<PAGE> 1
DECEMBER 31, 1996 IVY FUNDS
IVY GROWTH WITH INCOME FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
The US stock market got out of the starting blocks in strong fashion
in 1996 and again finished the year with double-digit returns. Within this
environment, the Ivy Growth with Income Fund outperformed the average general
equity fund, as tracked by Lipper Analytical Services Inc., but slightly
underperformed the S&P 500 index. For the twelve months ended December 31,
1996 the Ivy Growth with Income Fund had a total return of 20.46% compared to
19.47% for the average of general equity funds and 23.22% for the S&P 500.
(For the Fund's total return with sales charge, and performance commentary,
please refer to the following page.)
The Ivy Growth with Income Fund is managed using a style called Growth
at a Reasonable Price (GARP). Holdings generally must meet a valuation
criterion whereby future growth rate expectations for earnings must be greater
than the price/earnings ratio for the stock. This investment style falls
somewhere between pure value and pure growth. For additional risk control, the
overall price/earnings ratio of the Fund is kept below that of the S&P 500.
Within this investment style, several themes are emphasized. The
first is technology, which continues to contribute a larger proportion to GDP
annually. Accordingly, the Ivy Growth with Income Fund is weighted heavily in
this area. Representative holdings include IBM, Intel, Microsoft and Cisco
Systems.
A second important theme is based on demographics, the premise being
as people get older they spend more money on services rather than goods.
According to our research, these services are generally in the health care,
financial and leisure areas. Examples of service companies benefitting from
increased spending are Columbia/HCA and Carnival Corp.
Another theme is global capital spending. As emerging economies grow,
they must develop their infrastructures to stay competitive. We believe
Caterpillar and Foster Wheeler are two good examples of companies that should
benefit from increased capital spending at the global level.
Finally, the Ivy Growth with Income Fund is invested in Real Estate
Investment Trusts (REITs). Because of the positive fundamental changes taking
place in the real estate industry, we believe REITs will continue to make
positive contributions to the Fund. The supply of new construction in various
sectors of this industry has declined and now is in greater balance with
demand. As a result, pricing is at more of an equilibrium than in the recent
past. These stocks embody the securitization of real estate and provide
liquidity for real estate holdings. Key underlying fundamentals contributing
to the expected future gains include the lack of new building and increasing
lease and rental rates. We are currently finding attractive investments in the
office, industrial, self-storage and apartment sectors. REITs continue to be a
core holding for this Fund because of their strong income generating ability.
These stocks tend to have yields higher than the overall market that may help
to cushion the Fund during periods of prolonged market volatility.
We believe over the long term, the Ivy Growth with Income Fund should
continue to provide competitive returns while maintaining its strategy of risk
control. This Fund should remain an excellent investment choice for
conservative investors who seek equity exposure, combined with risk control.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 2
IVY GROWTH WITH INCOME FUND
PERFORMANCE COMMENTARY
While the Ivy Growth with Income Fund did outperform the average of general
equity funds as tracked by Lipper Analytical Services Inc. (20.46% as compared
to 19.47%), it did slightly underperform the S&P 500 which was up 23.22%. This
is the result of the Fund's risk-control strategy that provides the portfolio
with downside protection in periods of market weakness but prevents the Fund
from fully participating in a rising market. Since the Fund's inception twelve
years ago, investors have benefitted from this risk-control strategy as the Fund
has experienced negative performance in only two years, with the largest decline
being 2.03%.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (4/84) OF A $10,000
INVESTMENT
CHART
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C*** & D****
Average Annual
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
14.59% 19.59% 14.59% 19.59%
D: D: D: D:
1 Yr. 13.53% 13.53% 19.41% 19.41% 19.41% 19.41%
- ------------------------------------------------------------------------------------
5 Yr. 10.41% 10.41% -- -- -- --
- ------------------------------------------------------------------------------------
10 Yr. 12.48% 12.47% -- -- -- --
- ------------------------------------------------------------------------------------
B: B: B: B:
11.58% 12.31% 11.58% 12.31%
C: C: C: C:
11.37% 12.37% 11.37% 12.37%
D: D: D: D:
Since Inception 14.99% 14.98% 13.74% 13.74% 13.74% 13.74%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
****Class D shares are not available for sale.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Growth with
Income Fund will fluctuate and at redemption may be worth more or less than the
amount of the original investment.
The Lipper Average Growth With Income index and the S&P 500 are unmanaged
indices of stocks which assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses. It is not possible to invest in an
index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B, Class C and Class D shares will vary
relative to that of Class A shares based on differences in their respective
sales loads and fees.
- --------------------------------------------------------------------------------
<PAGE> 3
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCKS -- 77.1% SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 4.9%
Crown Cork & Seal Company,
Inc.......................... 15,000 $ 815,625
Du Pont (E.I.) De Nemours &
Company...................... 12,500 1,179,687
Ferro Corporation.............. 14,000 397,250
Harsco Corporation............. 17,000 1,164,500
Union Carbide Corporation
Holding Company.............. 6,000 245,250
-----------
3,802,312
-----------
CAPITAL GOODS -- 9.6%
AGCO Corporation............... 35,000 1,001,875
American Standard Companies,
Inc.*........................ 16,500 631,125
Caterpillar, Inc............... 6,500 489,125
Fluor Corporation.............. 6,500 407,875
Foster Wheeler Corporation..... 35,500 1,317,938
General Electric Company....... 12,800 1,265,600
Johnson Controls, Inc.......... 14,000 1,160,250
Kaydon Corporation............. 14,000 659,750
Tecumseh Products Company...... 8,300 476,213
-----------
7,409,751
-----------
CONSUMER NON-DURABLES -- 7.3%
Allegiance Corporation*........ 32,800 906,100
Elan Corp. PLC -- Sponsored
ADR*(a)...................... 36,000 1,197,000
Mattel, Inc.................... 32,000 888,000
Nabisco Holdings Corporation
Class A...................... 21,000 816,375
PepsiCo, Inc................... 28,000 819,000
Tupperware Corporation......... 6,200 332,475
Warnaco Group, Inc............. 24,600 728,775
-----------
5,687,725
-----------
CONSUMER SERVICES -- 11.5%
ADT Limited*................... 37,500 857,812
Brunswick Corporation.......... 16,500 396,000
Carnival Corporation Class A... 42,900 1,415,700
Eckerd Corporation*............ 29,500 944,000
Federated Department Stores,
Inc.*........................ 13,000 443,625
Harte-Hanks Communications..... 30,000 832,500
Lowe's Companies, Inc.......... 17,000 603,500
Pier 1 Imports, Inc............ 48,000 846,000
Royal Caribbean Cruises Ltd.... 4,000 93,500
Sears, Roebuck & Co,........... 22,000 1,014,750
Sun International Hotels Ltd... 20,000 730,000
Sunglass Hut International,
Inc*......................... 100,000 725,000
-----------
8,902,387
-----------
ENERGY -- 6.7%
Basic Petroleum International,
Ltd.*........................ 11,100 366,300
Dresser Industries, Inc........ 17,000 527,000
Enron Corporation.............. 12,000 517,500
Helmerich & Payne, Inc......... 12,000 625,500
Noble Drilling Corporation*.... 45,000 894,375
Nuevo Energy Company*.......... 16,800 873,600
Parker & Parsley Petroleum
Company...................... 15,000 551,250
Schlumberger, Ltd.............. 8,000 799,000
-----------
5,154,525
-----------
FINANCIAL SERVICES -- 17.0%
AMBAC, Inc..................... 11,600 769,950
Donaldson, Lufkin & Jenrette,
Inc.......................... 21,700 781,200
Exel Limited................... 28,000 1,060,500
Federal Home Loan Mortgage
Corp......................... 9,200 1,013,150
Federal National Mortgage
Association.................. 25,800 961,050
First Chicago NBD
Corporation.................. 14,500 779,375
First Union Corporation........ 14,500 $ 1,073,000
J.P. Morgan & Company Inc...... 9,000 878,625
NationsBank Corporation........ 11,000 1,075,250
Norwest Corporation............ 11,200 487,200
Penncorp Financial Group,
Inc.......................... 17,000 612,000
Providian Corporation.......... 15,000 770,625
Signet Banking Corporation..... 30,000 922,500
Terra Nova (Bermuda) Holdings
Ltd.......................... 32,000 688,000
Travelers, Inc................. 29,800 1,352,175
-----------
13,224,600
-----------
HEALTHCARE -- 5.8%
Apria Healthcare Group,
Inc.*........................ 27,500 515,625
Boston Scientific
Corporation*................. 20,000 1,200,000
Columbia/HCA Healthcare Corp... 31,800 1,295,850
Humana, Inc.*.................. 8,000 153,000
Integrated Living Communities,
Inc.*........................ 70,000 402,500
Pharmacia & Upjohn, Inc........ 24,000 951,000
-----------
4,517,975
-----------
TECHNOLOGY -- 13.5%
Bell & Howell Company*......... 36,000 855,000
Cabletron Systems, Inc.*....... 44,000 1,463,000
Cisco Systems, Inc.*........... 6,000 381,750
Hewlett-Packard Company........ 16,500 829,125
Informix Corporation*.......... 30,000 611,250
Intel Corp..................... 14,600 1,911,688
International Business Machines
Corporation.................. 10,200 1,540,200
KLA Instruments Corporation*... 18,000 639,000
Microsoft Corporation*......... 21,000 1,735,125
Oracle Corporation*............ 12,300 513,525
-----------
10,479,663
-----------
UTILITIES -- 0.8%
Vodafone Group plc -- ADR
(a).......................... 15,000 620,625
-----------
TOTAL COMMON STOCKS
(Cost -- $50,203,642)........ 59,799,563
-----------
PREFERRED STOCK -- 0.4%
- -------------------------------
Time Warner, Inc.
