponsored ADR
(Class B)............................ 3,400 70,975
Empresa Nacional Electricidad S.A...... 4,900 110,556
Genesis Chile Fund..................... 22,182 1,114,645
Laboratorio Chile S.A. ADR............. 4,000 114,500
Quimica Minera Chile S.A. Sponsored
ADR.................................. 2,400 158,700
Santa Isabel S.A. ADR.................. 8,000 258,000
Vina Concha y Toro S.A. ADR............ 5,500 170,156
-----------
2,438,335
-----------
COLOMBIA -- 1.3%
Banco Ganadero S.A. ADR................ 4,700 169,200
Banco Industrial Colombiano ADR........ 10,400 187,200
Cementos Diamante ADR 144A............. 8,200 109,675
-----------
466,075
-----------
PANAMA -- 0.2%
Panamerican Beverages, Inc -- A........ 2,400 78,900
-----------
PERU -- 1.7%
Banco Wiese ADR........................ 24,800 161,200
CPT Telefonica del Peru S.A. -- 'B'*... 120,000 315,322
Credicorp Ltd.......................... 5,868 129,096
-----------
605,618
-----------
TOTAL EQUITY SECURITIES
(Cost -- $28,847,131)................ 33,292,375
-----------
CORPORATE BONDS -- 0.5% PRINCIPAL
- --------------------------------------- ----------
Inversiones y Representaciones S.A.
'Parcks' 144A Floating Rate, 4.50%,
07/04/03............................. $ 60,000 68,400
Piltel International Holding Corp.
(Convertible), 1.75%, 07/17/06....... 100,000 97,750
-----------
TOTAL CORPORATE BONDS
(Cost -- $160,000)................... 166,150
-----------
TOTAL INVESTMENTS -- 96.1%
(Cost -- $29,007,131)(b)............. 33,458,525
OTHER ASSETS, LESS
LIABILITIES -- 3.9%.................. 1,358,066
-----------
NET ASSETS -- 100%..................... $34,816,591
===========
ADR - American Depository Receipt
ADS - American Depository Share
GDR - Global Depository Receipt
NV - Non-voting
ORD - Ordinary
* Non-income producing security.
(a) Security valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
this security at June 30, 1997 aggregated $42,742.
See Note 1 of the Notes to Financial Statements.
(b) Cost is approximately the same for
Federal Income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 6,827,908
Gross unrealized depreciation..................... (2,376,514)
-----------
Net unrealized appreciation................... $ 4,451,394
===========
Purchases and sales of securities other than short-term obligations
aggregated $13,509,259 and $1,131,177, respectively, for the period
ended June 30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 144
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $29,007,131)...... $33,458,525
Cash........................................................ 1,224,612
Cash denominated in foreign currencies (cost -- $126,504)... 126,147
Receivables
Fund shares sold.......................................... 89,997
Dividends and interest.................................... 127,453
Deferred organization expenses.............................. 23,033
Other assets................................................ 13,413
-----------
Total assets............................................ 35,063,180
-----------
LIABILITIES
Payables
Investments purchased..................................... 129,375
Fund shares repurchased................................... 49,554
Management fee............................................ 27,717
12b-1 service and distribution fees....................... 17,476
Other payables to related parties......................... 10,704
Accrued expenses............................................ 11,763
-----------
Total liabilities....................................... 246,589
-----------
NET ASSETS.................................................. $34,816,591
===========
CLASS A
Net asset value and redemption price per share
($17,799,227/1,526,718 shares outstanding)................ $ 11.66
===========
Maximum offering price per share ($11.66 x 100/94.25)*...... $ 12.37
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($13,069,755/1,133,664 shares outstanding).......... $ 11.53
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($3,947,609 / 341,581 shares outstanding)........... $ 11.56
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $30,133,517
Undistributed net realized gain on investments and foreign
currency transactions................................... 159,130
Undistributed net investment income....................... 73,516
Net unrealized appreciation on investments and foreign
currency transactions................................... 4,450,428
-----------
NET ASSETS.................................................. $34,816,591
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 145
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $30,818 foreign taxes withheld.......... $ 401,621
Interest.................................................. 5,554
----------
407,175
----------
EXPENSES
Management fee............................................ $136,048
Transfer agent............................................ 28,368
Administrative services fee............................... 13,605
Custodian fees............................................ 40,682
Blue Sky fee.............................................. 10,638
Auditing and accounting fees.............................. 8,029
Shareholder reports....................................... 2,681
Amortization of organization expenses..................... 4,896
Fund accounting........................................... 18,204
Trustees' fees............................................ 2,977
12b-1 service and distribution fees....................... 82,000
Legal..................................................... 12,803
Other..................................................... 6,544
----------
367,475
Fees paid indirectly...................................... (33,816)
----------
Net expenses............................................ 333,659
----------
NET INVESTMENT INCOME....................................... 73,516
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 205,526
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 3,477,014
----------
Net gain on investment transactions..................... 3,682,540
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $3,756,056
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 146
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1997* 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 73,516 $ (54,000)
Net realized gain (loss) on investments and foreign
currency transactions................................... 205,526 (46,120)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 3,477,014 948,226
----------- -----------
Net increase resulting from operations.................. 3,756,056 848,106
----------- -----------
Distributions in excess of net investment income
Class A................................................... -- (984)
Class B................................................... -- (623)
Class C................................................... -- (186)
----------- -----------
Total distributions to shareholders..................... -- (1,793)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... 5,855,024 5,914,397
Class B................................................... 5,467,358 5,096,850
Class C................................................... 1,691,011 1,808,893
----------- -----------
Net increase resulting from Fund share transactions..... 13,013,393 12,820,140
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 16,769,449 13,666,453
NET ASSETS
Beginning of period....................................... 18,047,142 4,380,689
----------- -----------
END OF PERIOD............................................. $34,816,591 $18,047,142
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 73,516 $ --
=========== ===========
</TABLE>
* Unaudited.
(See Notes to Financial Statements)
<PAGE> 147
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX NOVEMBER 1, 1994
CLASS A MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ --------------------- ----------------
1997* 1996 1995 1994
SELECTED PER SHARE DATA ------------ ------- ------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.12 $ 9.05 $ 8.64 $10.00
------- ------- ------ ------
Income (loss) from investment operations
Net investment income (loss).............................. .05(g) (.02)(a) .01(a) --(a)
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.49(g) 1.09 .54 (1.36)
------- ------- ------ ------
Total from investment operations........................ 1.54 1.07 .55 (1.36)
------- ------- ------ ------
Less distributions
From net investment income................................ -- -- .01 --
From net realized gain.................................... -- -- .10 --
In excess of net realized gain............................ -- -- .03 --
------- ------- ------ ------
Total distributions..................................... -- -- .14 --
------- ------- ------ ------
Net asset value, end of period.............................. $ 11.66 $ 10.12 $ 9.05 $ 8.64
======= ======= ====== ======
Total return(%)............................................. 15.22(c) 11.83(b) 6.40(b) (13.50)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $17,799 $ 9,925 $3,435 $ 611
Ratio of expenses to average net assets(e)
With expense reimbursement(%)............................. -- 2.45 2.55 2.20(d)
Without expense reimbursement(%).......................... 2.33(d) 2.82 7.18 20.74(d)
Ratio of net investment income (loss) to average net
assets(%)................................................. 0.90(d) (.23)(a) .24(a) .52(a)(d)
Portfolio turnover rate(%).................................. 4 27 14 --
Average commission rate(f).................................. $ .0023 $ .0018 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 148
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX NOVEMBER 1, 1994
CLASS B MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ -------------------- ----------------
1997* 1996 1995 1994
SELECTED PER SHARE DATA ------------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.04 $ 9.05 $ 8.64 $ 10.00
------- ------ ------ --------
Income (loss) from investment operations
Net investment income (loss).............................. .01(g) (.06)(a) (.02)(a) --(a)
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.48(g) 1.05 .51 (1.36)
------- ------ ------ --------
Total from investment operations........................ 1.49 .99 .49 (1.36)
------- ------ ------ --------
Less distributions
From net realized gain.................................... -- -- .08 --
------- ------ ------ --------
Total distributions..................................... -- -- .08 --
------- ------ ------ --------
Net asset value, end of period.............................. $ 11.53 $10.04 $ 9.05 $ 8.64
======= ====== ====== ========
Total return(%)............................................. 14.84(c) 10.95(b) 5.62(b) (13.60)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $13,070 $6,269 $ 945 $ 121