(Cost -- $268,212)........... 7,000 271,250
-----------
REAL ESTATE INVESTMENT TRUSTS
(REITS) -- 18.1%
- -------------------------------
Amli Residential Properties
Trust........................ 30,000 701,250
Apartment Investment &
Management Co................ 65,000 1,836,250
Arden Realty Group, Inc........ 30,000 832,500
Beacon Properties
Corporation.................. 13,800 505,425
Boykin Lodging Company*........ 60,000 1,440,000
Brandywine Realty Trust........ 10,000 195,000
Cali Realty Corp............... 15,000 463,125
Developers Diversified Realty
Corporation.................. 14,000 519,750
Duke Realty Investments, Inc... 30,000 1,155,000
Equity Residential Properties
Trust........................ 15,000 618,750
Essex Property Trust........... 30,000 881,250
First Industrial Realty Trust,
Inc.......................... 30,000 911,250
Prentiss Properties Trust...... 60,700 1,517,500
Storage Trust Realty........... 40,000 1,080,000
Storage USA, Inc............... 16,000 602,000
Walden Residential Properties,
Inc.......................... 30,000 746,250
-----------
TOTAL REITS
(Cost -- $11,437,397)........ 14,005,300
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 4
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS PURCHASED -- 0.2% CONTRACTS VALUE
- --------------------------------------------------------
<S> <C> <C>
PURCHASED PUT OPTIONS
Standard & Poors 500 Index,
March/670/Put................ 120 $ 78,000
Standard & Poors 500 Index,
March/675/Put................ 124 88,350
-----------
TOTAL OPTIONS PURCHASED
(Cost -- $367,832)........... 166,350
-----------
TOTAL INVESTMENTS -- 95.8%
(Cost -- $62,277,083)(b)..... 74,242,463
-----------
OPTIONS WRITTEN -- (0.5%)
- -------------------------------
WRITTEN COVERED CALL OPTIONS
ADT Limited,
March/22.50/Call............. 125 (13,281)
Allegiance Corporation,
February/22.50/Call.......... 60 (33,750)
American Standard Companies,
Inc., April/40/Call.......... 30 (6,563)
Boston Scientific Corporation,
February/60/Call............. 40 (13,250)
Cabletron Systems, Inc.,
April/45/Call................ 80 (4,500)
Carnival Corporation Class A
April/35/Call................ 80 (5,000)
Caterpillar, Inc.,
February/80/Call............. 10 (1,125)
Columbia/HCA Healthcare Corp.,
February/40/Call............. 60 (14,250)
Dresser Industries, Inc.,
April/35/Call................ 35 (2,187)
Du Pont (E.I.) De Nemours &
Company, April/100/Call...... 35 (8,750)
Eckerd Corporation,
February/35/Call............. 295 (5,531)
Enron Corporation,
April/45/Call................ 25 (4,063)
General Electric Company,
March/105/Call............... 20 (5,750)
Helmerich & Payne, Inc.,
March/55/Call................ 20 (3,312)
Helmerich & Payne, Inc.,
March/60/Call................ 20 (875)
Intel Corp., April/130/Call.... 20 (18,500)
Intel Corp., April/140/Call.... 30 (41,625)
International Business Machines
Corporation,
April/155/Call............... 20 (14,750)
International Business Machines
Corporation,
April/160/Call............... 20 (20,000)
Johnson Controls, Inc.,
April/85/Call................ 25 (8,281)
Lowe's Companies, Inc.,
April/45/Call................ 45 (2,250)
Mattel, Inc., April/30/Call.... 60 (8,250)
Microsoft Corporation,
April/80/Call................ 80 $ (66,000)
Nabisco Holdings Corporation
Class A, March/40/Call....... 60 (10,125)
NationsBank Corporation,
February/100/Call............ 20 (7,500)
Norwest Corporation,
April/45/Call................ 20 (4,750)
Nuevo Energy Company,
April/55/Call................ 35 (11,812)
Parker & Parsley Petroleum
Company, March/30/Call....... 30 (21,938)
Schlumberger Ltd.,
February/105/Call............ 30 (6,563)
Travelers, Inc.,
March/48.75/Call............. 80 (10,000)
-----------
TOTAL OPTIONS WRITTEN
(Premiums
received -- $352,241)........ (374,531)
-----------
OTHER ASSETS, LESS
LIABILITIES -- 4.7%.......... 3,673,442
-----------
NET ASSETS -- 100%............. $77,541,374
===========
</TABLE>
* Non-income producing security.
(a) Foreign security.
(b) Cost is approximately the same for Federal income
tax purposes.
ADR -- American Depository Receipt
<TABLE>
<S> <C>
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation based
on cost for financial statement and Federal income tax
purposes is as follows:
Gross unrealized appreciation......... $13,424,772
Gross unrealized depreciation......... (1,459,392)
-----------
Net unrealized appreciation....... $11,965,380
===========
</TABLE>
Purchases and sales of securities (other than short-term
obligations) aggregated $97,112,873 and $103,649,140,
respectively, for the period ended December 31, 1996.
Transactions in written call options during the year
ended December 31, 1996 were:
<TABLE>
<CAPTION>
PREMIUMS
NUMBER OF RECEIVED/
CONTRACTS (PAID)
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1995.......... 0 $ 0
Contracts written....................... 1,510 355,181
Contracts closed........................ (20) (2,940)
------ --------
Outstanding at December 31, 1996.......... 1,490 $352,241
====== ========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $62,277,083)...... $74,242,463
Cash........................................................ 3,566,383
Receivables
Fund shares sold.......................................... 10,901
Dividends and interest.................................... 172,964
Other assets................................................ 85,785
-----------
Total assets.............................................. 78,078,496
-----------
LIABILITIES
Payables
Dividends to shareholders................................. 21,204
Fund shares repurchased................................... 11,374
Management fee............................................ 56,699
12b-1 service and distribution fees....................... 24,591
Other payables to related parties......................... 34,779
Accrued expenses............................................ 13,944
Written options outstanding at market (premiums
received -- $352,241)..................................... 374,531
-----------
Total liabilities......................................... 537,122
-----------
NET ASSETS.................................................. $77,541,374
===========
CLASS A
Net asset value and redemption price per share
($63,219,192/5,555,826 shares outstanding)................ $ 11.38
===========
Maximum offering price per share ($11.38 X 100/94.25)*...... $ 12.07
===========
CLASS B
Net asset value and offering price per share
($13,473,108/1,185,838 shares outstanding)**.............. $ 11.36
===========
CLASS C
Net asset value and offering price per share ($28,315/2,491
shares outstanding)**..................................... $ 11.37
===========
CLASS D
Net asset value and redemption price per share ($820,759 /
72,047 shares outstanding)................................ $ 11.39
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $72,807,907
Accumulated net realized loss on investments.............. (7,258,212)
Accumulated net investment income......................... 48,589
Net unrealized appreciation (depreciation) on
Investments............................................. 12,166,862
Options................................................. (223,772)
-----------
NET ASSETS.................................................. $77,541,374
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 6
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 1,437,214
Interest.................................................. 404,471
-----------
1,841,685
-----------
EXPENSES
Management fee............................................ $629,322
Transfer agent............................................ 233,399
Administrative services fee............................... 74,038
Custodian fees............................................ 9,461
Blue Sky fees............................................. 25,013
Auditing and accounting fees.............................. 21,368
Shareholder reports....................................... 7,267
Fund accounting........................................... 87,182
Trustees' fees............................................ 4,480
12b-1 service and distribution fees....................... 249,766
Legal..................................................... 22,430
Other..................................................... 68,128
-----------
Total expenses.......................................... 1,431,854
-----------
NET INVESTMENT INCOME....................................... 409,831
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments and foreign currency transactions........... 12,587,897
Options................................................. (136,689)
Net unrealized appreciation (depreciation) during the
period on
Investments and foreign currency transactions........... 1,131,380
Options................................................. (223,772)
-----------
Net gain on investment transactions..................... 13,358,816
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $13,768,647
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 7
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 409,831 $ 570,249
Net realized gain on
Investments and foreign currency transactions........... 12,587,897 3,005,363
Options................................................. (136,689) --
Net unrealized appreciation (depreciation) during the
period on
Investments............................................. 1,131,380 10,477,958
Options................................................. (223,772) --
Forward foreign currency contracts...................... -- 8,082
----------- -----------
Net increase resulting from operations.................. 13,768,647 14,061,652
----------- -----------
Class A distributions
From net investment income................................ (409,831) (448,998)
In excess of net investment income........................ (170,374) --
From net realized gain.................................... (8,490,622) (1,323,702)
----------- -----------
Total distributions to Class A shareholders............. (9,070,827) (1,772,700)
----------- -----------
Class B distributions
From net investment income................................ -- (6,337)
In excess of net investment income........................ (84,427) --
From net realized gain.................................... (1,738,301) (198,573)
----------- -----------
Total distributions to Class B shareholders............. (1,822,728) (204,910)
----------- -----------
Class C distributions
In excess of net investment income........................ (39) --
From net realized gain.................................... (3,730) --
----------- -----------
Total distributions to Class C shareholders............. (3,769) --
----------- -----------
Class D distributions
From net investment income................................ -- (1,556)
In excess of net investment income........................ (7,039) --
From net realized gain.................................... (103,094) (35,765)
----------- -----------
Total distributions to Class D shareholders............. (110,133) (37,321)
----------- -----------
Fund share transactions (Note 5)
Class A................................................. 1,711,001 22,755,447
Class B................................................. 4,351,868 1,580,170
Class C................................................. 29,562 --
Class D................................................. (476,754) (2,088,473)
----------- -----------
Net increase resulting from Fund share transactions..... 5,615,677 22,247,144
----------- -----------
Total increase in net assets................................ 8,376,867 34,293,865
NET ASSETS
Beginning of period....................................... 69,164,507 34,870,642
----------- -----------
END OF PERIOD............................................. $77,541,374 $69,164,507
=========== ===========
ACCUMULATED NET INVESTMENT INCOME........................... $ 48,589 $ --
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 8
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
SELECTED PER SHARE DATA ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.98 $ 9.08 $ 9.70 $ 9.21 $ 9.74
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income..................................... .08 .11 .17 .08 .07
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.16 2.13 (.36) 1.30 .18
------- ------- ------- ------- -------
Total from investment operations........................ 2.24 2.24 (.19) 1.38 .25
------- ------- ------- ------- -------
Less distributions
From net investment income................................ .08 .08 .17 .06 .07
In excess of net investment income........................ .03 -- .01 -- --
From net realized gain.................................... 1.73 .26 .25 .83 .71
------- ------- ------- ------- -------
Total distributions..................................... 1.84 .34 .43 .89 .78
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 11.38 $ 10.98 $ 9.08 $ 9.70 $ 9.21
======= ======= ======= ======= =======
Total return(%)(a).......................................... 20.46 24.93 (2.03) 15.07 2.61
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $63,219 $59,054 $26,017 $22,669 $19,045
Ratio of expenses to average net assets(%).................. 1.81 1.96 1.84 2.14 1.94
Ratio of net investment income to average net assets(%)..... .68 1.06 1.83 .88 .73
Portfolio turnover rate(%).................................. 138 81 36 85 163
Average commission rate(e).................................. $ .0580 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
CLASS B FOR THE YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
------------------------------- -----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA ------- ------ ------ -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.98 $ 9.08 $ 9.70 $10.43
------- ------ ------ ------
Income (loss) from investment operations
Net investment income (loss).............................. (.01) .03 .09 --
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.15 2.13 (.36) .05
------- ------ ------ ------
Total from investment operations........................ 2.14 2.16 (.27) .05
------- ------ ------ ------
Less distributions
From net investment income................................ -- .01 .09 .01
In excess of net investment income........................ .08 -- .01 --
From net realized gain.................................... 1.68 .25 .25 .77
------- ------ ------ ------
Total distributions..................................... 1.76 .26 .35 .78
------- ------ ------ ------
Net asset value, end of period.............................. $ 11.36 $10.98 $ 9.08 $ 9.70
======= ====== ====== ======
Total return(%)............................................. 19.59(a) 23.94(a) (2.88)(a) .61(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $13,473 $8,868 $5,849 $ 888
Ratio of expenses to average net assets(%).................. 2.55 2.75 2.70 3.09(c)
Ratio of net investment income (loss) to average net
assets(%)................................................. (.06) .27 .97 (.07)(c)
Portfolio turnover rate(%).................................. 138 81 36 85
Average commission rate(e).................................. $ .0580 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT)
TO DECEMBER 31,
----------------
1996
SELECTED PER SHARE DATA ----------------
<S> <C>
Net asset value, beginning of period........................ $11.73
------
Income from investment operations
Net investment loss....................................... (.08)
Net realized and unrealized gain on investment
transactions............................................ 1.53
------
Total from investment operations........................ 1.45
------
Less distributions
In excess of net investment income........................ .08
From net realized gain.................................... 1.73
------
Total distributions..................................... 1.81
------
Net asset value, end of period.............................. $11.37
======
Total return(%)............................................. 12.37(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 28
Ratio of expenses to average net assets(%).................. 3.02(c)
Ratio of net investment loss to average net assets(%)....... (.53)(c)
Portfolio turnover rate(%).................................. 138
Average commission rate(e).................................. $.0580
</TABLE>
(See Notes to Financial Statements)
<PAGE> 9
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 16, 1993
CLASS D(D) FOR THE YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
------------------------------ ----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA ------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $10.98 $ 9.08 $ 9.70 $ 9.83
------ ------ ------ ------
Income (loss) from investment operations
Net investment income (loss).............................. (.02) .03 .09 --
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.14 2.13 (.36) .73
------ ------ ------ ------
Total from investment operations........................ 2.12 2.16 (.27) .73
------ ------ ------ ------
Less distributions
From net investment income................................ -- .01 .09 .06
In excess of net investment income........................ .08 -- .01 --
From net realized gain.................................... 1.63 .25 .25 .80
------ ------ ------ ------
Total distributions..................................... 1.71 .26 .35 .86
------ ------ ------ ------
Net asset value, end of period.............................. $11.39 $10.98 $ 9.08 $ 9.70
====== ====== ====== ======
Total return(%)............................................. 19.41(a) 23.94(a) (2.88)(a) 7.59(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 821 $1,242 $3,004 $5,185
Ratio of expenses to average net assets(%).................. 2.63 2.75 2.70 3.09(c)
Ratio of net investment income (loss) to average net
assets(%)................................................. (.14) .27 .97 (.07)(c)
Portfolio turnover rate(%).................................. 138 81 36 85
Average commission rate(e).................................. $.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.