Ratio of expenses to average net assets(e)
With expense reimbursement(%)............................. -- 3.20 3.30 2.95(d)
Without expense reimbursement(%).......................... 3.10(d) 3.57 7.93 21.49(d)
Ratio of net investment income (loss) to average net
assets(%)................................................. .13(d) (.98)(a) (.51)(a) (.23)(a)(d)
Portfolio turnover rate(%).................................. 4 27 14 --
Average commission rate(f).................................. $ .0023 $.0018 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 149
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 30, 1996
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1997* 1996
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $10.06 $ 9.89
------ ------
Income (loss) from investment operations
Net investment income (loss).............................. .01(g) (.02)(a)
Net realized and unrealized gain on investment
transactions............................................ 1.49(g) .19
------ ------
Total from investment operations........................ 1.50 .17
------ ------
Net asset value, end of period.............................. $11.56 $10.06
====== ======
Total return(%)(c).......................................... 14.91 1.73
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $3,948 $1,854
Ratio of expenses to average net assets(e)
With expense reimbursement(%)(d).......................... -- 3.16
Without expense reimbursement(%)(d)....................... 3.12 3.53
Ratio of net investment income (loss) to average net
assets(%)(d).............................................. .12 (.94)(a)
Portfolio turnover rate(%).................................. 4 27
Average commission rate(f).................................. $.0023 $.0018
(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, if any.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding.
* Unaudited.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 150
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy New Century Fund (the Fund), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board. As of June 30, 1997, securities valued in good faith by the Valuation
Committee of the Board were determined to have no market value, and have been
noted as such in the investment portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$46,000 as of December 31, 1996, which may be applied against realized net
taxable gain of each succeeding fiscal year until fully utilized or until the
expiration date, whichever occurs first. The carryforward expires in 2004.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
<PAGE> 151
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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 $33,816 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.95% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1997, the net amount of underwriting
discount retained by IMDI was $9,631.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of
$18,015, $48,795 and $15,190, for Class A, Class B and Class C, respectively,
are reflected as 12b-1 service and distribution fees in the Statement of
Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $13,916, $10,765 and $3,687, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 689,206 $ 7,403,046 770,476 $ 7,578,070
Repurchased................... (143,570) (1,548,022) (169,014) (1,663,673)
-------- ----------- -------- -----------
Net increase.................. 545,636 $ 5,855,024 601,462 $ 5,914,397
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 577,016 $ 6,190,226 605,573 $ 5,942,047
Issued on reinvestment of
distributions................ -- -- 39 388
Repurchased................... (67,633) (722,868) (85,800) (845,585)
-------- ----------- -------- -----------
Net increase.................. 509,383 $ 5,467,358 519,812 $ 5,096,850
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1997 TO DECEMBER 31, 1996
---------------------- ----------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 191,516 $ 2,054,986 186,226 $ 1,829,278
Issued on reinvestment of
distributions................ -- -- 14 142
Repurchased................... (34,121) (363,975) (2,054) (20,527)
-------- ----------- -------- -----------
Net increase.................. 157,395 $ 1,691,011 184,186 $ 1,808,893
======== =========== ======== ===========
</TABLE>
<PAGE> 152
June 30, 1997
IVY FUNDS(R)
Ivy
Pan-Europe
Fund
- ---------------
Semi-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
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
MARKET COMMENTARY:
We would like to take this opportunity to welcome you as a shareholder of
the Ivy Pan-Europe Fund. There are many potential benefits to investing
internationally including additional diversification, minimizing risk and
maximizing return.
The Ivy Pan-Europe Fund is positioned to benefit from continuing corporate
restructuring, more competitive currencies and a lower interest rate
environment in Western Europe. A majority of the Ivy Pan-Europe Fund is
invested in large-capitalization, blue-chip stocks with some exposure to what
we believe to be significantly undervalued, smaller-capitalization European
companies.
In many cases, current price-to-earnings ratios in Europe are relatively
high due to depressed earnings. We believe economic growth will accelerate as
the benefits of weaker currencies and very favorable interest rates take hold.
And, just as restructuring has been an important theme in America over the last
decade, market forces are causing a similar process in Europe.
On the currency front, according to our research, the deutschemark was
approaching fair value in the 1.70 range. However, the surprise result of the
French election caused us to rethink this view. With the socialist party far
less committed to European Monetary Union (EMU) than its predecessor, there
could be far more pressure on the entire currency system. We believe a few
scenarios are possible. First, in an effort to save jobs (a key feature of the
French socialist platform) the Maastricht rules could be relaxed. This would
make it easier for "weaker" countries such as Italy, Spain and Portugal to
join, thereby placing additional downward pressure on the core European
currencies. Second, influenced by Germany's hard line, the Maastricht treaty
could be interpreted more strictly, which would result in a more limited
initial group (Germany plus the Benelux countries). Third, EMU could be
disbanded entirely. We believe that the first scenario is the most likely and
pressure on European currencies could reignite.
The Ivy Pan-Europe Fund is well diversified among 17 countries with the
largest commitments to the United Kingdom (21%), France (12%) and Sweden (12%).
Some of the Fund's larger-company holdings include: Volkswagen, Electrolux,
Shell and ING. Smaller-capitalization stocks are: Leica Camera, Safilo and
Grupo Anaya.
We believe the longer-term benefits of international investing cannot be
overlooked and encourage investors to stay the course.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
INVESTMEMT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 153
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 92.3% SHARES VALUE
<S> <C> <C>
- ------------------------------------------
AUSTRIA -- 2.2%
Creditanstalt-Bankverein.................. 80 $ 3,217
Julius Meinl International AG............. 12 372
-----------
3,589
-----------
BELGIUM -- 0.7%
Solvay S.A................................ 2 1,179
-----------
CZECH REPUBLIC -- 1.4%
SPT Telekom a.s........................... 22 2,309
-----------
DENMARK -- 2.0%
Unidanmark A/S............................ 58 3,263
-----------
FINLAND -- 3.3%
Enso OY -- R Shares....................... 171 1,580
Pohjola Insurance Group B................. 76 2,253
UPM -- Kymmene Corp....................... 63 1,455
-----------
5,288
-----------
FRANCE -- 11.8%
Banque Nationale de Paris................. 72 2,970
Bongrain S.A.............................. 3 1,175
Bouygues.................................. 16 1,318
Elf Gabon................................. 7 1,662
Eurotunnel S.A.*.......................... 1,300 1,428
Groupe Danone............................. 13 2,150
Scor...................................... 56 2,257
Societe Generale.......................... 27 3,017
SoGen S.A................................. 64 1,341
Usinor Sacilor............................ 96 1,733
-----------
19,051
-----------
GERMANY -- 7.7%
BMW AG.................................... 1 825
Daimler-Benz AG........................... 19 1,547
Dyckerhoff AG............................. 3 1,088
Leica Camera AG........................... 51 1,259
Merck KGaA................................ 112 4,885
Porsche AG -- Preferred................... 1 1,303
Volkswagen AG............................. 2 1,517
-----------
12,424
-----------
HUNGARY -- 1.0%
BorsodChem GDR 144A*...................... 41 1,594
-----------
ITALY -- 2.1%
Fiat S.p.A.*.............................. 447 1,608
Safilo S.p.A.............................. 77 1,787
-----------
3,395
-----------
NETHERLANDS -- 7.5%
Akzo Nobel NV............................. 11 1,510
Fortis Amev NV............................ 58 2,587
Hagemeyer NV.............................. 33 1,708
Hoogovens NV.............................. 32 1,787
ING Groep NV.............................. 56 2,587
Nedlloyd Groep NV......................... 65 1,881
-----------
12,060
-----------
NORWAY -- 5.0%
Bergesen.................................. 136 3,214
Saga Petroleum Series A Free.............. 256 4,861
-----------
8,075
-----------
PORTUGAL -- 2.2%
Cimpor Cimentos........................... 67 1,564
Portugal Telecom S.A. ADR................. 50 2,006
-----------
3,570
-----------
RUSSIA -- 1.5%
LUKoil Holding Co. -- Sponsored ADR....... 30 2,353
-----------
SPAIN -- 4.6%
Corp. Financiera Reunida, S.A. (COFIR).... 767 $ 3,233
Grupo Anaya S.A........................... 108 2,115
Telefonica de Espana S.A. ADR............. 25 2,156
-----------
7,504
-----------
SWEDEN -- 11.8%
ABB AB -- B Shares........................ 236 3,296
AssiDoman AB.............................. 55 1,565
Astra AB "B" Shares....................... 101 1,801
Electrolux AB............................. 24 1,732
Granges AB................................ 12 161
S.K.F. AB Series "B"...................... 130 3,362
Sandvik AB -- "B" Shares.................. 144 4,088
Stora Kopparbergs Bergslags Aktiebolag
(STORA)................................. 100 1,630
Volvo AB B Shares......................... 54 1,446
-----------
19,081
-----------
SWITZERLAND -- 7.0%
Edipresse S.A............................. 9 2,130
Fotolabo S.A.............................. 4 1,276
Georg Fischer AG Bearer................... 1 1,393
Holderbank Financiere Glaris AG........... 1 946