(See Notes to Financial Statements)
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996, there were no
such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may write (sell) 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 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.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designated
$8,336,816 as capital gain dividends for its taxable year ended December 31,
1996.
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 (Note 4). 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 investment income and net capital gain
realized during the year. An additional distribution may be declared if
necessary to avoid the payment of a four percent Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which
is due to changes in market prices of securities
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
held. Such fluctuations are included with net realized and unrealized gain or
loss on investments. Exchange gains or losses from currency translation of
other assets and liabilities, if significant, are reported as a separate
component of Net realized and unrealized gain (loss) on investment
transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY 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 .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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $15,182.
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 $126,322, $114,350, $79 and
$9,015 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 IMSC a monthly fee plus certain out-of-pocket expenses. Such fees
and expenses of $198,964, $31,195, $59 and $3,181 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.
4. ACQUISITION OF MACKENZIE NORTH AMERICAN FUND
On April 1, 1995, the Fund acquired the net assets (valued at $27,815,572)
of Mackenzie North American Fund (MNAF), approved by MNAF's shareholders on
March 31, 1995. The acquisition was accomplished by a tax-free exchange, based
on values computed as of the close of business on March 31, 1995 of 2,962,768
(NAV $9.39) shares of the Fund for the 4,368,536 (NAV $6.37) shares of MNAF
outstanding. MNAF's net assets at that date, including $10,629,907 net realized
capital loss and $778,631 unrealized depreciation, were combined with the Fund
for total net assets after acquisition of $64,583,061.
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class D were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 771,160 $ 8,920,002 995,850 $ 9,779,465
Issued in connection with
the acquisition of
Mackenzie North American
Fund.................... -- -- 2,962,768 27,815,572
Issued on reinvestment of
distributions........... 673,234 7,657,806 132,508 1,422,527
Repurchased.............. (1,266,282) (14,866,807) (1,580,020) (16,262,117)
---------- ------------ ---------- ------------
Net increase............. 178,112 $ 1,711,001 2,511,106 $ 22,755,447
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 554,493 $ 6,504,150 478,516 $ 4,852,229
Issued on reinvestment of
distributions........... 160,600 1,737,755 17,693 190,075
Repurchased.............. (337,018) (3,890,037) (332,940) (3,462,134)
---------- ------------ ---------- ------------
Net increase............. 378,075 $ 4,351,868 163,269 $ 1,580,170
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 3,952 $ 46,287
Issued on reinvestment of
distributions........... 335 3,810
Repurchased.............. (1,796) (20,535)
---------- ------------
Net increase............. 2,491 $ 29,562
========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS D* SHARES AMOUNT SHARES AMOUNT
- -------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Issued on reinvestment of
distributions........... 9,114 $ 103,727 3,107 $ 32,805
Repurchased.............. (50,213) (580,481) (220,936) (2,121,278)
---------- ------------ ---------- ------------
Net decrease............. (41,099) $ (476,754) (217,829) $ (2,088,473)
========== ============ ========== ============
</TABLE>
* Class D shares are not available for sale.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth with Income Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVYIX123196
<PAGE> 13
DECEMBER 31, 1996 IVY FUNDS
IVY GROWTH FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
The US stock market got out of the starting blocks in strong fashion
in 1996 once again providing investors with double-digit returns. Within this
environment the Ivy Growth Fund performed well, although it trailed the average
of general equity funds and the S&P 500. For the twelve months ended December
31, 1996, the total return of the Ivy Growth Fund was 17.22% on a net asset
value basis as compared to the average of general equity funds as tracked by
Lipper Analytical Service Inc. and the S&P 500, which were up 19.47% and 23.22%
respectively. (For the Fund's total return with sales charge and performance
commentary, please refer to the following page.)
The strength of the US market continues to surprise most observers.
It appears "as expected" or "better than expected" earnings reports are driving
the market as not even a 0.40% rise in interest rates at year end had any
meaningful negative impact on stock prices. The price/earnings ratio of the
S&P 500 is around 18, which is not abnormally high from an historic
perspective. Additionally, the demand for long-term financial assets continues
to be strong as cash flows into mutual funds remain high. Interest rates and
inflation are likely to remain low but we would expect the Federal Reserve
Board to tighten monetary policy should there be any indications to the
contrary.
About half of the Ivy Growth Fund is invested in larger capitalization
stocks which were very much in favor in 1996. Demographics, and in particular
an aging population is one investment theme found in the Fund. The thesis is
that as people get older, they tend to spend more money on services rather than
goods. According to our research, these services are generally health care,
financial and leisure time.
Real estate investment trusts (REITs) were added in mid-1996 because
the industry fundamentals became attractive and valuations were good. Global
capital spending and technology are two other investment themes of the Ivy
Growth Fund. US companies such as Caterpillar and Foster Wheeler should
benefit from the need of countries around the world to build and rebuild their
infrastructures.
Within the technology sector, our research indicated that there was
excess inventory for personal computers and semiconductors, particularly memory
circuits at the start of 1996. This excess diminished earnings visibility and
pressured valuations, even in those sectors unaffected by the inventory cycle.
However, by mid- to late-summer, there was evidence of a gradual improvement
which benefitted the technology portion of the Ivy Growth Fund.
We continue to believe many markets outside the US are attractively
priced and offer the added benefit of geographic diversification. The foreign
stocks in the Fund are spread throughout Europe, Asia and Latin America and are
selected using a long-term value approach. Most are large-capitalization
issues located in developed markets. Despite the lackluster performance of
many foreign markets in 1996, the international equities in the Ivy Growth Fund
made a positive contribution to its overall return. Looking ahead, we believe
this portion of the Fund should continue to reduce overall volatility and
enhance long-term returns.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 14
IVY GROWTH FUND PERFORMANCE COMMENTARY
The Ivy Growth Fund provided investors with solid returns in 1996 although it
did underperform the average of general equity funds as tracked by Lipper, and
the S&P 500. For the twelve months ended December 31, 1996 the Fund was up
17.22% on a total return basis. This compares to 19.47% and 23.22% for the
average of general equity funds and the S&P 500 respectively. The difference in
performance is attributed to the investment strategy of the Fund as compared to
its two benchmarks. The average Lipper general equity fund and the S&P 500 are
primarily invested in large capitalization US companies.
10-YEAR PERFORMANCE COMPARISONS
OF THE FUND OF A $10,000
INVESTMENT
CHART
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Growth Fund will
fluctuate and at redemption may be worth more or less than the amount of the
original investment.
The Lipper Average Growth Fund represents the performance of the average growth
fund as measured by Lipper Analytical Services, Inc. The S&P 500 is an unmanaged
index of stocks which assumes reinvestment of dividends and, unlike Fund
returns, does not reflect any fees or expenses. It is not possible to invest in
an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
IVY GROWTH FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C***
Average Annual
Total Return Average Annual Total Return
-------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
-------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
--------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
1 Yr. 10.48% 10.48% 11.02% 16.02% 11.02% 16.02%
- ----------------------------------------------------------------------------------
5 Yr. 10.03% 9.97% -- -- -- --
- ----------------------------------------------------------------------------------
10 Yr. 11.09% 11.06% -- -- -- --
- ----------------------------------------------------------------------------------
B: B: B: B:
11.36% 12.09% 11.28% 12.02%
C: C: C: C:
Since Inception 10.75% 10.74% 4.20% 5.20% 4.20% 5.20%
- ----------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 15
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 97.8% SHARES VALUE
- -----------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 6.6%
AKZO Nobel NV(a)............ 12,000 $ 1,637,243
Anglo-American Corporation
of South Africa
Limited(a)................ 6,000 330,305
AssiDoman AB(a)............. 24,200 673,401
BASF AG(a).................. 19,000 727,398
Bayer AG(a)................. 11,500 466,013
Cementos de Mexico S.A.
'B'(a).................... 118,750 461,604
Crown Cork & Seal Company,
Inc....................... 30,000 1,631,250
Du Pont (E.I.) De Nemours &
Company................... 27,000 2,548,125
Enso OY -- R(a)............. 72,000 577,998
Ferro Corporation........... 46,000 1,305,250
Fletcher Challenge
Building(a)............... 183,750 564,742
Fletcher Challenge
Forests(a)................ 104,286 174,626
Fletcher Challenge
Paper(a).................. 184,500 379,335
Guangdong Tannery Ltd.(a)... 80,000 20,168
Harsco Corporation.......... 38,000 2,603,000
Holderbank Financiere Glaris
AG(a)..................... 1,520 1,082,220
Imperial Chemical Industries
PLC -- Sponsored ADR
(a)....................... 19,000 988,000
Millenium Chemicals
Inc.*(a).................. 2,285 40,559
Nampak Limited (a).......... 34,400 136,791
Philips Electronics NV(a)... 18,600 752,716
Semen Gresik(a)............. 110,000 353,862
Stora Kopparbergs Bergslags
Aktiebolag(a)............. 46,200 636,026
Trelleborg AB B Free
Shares(a)................. 116,300 1,541,463
Union Carbide Corporation
Holding Company........... 19,000 776,625
UPM-Kymmene OY(a)........... 28,840 603,830
------------
21,012,550
------------
BUSINESS SERVICES -- 2.3%
Applied Graphics
Technologies, Inc.*....... 28,000 815,500
BISYS Group, Inc.*.......... 18,000 667,125
Cohr, Inc.*................. 15,000 405,000
Copart, Inc.*............... 25,000 328,125
Corrections Corporation of
America*.................. 51,300 1,571,063
Daisytek International
Corporation*.............. 21,600 885,600
Dendrite International,
Inc.*..................... 20,600 169,950
Employee Solutions, Inc.*... 24,000 492,000
Gartner Group, Inc.*........ 24,400 950,075
Profit Recovery Group
International, Inc.*...... 32,000 512,000
Quick Response Services,
Inc.*..................... 20,000 570,000
------------
7,366,438
------------
CAPITAL GOODS -- 4.4%
AGCO Corporation............ 77,000 2,204,125
American Standard Companies,
Inc.*..................... 38,000 1,453,500
Caterpillar, Inc............ 13,000 978,250
Fluor Corporation........... 15,000 941,250
Foster Wheeler
Corporation............... 75,000 2,784,375
Johnson Controls, Inc....... 25,000 2,071,875
Kaydon Corporation.......... 27,000 1,272,375
Schneider, S.A.(a).......... 24,379 1,124,989
Tecumseh Products Company... 19,000 1,090,125
------------
13,920,864
------------
CONGLOMERATES -- 2.9%
Benpres Holdings Corp. --
Sponsored GDR*(a)......... 57,000 427,500
Cheung Kong(a).............. 167,000 1,484,325
Guangdong Investments(a).... 1,600,000 1,541,048
Hanson PLC ADR(a)........... 32,000 216,000
Jardine Matheson Holdings
Ltd.(a)................... 75,200 496,320
Jardine Strategic Holdings
Ltd.(a)................... 171,562 621,054
Jardine Strategic Holdings
Warrants 98*(a)........... 19,062 7,625
Metro Pacific
Corporation(a)............ 1,500,000 $ 370,722
New World Development
Company Ltd.(a)........... 247,000 1,668,488
Pacific Dunlop Ltd.(a)...... 215,000 546,447
Swire Pacific Ltd. Class
A(a)...................... 184,000 1,754,364
------------
9,133,893
------------
CONSUMER DURABLES -- 2.0%
Brunswick Corp.............. 38,500 924,000
CIADEA S.A ADR*(a).......... 40,150 190,746
Electrolux AB(a)............ 12,500 724,953
Fiat SpA*(a)................ 265,000 799,967
PT Astra International(a)... 142,000 390,688
Perusahaan Otomobil Nasional
Berhad(a)................. 78,000 494,158
Peugeot Citroen(a).......... 6,200 696,477
Volkswagen AG(a)............ 3,600 1,489,187
Volvo AB B.................. 28,000 617,162
------------
6,327,338
------------
CONSUMER NON-DURABLES --6.3%
Allegiance Corporation*..... 66,200 1,828,775
Cadbury Schweppes PLC(a).... 27,000 227,560
First Commonwealth, Inc.*... 18,000 355,500
Grand Metropolitan PLC ADR
(a)....................... 27,104 857,164
Group Danone(a)............. 5,500 764,897
Imperial Tobacco Group PLC
ADR*(a)................... 8,000 102,000
Integrated Living
Communities, Inc.*........ 155,000 891,250
Mattel, Inc................. 95,000 2,636,250
Nabisco Holdings Corporation
Class A................... 69,000 2,682,375
Nestle AG Registered (a).... 2,013 2,154,343
PepsiCo, Inc................ 62,000 1,813,500
Rembrandt Group
Limited(a)................ 21,000 187,440
South African Breweries
Ltd.(a)................... 5,287 133,941
South African Breweries Ltd.
Sponsored ADR(a).......... 5,200 130,000
Time Warner, Inc.
Preferred................. 23,000 891,250
Tsingtao Brewery Series
H(a)...................... 1,176,000 448,507
Tupperware Corporation...... 18,500 992,062
Unilever NV ADR(a).......... 4,700 823,675
Vina Concha y Toro
S.A.(a)................... 13,400 314,900
Warnaco Group, Inc. Class
A......................... 69,400 2,055,975
------------
20,291,364
------------
CONSUMER SERVICES -- 10.9%
ADT Limited *............... 75,000 1,715,625
Barnes & Noble, Inc.*....... 13,000 351,000
Boston Chicken, Inc.*....... 48,000 1,722,000
Carnival Corporation Class
A......................... 80,000 2,640,000
Comcast UK Cable Partners
Ltd.*..................... 30,000 408,750
CompUSA, Inc.*.............. 27,200 561,000
Corporate Express, Inc.*.... 31,400 924,338
Cuc International Inc....... 61,750 1,466,563
Eckerd Corporation *........ 70,500 2,256,000
Extended Stay America,
Inc.*..................... 46,000 925,750
Federated Department Stores,
Inc.*..................... 30,000 1,023,750
Galeries Lafayette *(a)..... 2,060 731,478
Genting Berhad(a)........... 70,000 482,280
Harte-Hanks
Communications............ 60,000 1,665,000
International Speedway
Corp. -- Class A*......... 37,000 758,500
Julius Meinl International
AG(a)..................... 3,900 111,536
Just for Feet, Inc.*........ 18,500 485,625
Lowe's Companies, Inc....... 40,000 1,420,000
Lusomundo-SGPS S.A.
Preferred Shares(a)....... 26,200 238,964
Northland Cranberries Inc.
Class A................... 30,000 690,000
Petco Animal Supplies,
Inc.*..................... 25,000 518,750
PetsMart Inc.*.............. 16,000 350,000
</TABLE>
(See Notes to Financial Statements)
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -----------------------------------------------------
<S> <C> <C>
Pier 1 Imports, Inc....... 87,000 $ 1,533,375
Planet Hollywood
International, Inc.*.... 42,600 841,350
Premier Parks, Inc.*...... 15,000 481,875
Rio Hotel and Casino,
Inc.*................... 50,000 731,250
Robinson Department Store
Public Company
Limited(a).............. 272,100 527,963
Royal Caribbean Cruises
Ltd..................... 9,300 217,387
Santa Isabel S.A.
ADR(a).................. 8,800 199,100
Scandinavian Broadcasting
System S.A.*............ 11,000 191,125
Sears, Roebuck & Co....... 50,000 2,306,250
Station Casinos, Inc.*.... 25,000 253,125
Stewart Enterprises Inc
Class A................. 21,000 714,000
Sun International Hotels
Ltd.*................... 30,000 1,095,000
Sunglass Hut
International, Inc.*.... 200,000 1,450,000
Sylvan Learning Systems,
Inc.*................... 26,100 743,850
TRM Copy Centers
Corporation *........... 62,000 604,500
Tourism Holdings
Limited(a).............. 421,000 803,118
Viking Office Products,
Inc.*................... 10,000 266,875
West Marine Inc.*......... 10,000 282,500
------------
34,689,552
------------
ENERGY -- 6.7%
Basic Petroleum
International, Ltd.*.... 22,200 732,600
Dresser Industries, Inc... 58,000 1,798,000
Elf Aquitaine S.A.(a)..... 20,000 1,816,980
Enron Corporation......... 38,000 1,638,750
Fletcher Challenge
Energy(a)............... 263,750 764,029
Helmerich & Payne, Inc.... 41,500 2,163,187
Noble Drilling
Corporation*............ 90,000 1,788,750
Norsk Hydro A.S. ADR(a)... 37,500 2,010,938
Nuevo Energy Company*..... 33,300 1,731,600
Parker & Parsley Petroleum
Company................. 50,000 1,837,500
Schlumberger, Ltd......... 27,000 2,696,625
Shell Transport & Trading
Co.(a).................. 65,000 1,125,137
Total S.A. ADR(a)......... 20,155 811,239
YPF S.A. Sponsored
ADR(a).................. 22,000 555,500
------------
21,470,835
------------
FINANCIAL SERVICES --14.6%
ABN Amro Bank(a).......... 8,700 565,335
A.F.P. Provida S.A.
ADR(a).................. 10,300 193,125
AMBAC, Inc................ 27,000 1,792,125
Advanta Corporation Class
B....................... 19,000 776,625
Arab Malaysian Corporation
Berhad(a)............... 189,000 942,940
Asia Credit Company
PLC(a).................. 17,000 67,960
Australia & New Zealand
Banking Group Ltd.(a)... 78,000 491,278
Bank of Ireland(a)........ 89,175 814,150
Bank of Scotland(a)....... 180,000 950,285
Bankok Bank Public Company
Limited(a).............. 45,000 435,257
Banque Nationale De
Paris(a)................ 13,500 521,434
Barclays PLC(a)........... 30,500 522,207
CS Holding AG(a).......... 6,500 665,626
Capital One Financial
Corp.................... 5,900 212,400
Compagnie Financiere de
Paribas (a)............. 12,455 840,678
Credit Acceptance
Corporation*............ 7,200 169,200
DCB Holdings Berhad (a)... 103,000 352,781
Dhana Siam Finance & Secs.