Jelmoli Holding AG Bearer................. 2 1,248
Pargesa Holding S.A....................... 2 2,661
Sulzer AG Registered...................... 2 1,715
-----------
11,369
-----------
UNITED KINGDOM -- 20.5%
Albert Fisher Group PLC................... 310 223
Barclays PLC.............................. 152 3,016
British Steel plc......................... 625 1,550
Cadbury Schweppes PLC ADR................. 235 2,094
HSBC Holdings plc......................... 107 3,292
Hanson PLC Sponsored ADR.................. 50 1,250
Hazelwood Foods PLC....................... 1,115 2,078
Imperial Chemical Industries PLC -
Sponsored ADR........................... 121 1,683
Jarvis Hotels PLC......................... 609 1,424
National Westminster Bank PLC ADR......... 240 3,225
PizzaExpress PLC.......................... 186 1,947
Shell Transport & Trading Co.............. 747 5,091
Standard Chartered PLC.................... 193 2,942
Waterford Wedgwood PLC.................... 967 1,255
Willis Corroon Group PLC.................. 958 2,065
-----------
33,135
-----------
TOTAL EQUITY SECURITIES
(Cost -- $145,765)(a)................... 149,239
OTHER ASSETS, LESS LIABILITIES -- 7.7%.... 12,517
-----------
NET ASSETS -- 100%........................ $ 161,756
===========
ADR - American Depository Receipt
NV - Non-voting
* Non-income producing security.
(a) Cost is the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1997, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 6,863
Gross unrealized depreciation..................... (3,389)
-----------
Net unrealized appreciation................... $ 3,474
===========
Purchases and sales of securities other than short-term obligations
aggregated $145,764 and $0, respectively, for the period ended June
30, 1997.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 154
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $145,765)......... $ 149,239
Cash........................................................ 12,500
Receivables
Dividends and interest.................................... 360
Manager for expense reimbursement......................... 6,810
Deferred organization expenses.............................. 58,759
-----------
Total assets.............................................. 227,668
-----------
LIABILITIES
Payables
Management fee............................................ 131
12b-1 service and distribution fees....................... 34
Other payables to related parties......................... 1,693
Accrued expenses............................................ 64,054
-----------
Total liabilities......................................... 65,912
-----------
NET ASSETS.................................................. $ 161,756
===========
CLASS A
Net asset value and redemption price per share
($161,756/15,696 shares outstanding)...................... $ 10.31
===========
Maximum offering price per share ($10.31 X 100/94.25)*...... $ 10.94
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 156,989
Undistributed net realized loss on investments and foreign
currency transactions................................... (5)
Undistributed net investment income....................... 1,298
Net unrealized appreciation on investments and foreign
currency transactions................................... 3,474
-----------
NET ASSETS.................................................. $ 161,756
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
(See Notes to Financial Statements)
<PAGE> 155
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 13, 1997 (COMMENCEMENT) TO JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $77 foreign taxes withheld.............. $ 1,484
Interest.................................................. 281
----------
1,765
----------
EXPENSES
Management fee............................................ $ 212
Transfer agent............................................ 45
Administrative services fee............................... 21
Custodian fees............................................ 300
Auditing and accounting fees.............................. 1,500
Fund accounting........................................... 1,650
12b-1 service and distribution fees....................... 53
Legal..................................................... 3,000
Other..................................................... 495
----------
7,276
Expenses reimbursed by manager............................ (6,809)
----------
Net expenses............................................ 467
----------
NET INVESTMENT INCOME....................................... 1,298
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (5)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 3,474
----------
Net gain on investment transactions..................... 3,469
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 4,767
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 156
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 13, 1997 (COMMENCEMENT) TO JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income....................................... $ 1,298
Net realized loss on investments and foreign currency
transactions............................................ (5)
Net unrealized appreciation during the period on
investments............................................. 3,474
--------
Net increase resulting from operations.................. 4,767
--------