Public Co. Ltd (a)...... 55,000 130,850
Donaldson, Lufkin &
Jenrette, Inc.*......... 49,400 1,778,400
Exel Limited.............. 60,000 2,272,500
Federal Home Loan Mortgage
Corp.................... 21,000 2,312,625
Federal National Mortgage
Association............. 50,000 1,862,500
First Chicago NBD
Corporation............. 26,000 1,397,500
First Union Corporation... 33,500 2,479,000
Fortis Amev NV(a)......... 24,500 856,923
Green Tree Financial
Corp.................... 17,000 656,625
HSBC Holdings PLC(a)...... 115,997 2,481,902
ING Groep NV(a)........... 28,257 $ 1,016,082
J.P. Morgan & Company
Inc..................... 18,000 1,757,250
Krung Thai Bank Public
Company Limited (a)..... 75,000 144,793
Krung Thai Thanakit
PLC(a).................. 26,000 66,420
Litchfield Financial
Corp.................... 31,500 464,625
National Australia Bank
Ltd.(a)................. 42,000 493,708
National Westminster Bank
PLC(a).................. 41,500 486,835
NationsBank Corporation... 26,300 2,570,825
Nava Finance and
Securities Public
Company Limited*(a)..... 40,000 54,992
Norwest Corporation....... 27,000 1,174,500
PennCorp Financial, Inc... 39,000 1,404,000
Peregrine Investment
Holdings(a)............. 828,000 1,418,359
Peregrine Investment
Holdings Warrants*(a)... 82,800 26,494
Providian Corporation..... 35,000 1,798,125
Signet Banking
Corporation............. 60,000 1,845,000
Societe Generale.......... 4,700 507,181
Terra Nova (Bermuda)
Holdings Ltd............ 70,000 1,505,000
Travelers, Inc............ 60,000 2,722,500
Westpac Banking Corp.
Ltd.(a)................. 84,000 477,696
------------
46,476,616
------------
HEALTHCARE -- 12.8%
Access Health, Inc.*...... 25,000 1,118,750
American Medical Response,
Inc.*................... 25,100 815,750
Apria Healthcare Group,
Inc.*................... 60,000 1,125,000
Arbor Health Care Company
*....................... 24,200 629,200
Astra AB B Free
Shares(a)............... 33,000 1,590,064
Autoimmune, Inc.*......... 15,000 230,625
Biochem Pharma, Inc.*..... 25,500 1,281,375
Biopsys Medical, Inc.*.... 15,000 326,250
Boston Scientific
Corporation*............ 40,000 2,400,000
CIMA Labs, Inc.*.......... 21,600 132,300
Cardiovascular
Dynamics*............... 25,000 325,000
Centocor, Inc.*........... 8,000 286,000
Cephalon, Inc.*........... 15,000 307,500
Columbia/HCA Healthcare
Corp.................... 69,300 2,823,975
Compdent Corporation*..... 24,000 846,000
Depotech Corporation*..... 12,000 196,500
Dura Pharmaceuticals,
Inc.*................... 33,600 1,604,400
Elan Corp.
PLC -- Sponsored
ADR*(a)................. 117,000 3,890,250
Express Scripts,
Inc. -- Class A*........ 10,000 358,750
Geltex Pharmaceuticals,
Inc.*................... 30,000 727,500
Genzyme Corp. -- General
Division*............... 36,000 783,000
Genzyme Corp. -- Tissue
Repair*................. 3,104 22,116
Health Management
Associates, Inc.*....... 25,000 562,500
Horizon Mental Health
Management, Inc.*....... 15,000 416,250
Humana, Inc.*............. 27,000 516,375
Liposome Company, Inc.*... 94,000 1,797,750
Medpartners/Mullikin,
Inc.*................... 15,000 315,000
Merck KGaA(a)............. 24,000 861,978
NABI, Inc.*............... 50,000 437,500
Neurex Corporation*....... 26,000 442,000
Norland Medical Systems,
Inc.*................... 15,000 101,250
Omnicare, Inc............. 35,200 1,130,800
Orthodontic Centers of
America,
Inc.*................... 102,000 1,632,000
OrthoLogic Corp.*......... 20,000 112,500
Penederm, Inc.*........... 5,500 68,063
Pharmacia & Upjohn, Inc... 60,000 2,377,500
PhyCor, Inc.*............. 30,988 879,270
Physician Support Systems,
Inc.*................... 44,000 847,000
Renal Treatment Centers
Inc.*................... 40,000 1,020,000
Sepracor, Inc.*........... 25,000 415,625
Serologicals
Corporation*............ 18,000 636,750
Sonus Pharmaceuticals,
Inc.*................... 22,500 669,375
Spine-Tech, Inc.*......... 10,000 250,000
Total Renal Care Holdings,
Inc.*................... 15,000 543,750
</TABLE>
(See Notes to Financial Statements)
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
Trinity Biotech PLC ADR
Warrants A*............. 60,000 $ 90,000
Trinity Biotech PLC ADR
Warrants B*............. 30,000 37,500
United Dental Care,
Inc.*................... 12,000 364,500
Uromed Corporation*....... 52,500 511,875
Vencor, Inc.*............. 13,000 411,125
VidaMed, Inc.*............ 30,000 386,250
Vivra, Inc.*.............. 19,500 706,875
Vivus, Inc.*.............. 19,500 538,688
------------
40,900,354
------------
INDUSTRIAL -- 2.0%
Clipsal Industries
Ltd.(a)................. 252,000 917,280
General Electric
Company................. 16,500 1,631,437
Hunter Douglas NV(a)...... 9,900 666,778
Lyonnaise Des
Eaux -- Dumez (a)....... 9,399 873,054
SMH AG(a)................. 1,000 614,424
United Waste Systems
Inc.*................... 39,000 1,340,625
Waste Management
International
PLC*(a)................. 51,400 404,775
------------
6,448,373
------------
MISCELLANEOUS -- 0.5%
Fidelity Advisor Korea
Fund *.................. 80,000 760,000
ROC Taiwan Fund *......... 48,000 492,000
Taiwan Fund, Inc.......... 22,000 489,500
------------
1,741,500
------------
PROPERTY DEVELOPERS &
INVESTMENT -- 0.3%
DBS Land Limited(a)....... 157,000 578,023
Land & General
Berhad(a)............... 150,000 359,334
------------
937,357
------------
TECHNOLOGY -- 19.1%
3Com Corporation *........ 20,150 1,478,506
ASM Lithography Holding NV
*(a).................... 8,000 398,500
Aerial Communications,
Inc.*................... 40,000 325,000
Altera Corporation *...... 12,400 901,325
ANADIGICS, Inc.*.......... 10,000 392,500
Analog Devices, Inc.*..... 28,000 948,500
Applix, Inc.*............. 12,000 262,500
Arch Communications Group,
Inc.*................... 43,000 403,125
Baan Company, NV *(a)..... 11,000 382,250
Bell & Howell Holdings
Company *............... 84,000 1,995,000
CBT Group PLC ADR *....... 17,000 922,250
Cabletron Systems,
Inc.*................... 100,000 3,325,000
Cascade Communications,
Corp.*.................. 21,600 1,190,700
Checkfree Corporation *... 48,000 822,000
Cisco Systems, Inc.*...... 66,000 4,199,250
Citrix Systems, Inc.*..... 8,600 335,937
DSP Communications,
Inc.*................... 26,000 503,750
Elec & Eltek International
Co. Ltd.(a)............. 145,000 551,000
FileNet Corporation *..... 17,000 544,000
Gemstar International
Group
Limited *............... 47,200 826,000
Heartland Wireless
Communications, Inc.*... 20,000 262,500
Hewlett-Packard Company... 38,000 1,909,500
IKOS Systems, Inc.*....... 23,000 460,000
Informix Corporation *.... 88,200 1,797,075
Integrated Process
Equipment Corporation
*....................... 10,000 180,000
Intel Corp................ 43,500 5,695,781
Interlink Computer
Sciences, Inc.*......... 69,500 1,164,125
International Business
Machines Corp........... 23,100 3,488,100
KLA Instruments
Corporation............. 36,000 1,278,000
Komag, Inc.*.............. 15,000 406,875
Lattice Semiconductor
Corp.*.................. 21,000 966,000
Legato Systems, Inc.*..... 11,000 358,875
Linear Technology
Corporation............. 8,000 351,000
Maxim Integrated Products,
Inc.*................... 20,000 $ 865,000
McAfee Associates,
Inc.*................... 18,000 792,000
Microsoft Corporation *... 40,000 3,305,000
Omnipoint Corporation *... 18,000 346,500
Optika Imaging Systems,
Inc.*................... 113,800 570,778
Oracle Systems Corp.*..... 28,800 1,202,400
P-COM, Inc................ 24,000 711,000
Paging Network Inc.*...... 65,000 991,250
Pairgain Technologies,
Inc.*................... 54,400 1,655,800
Peoplesoft, Inc.*......... 13,000 623,187
Premisys Communications,
Inc.*................... 12,000 405,000
Project Software &
Development,
Inc.*................... 17,000 720,375
Proxim, Inc.*............. 38,000 874,000
QUALCOMM, Inc.*........... 28,400 1,132,450
RadiSys Corporation *..... 13,600 663,000
Red Brick Systems,
Inc.*................... 11,800 271,400
S3 Incorporated *......... 43,000 698,750
Sawtek Inc.*.............. 19,300 764,762
Security Dynamics
Technologies,
Inc.*................... 12,000 378,000
Sykes Enterprises,
Inc.*................... 16,500 618,750
Synopsys, Inc.*........... 23,000 1,063,750
Systemsoft Corporation
*....................... 35,000 520,625
Transaction Network
Services, Inc.*......... 63,750 733,125
Ultratech Stepper,
Inc.*................... 10,000 237,500
Veritas Software
Corporation *........... 22,500 1,119,375
VideoServer, Inc.*........ 8,000 340,000
Xylan Corporation *....... 11,000 310,750
------------
60,939,451
------------
TELEPHONE &
ELECTRIC -- 3.1%
Cia. de Telecomunicaciones
de Chile S.A.(a)........ 2,500 252,813
Empresa Nacional de
Electricidad --
ADR(a).................. 21,900 1,533,000
Empresa Nacional de
Electridad
S.A.(a)................. 11,800 182,900
PT Telekomunikasi
Indonesia -- Foreign
Reg.(a)................. 280,000 482,963
Portugal Telecom
S.A. -- ADR(a).......... 10,800 305,100
Telecomunicacoes
Brasileiras S.A.
Telebras(a)............. 24,700 1,889,550
Telefonica de
Argentina -- ADS(a)..... 9,100 235,462
Telefonica de Espana
S.A. -- ADR(a).......... 39,200 2,714,600
Vodafone Group
PLC -- ADR(a)........... 35,000 1,448,125
Western Wireless Corp.*... 19,000 263,625
WinStar Communications,
Inc.*................... 26,500 556,500
------------
9,864,638
------------
TRANSPORTATION -- 0.7%
Genesee & Wyoming Inc.
Class A *............... 20,700 719,325
Offshore Logistics,
Inc.*................... 24,146 467,829
RailTex, Inc.*............ 15,000 378,750
Wisconsin Central
Transportation
Corporation *........... 15,000 594,375
------------
2,160,279
------------
TOTAL EQUITY SECURITIES
(Cost --$234,701,222)... 303,681,402
------------
REAL ESTATE INVESTMENT
TRUSTS (REITS) -- 2.6%
Amli Residential
Properties Trust........ 60,000 1,402,500
Beacon Properties
Corporation............. 28,000 1,025,500
First Industrial Realty
Trust, Inc. ............ 60,000 1,822,500
Prentiss Properties
Trust*.................. 100,000 2,500,000
Walden Residential
Properties, Inc. ....... 60,000 1,492,500
------------
TOTAL REITS
(Cost -- $7,223,343).... 8,243,000
------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS PURCHASED -- 0.1% CONTRACTS VALUE
- -----------------------------------------------------
<S> <C> <C>
Standard & Poors 500
Index, March/670/Put.... 240 $ 156,000
Standard & Poors 500
Index, March/675/Put.... 264 188,100
------------
TOTAL OPTIONS PURCHASED
(Cost -- $759,612)...... 344,100
------------
TOTAL INVESTMENTS -- 97.9%
(Cost -- $242,684,177)(b)... 312,268,502
------------
OPTIONS WRITTEN -- (0.3%)
- --------------------------
ADT Limited,
March/22.50/Call........ 250 (26,562)
Allegiance Corporation,
February/22.50/Call..... 130 (73,125)
American Standard
Companies, Inc.,
April/40/Call........... 75 (16,406)
Boston Scientific
Corporation,
February/60/Call........ 90 (29,813)
Cabletron Systems, Inc.,
April/45/Call........... 200 (11,250)
Carnival Corporation Class
A, April/35/Call........ 200 (12,500)
Caterpillar, Inc.,
February/80/Call........ 25 (2,813)
Columbia/HCA Healthcare
Corp.,
February/40/Call........ 140 (33,250)
Dresser Industries, Inc.,
April/35/Call........... 115 (7,187)
Du Pont (E.I.) De Nemours
& Company,
April/100/Call.......... 75 (18,750)
Eckerd Corporation,
February/35/Call........ 705 (13,219)
Enron Corporation,
April/45/Call........... 75 (12,188)
General Electric Company,
March/105/Call.......... 50 (14,375)
Helmerich & Payne, Inc.,
March/55/Call........... 85 (14,077)
Helmerich & Payne, Inc.,
March/60/Call........... 85 (3,719)
Intel Corp.,
April/130/Call.......... 90 (124,875)
Intel Corp.,
April/140/Call.......... 45 (41,625)
International Business
Machines Corp.,
April/155/Call.......... 45 (45,000)
International Business
Machines Corp.,
April/160/Call.......... 45 (33,187)
Johnson Controls, Inc.,
April/85/Call........... 100 (33,125)
Lowe's Companies, Inc.,
April/45/Call........... 100 (5,000)
Mattel, Inc.,
April/30/Call........... 200 (27,500)
Microsoft Corporation,
April/80/Call........... 200 (165,000)
Nabisco Holdings
Corporation Class A,
March/40/Call........... 210 (35,438)
NationsBank Corporation,
February/100/Call....... 50 (18,750)
Norwest Corporation,
April/45/Call........... 55 (13,063)
Nuevo Energy Company,
April/55/Call........... 65 (21,937)
Parker & Parsley Petroleum
Company,
March/30/Call........... 100 $ (73,125)
Schlumberger, Ltd.,
February/105/Call....... 110 (24,062)
Travelers, Inc.,
March/48.75/Call........ 200 (25,000)
------------
TOTAL OPTIONS WRITTEN
(Premiums
received -- $918,726)... (975,921)
------------
OTHER ASSETS, LESS
LIABILITIES -- 2.4%..... 7,554,850
------------
NET ASSETS -- 100%........ $318,847,431
============
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 December 31, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 81,136,127
Gross unrealized depreciation.................... (11,551,802)
------------
Net unrealized appreciation.................. $ 69,584,325
============
Purchases and sales of securities other than short-term obligations
aggregated $211,736,167 and $231,152,800, respectively, for the
period ended December 31, 1996.
Forward foreign currency contracts at December 31, 1996 were:
</TABLE>
<TABLE>
<CAPTION>
FORWARD CONTRACTS UNREALIZED
(CURRENCY/ PRINCIPAL VALUE OF APPRECIATION/
EXPIRATION/COMMITMENT) AMOUNT OBLIGATION (DEPRECIATION)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Deutsch Marks/March 97/Sell....... 2,174,423 US $ (2,191,715) $(17,292)
French Francs/March 97/Sell....... 5,588,804 US (5,654,490) (65,686)
Netherland Guilders/March
97/Sell.......................... 3,737,478 US (3,756,920) (19,442)
Swiss Francs/March 97/Sell........ 2,578,541 US (2,546,277) 32,264
------------ --------
Total forward foreign currency
exchange contracts sold.......... $(14,149,402) $(70,156)
============ ========
</TABLE>
Transactions in written call options during the year ended December 31,
1996 were:
<TABLE>
<CAPTION>
PREMIUMS
NUMBER OF RECEIVED/
CONTRACTS (PAID)
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1995.......... 0 $ 0
Contracts written....................... 3,915 926,076
Contracts closed........................ (50) (7,350)
----- --------
Outstanding at December 31, 1996.......... 3,865 $918,726
===== ========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $242,684,177)..... $312,268,502
Cash........................................................ 8,984,594
Receivables
Fund shares sold.......................................... 5,718
Dividends and interest.................................... 355,778
Other assets................................................ 122,716
------------
Total assets.............................................. 321,737,308
------------
LIABILITIES
Payables
Distributions to shareholders............................. 2,059
Open forward foreign currency contracts................... 70,156
Investments purchased..................................... 1,417,851
Fund shares repurchased................................... 21,194
Management fee............................................ 230,673
12b-1 service and distribution fees....................... 20,190
Other payables to related parties......................... 111,949
Accrued expenses............................................ 39,884
Written options outstanding, at value (premiums
received -- $918,726)..................................... 975,921
------------
Total liabilities......................................... 2,889,877
------------
NET ASSETS.................................................. $318,847,431
============
CLASS A
Net asset value and redemption price per share
($314,907,567/17,730,592 shares outstanding).............. $ 17.76
============
Maximum offering price per share ($17.76 X 100/94.25)*...... $ 18.84
============
CLASS B
Net asset value and offering price per share
($3,849,718/217,627 shares outstanding)**................. $ 17.69
============
CLASS C
Net asset value and offering price per share ($90,146 /
5,124 shares outstanding)**............................... $ 17.59
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $248,919,219
Accumulated net realized gain on investments.............. 421,731
Accumulated net investment income......................... 50,714
Net unrealized appreciation (depreciation) on
Investments and foreign currency transactions........... 69,998,630
Options................................................. (472,707)
Forward foreign currency contracts...................... (70,156)
------------
NET ASSETS.................................................. $318,847,431
============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 20
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $249,706 foreign taxes withheld......... $ 4,027,582
Interest.................................................. 820,474
-----------
4,848,056
-----------
EXPENSES
Management fee............................................ $2,608,378
Transfer agent............................................ 897,128
Administrative services fee............................... 306,868
Custodian fees............................................ 103,350
Blue Sky fees............................................. 30,979
Auditing and accounting fees.............................. 61,764
Shareholder reports....................................... 14,700
Fund accounting........................................... 131,740
Trustees' fees............................................ 3,446
12b-1 service and distribution fees....................... 186,300
Legal fees................................................ 27,156
Other..................................................... 125,831
-----------
4,497,640
Expenses reimbursed by manager............................ (12,486)
-----------
Net expenses............................................ 4,485,154
-----------
NET INVESTMENT INCOME....................................... 362,902
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments and foreign currency transactions........... 29,676,848
Options................................................. (480,845)
Forward foreign currency contracts...................... 1,468,478
Net unrealized appreciation (depreciation) during the period on
Investments and foreign currency transactions........... 18,302,190
Options................................................. (472,707)
Forward foreign currency contracts...................... 167,966
-----------
Net gain on investment transactions..................... 48,661,930
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $49,024,832
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 21
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 362,902 $ 835,987
Net realized gain (loss) on
Investments and foreign currency transactions........... 31,145,326 15,071,628
Options................................................. (480,845) (345,250)
Net unrealized appreciation (depreciation) during the
period on
Investments and foreign currency transactions........... 18,302,190 49,271,083
Options................................................. (472,707) --
Forward foreign currency contracts...................... 167,966 (149,842)
------------ ------------
Net increase resulting from operations.................. 49,024,832 64,683,606
------------ ------------
Class A distributions
From net investment income................................ (389,158) (393,729)
In excess of net investment income........................ (1,722,867) --
From net realized gain.................................... (28,336,336) (14,615,580)
In excess of net realized gain............................ -- (521,353)
------------ ------------
Total distributions to Class A shareholders............. (30,448,361) (15,530,662)
------------ ------------
Class B distributions
From net realized gain.................................... (346,890) (110,798)
In excess of net realized gain............................ -- (9,479)
------------ ------------
Total distributions to Class B shareholders............. (346,890) (120,277)
------------ ------------
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 5)
Class A................................................. 6,870,702 9,822,759
Class B................................................. 1,041,023 922,346
Class C................................................. 91,198 --
------------ ------------
Net increase resulting from Fund share transactions..... 8,002,923 10,745,105
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 26,224,015 59,777,772
NET ASSETS
Beginning of period....................................... 292,623,416 232,845,644
------------ ------------
END OF PERIOD............................................. $318,847,431 $292,623,416
============ ============
ACCUMULATED NET INVESTMENT INCOME........................... $ 50,714 $ 25,339
============ ============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
SELECTED PER SHARE DATA -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 16.75 $ 13.91 $ 15.14 $ 14.98 $ 16.91
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income(a).................................. .02 .05 .05 .10 .17
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.86 3.73 (.49) 1.74 .70
-------- -------- -------- -------- --------
Total from investment operations........................ 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.............................. $ 17.76 $ 16.75 $ 13.91 $ 15.14 $ 14.98
======== ======== ======== ======== ========
Total return(%)(b).......................................... 17.22 27.33 (2.97) 12.29 5.21
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $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(%).......................... 1.45 1.60 1.49 1.43 1.40
Ratio of net investment income to average net
assets(%)(a).............................................. .13 .32 .32 .64 .98
Portfolio turnover rate(%).................................. 72 41 39 77(e) 138
Average commission rate(f).................................. $ .0439 N/A N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 23
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
CLASS B FOR THE YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
------------------------------ -----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA ------ ------ ------ -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $16.75 $13.91 $15.14 $ 16.42
------ ------ ------ --------
Income (loss) from investment operations
Net investment loss(a).................................... (.13) (.08) (.04) --
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.81 3.71 (.54) .37
------ ------ ------ --------
Total from investment operations........................ 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.............................. $17.69 $16.75 $13.91 $ 15.14
====== ====== ====== ========
Total return(%)............................................. 16.02(b) 26.13(b) (3.90)(b) 2.34(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $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(%).......................... 2.37 2.56 2.45 2.44(d)
Ratio of net investment loss to average net assets(%)(a).... (.79) (.64) (.64) (.33)(d)
Portfolio turnover rate(%).................................. 72 41 39 77(e)
Average commission rate(f).................................. $.0439 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 24
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT) TO
DECEMBER 31,
-----------------
1996
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $18.46
------
Loss from investment operations
Net investment loss(a).................................... (.06)
Net realized and unrealized gain on investment
transactions............................................ 1.02
------
Total from investment operations........................ .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.............................. $17.59
======
Total return(%)............................................. 5.20(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 90
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 2.44(d)
Without expense reimbursement(%).......................... 2.44(d)
Ratio of net investment loss to average net assets(%)(a).... (.86)(d)
Portfolio turnover rate(%).................................. 72
Average commission rate(f).................................. $.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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996, there were no
such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may write (sell) 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 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.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$28,776,451 as capital gain dividends for its taxable year ended December 31,
1996.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $20,448.