Fund share transactions (Note 4)
Class A................................................. 156,989
Class B................................................. --
Class C................................................. --
--------
Net increase resulting from Fund share transactions..... 156,989
--------
NET ASSETS -- END OF PERIOD................................. $161,756
========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 1,298
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 157
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 13, 1997
(COMMENCEMENT)
TO JUNE 30, 1997
-----------------
CLASS A
SELECTED PER SHARE DATA** -----------------
<S> <C>
Net asset value, beginning of period........................ $10.02
------
Income from investment operations
Net investment income(a).................................. .08
Net realized and unrealized gain on investment
transactions............................................ .21
------
Total from investment operations........................ .29
------
Net asset value, end of period.............................. $10.31
======
Total return(%)(b).......................................... 2.89
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 162
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 2.20
Without expense reimbursement(%)(c)....................... 34.21
Ratio of net investment income to average net
assets(%)(a)(c)........................................... 6.10
Portfolio turnover rate(%).................................. 0
Average commission rate(d).................................. $.0133
</TABLE>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Annualized.
(d) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
* Unaudited.
** Based on average shares outstanding.
(See Notes to Financial Statements)
<PAGE> 158
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Pan-Europe Fund (the Fund), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or the National Association of Securities Dealers Automated Quotation
("NASDAQ") System, are valued at the last quoted sale price reported as of the
close of regular trading on the exchange the security is traded most
extensively. If there is no such sale, the security is valued at the calculated
mean between the last bid and asked price on the exchange. Securities not traded
on an exchange or NASDAQ, but traded in another over-the-counter market are
valued at the average between the current bid and asked prices in such markets.
Short-term obligations and commercial paper are valued at amortized cost, which
approximates market. Debt securities (other than short-term obligations and
commercial paper) are valued on the basis of valuations furnished by a pricing
service authorized by the Board of Trustees (the Board), which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. For valuation purposes, quotations of foreign
securities in foreign currencies are translated into U.S. dollar equivalents
using the foreign exchange quotation in effect. All other securities are valued
at their fair value as determined in good faith by the Valuation Committee of
the Board; as of June 30, 1997, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and will be amortized on a
straight-line basis for a period not to exceed five years.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets.
Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, broker-
<PAGE> 159
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
age commissions, interest, litigation and indemnification expenses, and other
extraordinary expenses) to an annual rate of 1.95% of the Fund's average net
assets. The voluntary expense limitation may be terminated or revised at any
time.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. From May 13, 1997 (Commencement) to June 30, 1997, the net amount of
underwriting discount retained by IMDI was $16.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value. Class B and Class C shares are also subject to an ongoing
distribution fee at an annual rate of .75% of the average net asset value
attributable to Class B and Class C shares. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of $53,
$0 and $0, for Class A, Class B and Class C, respectively, are reflected as
12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $45, $0 and $0, for Class A, Class B and Class C, respectively, are
reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions from May 13, 1997 (Commencement) to June 30, 1997,
for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
------- ------ --------
<S> <C> <C>
Sold...................................................... 15,696 $156,989
------ --------
Net increase.............................................. 15,696 $156,989
====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
------- ------ --------
<S> <C> <C>
Sold...................................................... 1 $ 10
Repurchased............................................... (1) (10)
------ --------
Net increase.............................................. -- $ --
====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES AMOUNT
------- ------ --------
<S> <C> <C>
Sold...................................................... 1 $ 10
Repurchased............................................... (1) (10)
------ --------
Net increase.............................................. -- $ --
====== ========
</TABLE>