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 $153,152, $32,851 and $297 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 $888,356, $8,674 and $98 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. ACQUISITION OF MACKENZIE AMERICAN FUND
On April 1, 1995, the Fund acquired the net assets (valued at $22,845,039)
of Mackenzie American Fund (MAF), approved by MAF's shareholders on March 31,
1995. The acquisition was accomplished by a tax-free exchange, based on values
computed as of the close of business on March 31, 1995 of 1,558,771 (NAV $14.66)
shares (1,556,917 Class A and 1,854 Class B) of the Fund for 2,170,282 (NAV
$10.53) shares (2,167,700 Class A and 2,582 Class B) of MAF outstanding. MAF's
net assets at that date, including $604,631 unrealized appreciation on
investments, were combined with the Fund for total net assets after acquisition
of $264,077,723.
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,496,693 $ 27,187,211 1,293,661 $ 20,326,652
Issued in connection with
the acquisition of
Mackenzie American
Fund.................... -- -- 1,556,917 22,817,867
Issued on reinvestment of
distributions........... 1,580,308 28,065,960 854,211 14,217,886
Repurchased.............. (2,657,170) (48,382,469) (3,036,434) (47,539,646)
---------- ------------ ---------- ------------
Net increase............. 419,831 $ 6,870,702 668,355 $ 9,822,759
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 103,139 $ 1,850,267 274,170 $ 4,147,548
Issued in connection with
the acquisition of
Mackenzie American
Fund.................... -- -- 1,854 27,172
Issued on reinvestment of
distributions........... 18,721 331,192 7,166 119,052
Repurchased.............. (63,589) (1,140,436) (224,460) (3,371,426)
---------- ------------ ---------- ------------
Net increase............. 58,271 $ 1,041,023 58,730 $ 922,346
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 5,921 $ 105,632
Issued on reinvestment of
distributions........... 482 8,487
Repurchased.............. (1,279) (22,921)
---------- ------------
Net increase............. 5,124 $ 91,198
========== ============
</TABLE>
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVYFX123196
<PAGE> 29
DECEMBER 31, 1996 IVY FUNDS
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
We would like to take this opportunity to welcome you as a shareholder
of the new Ivy Global Science & Technology Fund. From its inception date of
July 22, 1996 through December 31, 1996 the Fund's total return was 64.34% on a
net asset value basis. This compares favorably to the S&P 500, which had a
total return of 18.29% over the same period. (For the Fund's total return with
sales charge, and performance commentary, please refer to the following page.)
Hindsight confirms the inception date of the Fund coincided with the
bottom for most technology stocks. During the first half of 1996 investors
focused on excess inventories of personal computers and semiconductors. By
late summer these concerns, which had been overhanging the entire technology
sector, began to lift and earnings visibility increased. Improving
fundamentals and a favorable overall market environment drove most technology
stocks higher through year end.
While technology is a global phenomenon, it has emerged as one of the
major growth engines of the US economy representing more than 10% of GDP. This
compares to only 4% in the late 1970s. We believe in no other sector of the
economy is the pace of change so rapid, nor the opportunity for growth so
great. In just the last ten years, billions of dollars of wealth have been
created by young companies like Intel, Microsoft, Cisco, and Oracle.
Our research supports our belief that we are still in the early part
of the growth curve. On a macro level, we expect several factors to drive
further growth. One of the most important is the continuing improvement in the
price/performance characteristics of semiconductors and the resulting decline
in the cost of computing power. We believe it is likely to continue over
several more generations of chips and drive the cost of computing power even
lower. We expect this process to generate numerous opportunities for both
equipment and software companies.
Global competition is another factor we expect to stimulate demand.
Companies seeking to maintain or improve their competitive position often look
to new technology as the solution. For instance, some of the fastest growing
niches within the software industry include applications like help desk
automation, electronic data interchange, data warehousing for decision support,
and sales force automation. Early adopters are buying these and other products
in their quest to gain a competitive advantage.
We also believe that over the next few years we will see data
transmitted at higher speeds, substantially enhancing the performance and
utility of computer networks, including the Internet. The pace at which these
improvement occur will likely be stimulated by deregulation and increased
competition among telecommunication providers.
The Ivy Global Science & Technology Fund focuses on areas that we
believe have the best prospects for rapid and sustainable growth. This
includes leading companies, both large and small, both domestic and global, in
sectors such as software, computer networking, telecom equipment, and
semiconductors, as well as indirect beneficiaries of technology growth such as
distributors, systems integrators, and information service companies. The Fund
also seeks participation in the growth of medical technology through
investments in biotechnology, pharmaceutical, and medical device companies.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 30
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
PERFORMANCE COMMENTARY
From the Fund's inception on July 22, 1996 through year-end 1996, the Ivy Global
Science & Technology Fund was up 64.34% and outperformed the S&P 500, which was
up 18.29% for the same period. The outperformance of the Fund compared to the
S&P 500 is due primarily to the Fund's focus on the technology sector which
outperformed the broader US market (the S&P 500).
PERFORMANCE COMPARISONS OF THE
FUND SINCE INCEPTION (7/22/96)
OF A $10,000 INVESTMENT
CHART
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
IVY GLOBAL SCIENCE AND TECHNOLOGY FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C***
Average Annual
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Yr. -- -- -- --
- ------------------------------------------------------------------------------------
B: B: B: B:
59.59% 64.59% 59.46% 64.46%
C: C: C: C:
Since Inception 54.89% 54.63% 63.84% 64.84% 63.71% 64.71%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses and a capital contribution by the Manager. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of Ivy Global Science &
Technology Fund will fluctuate and at redemption may be worth more or less than
the amount of the original investment. The S&P 500 is an unmanaged index of
stocks which assumes reinvestment of dividends and, unlike Fund returns, does
not reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
- --------------------------------------------------------------------------------
<PAGE> 31
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 83.3% SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
BIOTECHNOLOGY -- 6.4%
Alkermes, Inc.*............. 3,100 $ 72,075
Autoimmune, Inc.*........... 3,700 56,888
Biochem Pharma, Inc.*....... 2,000 100,500
Centocor, Inc.*............. 1,900 67,925
Ergo Science Corporation*... 9,700 127,312
Geltex Pharmaceuticals,
Inc.*..................... 5,800 140,650
Liposome Company Inc.*...... 7,200 137,700
Neurex Corporation*......... 7,500 127,500
ViroPharma Inc.*............ 6,000 52,500
-----------
883,050
-----------
BUSINESS & FINANCIAL
SERVICES -- 15.6%
Abacus Direct
Corporation*.............. 1,400 26,250
Applied Graphics
Technologies, Inc.*....... 4,400 128,150
BISYS Group, Inc............ 3,000 111,188
CBT Group PLC ADR*(a)....... 3,200 173,600
CCC Information Services
Group*.................... 200 3,200
CFI Proservices Inc.*....... 2,200 31,350
CHS Electronics, Inc.*...... 3,900 66,787
CompUSA, Inc.*.............. 200 4,125
Computer Learning Centers,
Inc.*..................... 1,000 28,500
Cotelligent Group, Inc.*.... 6,000 144,750
Cuc International, Inc.*.... 3,000 71,250
Daisytek International
Corporation*.............. 2,700 110,700
Desktop Data, Inc.*......... 5,400 103,950
Fair Issac and Company
Inc....................... 2,500 97,812
Forrester Research, Inc.*... 5,000 128,750
Gartner Group, Inc. -- Class
A*........................ 1,400 54,513
Ingram Micro Inc. -- Class
A*........................ 6,900 158,700
Intelligroup, Inc.*......... 2,500 27,500
International
Telecommunication Data
Systems, Inc.*............ 2,000 48,500
LCC International,
Inc. -- Class A........... 3,700 68,450
Lason Holdings, Inc.*....... 3,100 63,550
Meta Group, Inc.*........... 1,200 32,400
Profit Recovery Group
International, Inc.
(The)*.................... 6,000 96,000
Quickresponse Services
Inc.*..................... 2,300 65,550
Sabre Group Holdings Inc.... 400 11,150
Superior Consultant Holdings
Corporation*.............. 4,100 101,475
Sykes Enterprises,
Inc.*(a).................. 3,400 127,500
Whittman-Hart, Inc.*........ 3,200 82,000
-----------
2,167,650
-----------
COMPUTER SOFTWARE -- 17.5%
Aspect Development, Inc.*... 1,900 51,775
Baan Company, NV*(a)........ 2,500 86,875
Carnegie Group, Inc.*....... 2,800 19,600
Citrix Systems, Inc.*....... 2,100 82,031
DataWorks Corporation*...... 5,200 131,300
Dendrite International,
Inc.*..................... 5,600 46,200
Forte Software, Inc.*....... 200 6,550
Indus Group, Inc.*.......... 3,200 82,400
Infinity Financial
Technology, Inc.*......... 2,400 41,400
Interlink Computer Sciences,
Inc.*..................... 11,800 197,650
JDA Software Group, Inc.*... 2,700 76,950
Legato Systems, Inc.*....... 2,400 78,300
McAfee Associates, Inc.*.... 1,500 66,000
Memco Software Ltd.*........ 10,000 176,250
Microsoft Corporation*...... 1,600 132,200
Optika Imaging Systems,
Inc.*..................... 20,300 101,817
Oracle Corporation*......... 1,200 $ 50,100
Planning Sciences
International PLC*........ 5,100 61,200
Project Software &
Development, Inc.*........ 900 38,137
Rational Software
Corporation*.............. 2,200 87,038
Red Brick Systems, Inc.*.... 3,400 78,200
Remedy Corporation*......... 400 21,500
Rogue Wave Software*........ 4,600 72,450
SPSS, Inc.*................. 3,300 91,988
SQA, Inc.*.................. 300 9,975
Saville Systems Ireland
ADR*(a)................... 2,200 89,375
Security Dynamics
Technologies, Inc.*....... 600 18,900
Segue Software*............. 500 9,125
Select Software Tools
ADR*(a)................... 5,700 104,025
Siebel Systems, Inc.*....... 1,800 48,600
Systemsoft Corporation*..... 6,600 98,175
Veritas Software Corp.*..... 1,500 74,625
Versant Object Technology
Corp.*.................... 4,000 74,500
White Pine Software,
Inc.*..................... 3,000 21,750
-----------
2,426,961
-----------
HEALTHCARE -- 8.5%
Aksys, Ltd.*................ 1,300 11,212
Amisys Managed Care
Systems*.................. 4,600 78,200
Biopsys Medical, Inc.*...... 2,000 43,500
Cambridge Heart Inc......... 3,000 33,750
Cardiovascular Dynamics,
Inc.*..................... 3,000 39,000
Cytec Corporation*.......... 800 21,600
EndoSonics Corporation*..... 6,700 102,175
Endovascular Technologies,
Inc.*..................... 1,800 17,550
FemRx, Inc.*................ 8,600 38,700
Heartstream, Inc.*.......... 3,000 37,500
HemaSure, Inc.*............. 8,300 51,875
Intelligent Medical Imaging,
Inc.*..................... 9,000 56,250
MedQuist Inc.*.............. 1,900 47,025
Molecular Devices
Corporation*.............. 500 7,781
OrthoLogic Corp.*........... 6,300 35,438
Physician Support Systems,
Inc.*..................... 6,400 123,200
Serologicals Corporation*... 1,500 53,063
Spine-Tech, Inc.*........... 1,700 42,500
Sunquest Information
Systems, Inc.*............ 4,600 65,550
Uromed Corporation*......... 3,900 38,025
VidaMed, Inc.*.............. 10,200 131,325
Vivus, Inc.*................ 2,800 101,500
-----------
1,176,719
-----------
MISCELLANEOUS
TECHNOLOGY -- 12.9%
Biacore International AB
Sponsored ADR*(a)......... 10,000 220,000
EPIC Design Technology,
Inc.*..................... 400 10,000
Gemstar International Group
Ltd.*..................... 6,100 106,750
IKOS Systems, Inc.*......... 3,500 70,000
Intel Corporation........... 2,800 366,625
Komag, Inc.*................ 200 5,425
ONTRACK Data International,
Inc.*..................... 11,300 169,500
Periphonics Corp.*.......... 2,400 70,200
QIAGEN NV................... 4,600 118,450
RadiSys Corporation*........ 2,000 97,500
SBS Technologies, Inc.*..... 4,500 166,500
SeaChange International,
Inc.*..................... 1,500 38,250
Synopsys, Inc.*............. 2,300 106,375
Technology Modeling
Associates, Inc.*......... 5,400 71,550
Viisage Technology, Inc.*... 11,600 168,200
-----------
1,785,325
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 32
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
NETWORK & TELECOMMUNICATION
EQUIPMENT -- 8.9%
3Com Corporation*........... 300 $ 22,013
ACT Networks, Inc.*......... 800 29,200
Aware, Inc.*................ 2,400 24,300
Cascade Communications
Corp.*.................... 1,100 60,638
Cisco Systems, Inc.*........ 5,100 324,487
DSP Communications, Inc.*... 5,100 98,813
Harmonic Lightwaves,
Inc.*..................... 1,600 24,600
International Network
Services*................. 1,800 54,337
NetVantage, Inc.*........... 800 7,200
Network Appliance, Inc.*.... 3,100 157,712
Orckit Communications
Ltd.*..................... 6,700 65,325
P-COM, Inc.................. 2,000 59,250
Pairgain Technologies,
Inc.*..................... 1,800 54,788
Premisys Communications,
Inc.*..................... 2,200 74,250
Proxim, Inc.*............... 4,000 92,000
Sawtek Inc.*................ 700 27,738
Xylan Corporation*.......... 2,000 56,500
-----------
1,233,151
-----------
PHARMACEUTICALS -- 3.7%
Anesta Corp.*............... 6,100 117,425
Applied Analytical
Industries, Inc.*......... 500 9,562
Calypte Biomedical
Corporation*.............. 900 7,425
Dura Pharmaceuticals,
Inc.*..................... 1,600 76,400
Penederm Inc.*.............. 12,000 148,500
Sepracor, Inc.*............. 3,200 53,200
Sonus Pharmaceuticals,
Inc.*..................... 3,500 104,125
-----------
516,637
-----------
SEMICONDUCTORS &
EQUIPMENT -- 5.8%
ASM Lithography Holding
NV*(a).................... 2,700 134,494
Actel Corporation*.......... 400 9,500
Altera Corporation*......... 700 50,881
Analog Devices*............. 1,700 57,587
Benchmarq Microelectronics,
Inc.*..................... 4,000 85,500
Cymer, Inc.*................ 1,700 81,812
Etec Systems, Inc.*......... 3,900 149,175
Lattice Semiconductor
Corp.*.................... 200 9,200
Maxim Integrated Products,
Inc.*..................... 1,000 43,250
Micrel, Inc.*............... 2,000 63,250
Pri Automation, Inc.*....... 1,000 45,500
S3 Inc.*.................... 1,500 24,375
Trident Microsystems,
Inc.*..................... 3,000 50,625
-----------
805,149
-----------
TELECOMMUNICATION
SERVICES -- 4.0%
Advanced Fibre
Communications*........... 700 $ 38,938
Aerial Communications,
Inc.*..................... 400 3,250
Arch Communications Group,
Inc.*..................... 4,500 42,187
FaxSav Incorporated*........ 3,700 20,350
Lightbridge, Inc.*.......... 13,500 115,594
Omnipoint Corporation*...... 2,000 38,500
Paging Network, Inc.*....... 5,700 86,925
Transaction Network
Services, Inc.*........... 5,500 63,250
Univision Communications
Inc.*..................... 800 29,600
Western Wireless Corp.*..... 1,900 26,362
WinStar Communications,
Inc.*..................... 3,900 81,900
-----------
546,856
-----------
TOTAL EQUITY
SECURITIES -- 83.3%
(Cost --$10,533,391)(b)... 11,541,498
OTHER ASSETS, LESS
LIABILITIES -- 16.7%...... 2,313,590
-----------
NET ASSETS -- 100%.......... $13,855,088
===========
</TABLE>
ADR -- American Depository Receipt
NV -- Non-voting
* Non-income producing security.
(a) Foreign security.
(b) Cost is approximately the same Federal income tax purposes.
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation...................... $1,535,482
Gross unrealized depreciation...................... (527,375)
----------
Net unrealized appreciation.................... $1,008,107
==========
</TABLE>
Purchases and sales of securities other than short-term obligations
aggregated $11,296,686 and $825,212, respectively, for the period
ended December 31, 1996.
(See Notes to Financial Statements)
<PAGE> 33
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $10,533,391)...... $11,541,498
Cash........................................................ 2,199,985
Receivables
Fund shares sold.......................................... 149,399
Deferred organization expenses.............................. 54,503
Other assets................................................ 828
-----------
Total assets.............................................. 13,946,213
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 252
Investments purchased..................................... 54,378
Fund shares repurchased................................... 4,775
Management fee............................................ 10,872
12b-1 service and distribution fees....................... 5,930
Other payables to related parties......................... 5,388
Accrued expenses............................................ 9,530
-----------
Total liabilities......................................... 91,125
-----------
NET ASSETS.................................................. $13,855,088
===========
CLASS A
Net asset value and redemption price per share
($8,324,366/507,461 shares outstanding)................... $ 16.40
===========
Maximum offering price per share ($16.40 X 100/94.25)*...... $ 17.40
===========
CLASS B
Net asset value and offering price per share
($3,424,686/208,309 shares outstanding)**................. $ 16.44
===========
CLASS C
Net asset value and offering price per share
($2,106,036/127,942 shares outstanding)**................. $ 16.46
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $12,860,136
Accumulated net realized loss on investments.............. (13,155)
Net unrealized appreciation on investments................ 1,008,107
-----------
NET ASSETS.................................................. $13,855,088
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 22, 1996 (COMMENCEMENT) TO DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 140
Interest.................................................. 61
-----------
201
-----------
EXPENSES
Management fee............................................ $ 20,965
Transfer agent............................................ 2,446
Administrative services fee............................... 2,096
Custodian fees............................................ 2,643
Blue Sky fees............................................. 4,129
Auditing and accounting fees.............................. 2,200
Amortization of organization expenses..................... 2,642
Fund accounting........................................... 9,171
Trustees' fees............................................ 2,964
12b-1 service and distribution fees....................... 10,186
Legal..................................................... 5,439
Other..................................................... 1,000
-----------
65,881
Expenses reimbursed by manager............................ (14,813)
-----------
Net expenses............................................ 51,068
-----------
NET INVESTMENT LOSS......................................... (50,867)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 61,918
Net unrealized appreciation during the period on
investments............................................. 1,008,107
-----------
Net gain on investment transactions..................... 1,070,025
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 1,019,158
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 34
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JULY 22, 1996 (COMMENCEMENT) TO DECEMBER 31, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (50,867)
Net realized gain on investments.......................... 61,918
Net unrealized appreciation during the period on
investments............................................. 1,008,107
-----------
Net increase resulting from operations.................. 1,019,158
-----------
Distributions from net realized gain
Class A................................................... (17,214)
Class B................................................... (3,926)
Class C................................................... (3,066)
-----------
Total distribution paid to shareholders................. (24,206)
-----------
Fund share transactions (Note 4)
Class A................................................... 7,567,192
Class B................................................... 3,263,292
Class C................................................... 2,029,658
Class I................................................... (6)
-----------
Net increase resulting from
Fund share transactions............................... 12,860,136
-----------
NET ASSETS AT END OF PERIOD................................. $13,855,088
===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- -------- --------
SELECTED PER SHARE DATA FOR THE PERIOD JULY 22, 1996
(COMMENCEMENT) TO DECEMBER 31, 1996
--------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.00 $10.00 $10.00
------ ------ ------
Income from investment operations
Net investment loss(a).................................... (.06) (.06) (.05)
Net realized and unrealized gain on investment
transactions............................................ 6.49 6.52 6.53
------ ------ ------
Total from investment operations........................ 6.43 6.46 6.48
------ ------ ------
Less distributions
From net realized gain.................................... .03 .02 .02
------ ------ ------
Total distributions..................................... .03 .02 .02
------ ------ ------
Net asset value, end of period.............................. $16.40 $16.44 $16.46
====== ====== ======
Total return(%)(b).......................................... 64.34 64.59 64.84
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $8,324 $3,425 $2,106
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 2.19 2.99 2.95
Without expense reimbursement(%)(c)....................... 2.90 3.70 3.66
Ratio of net investment loss to average net
assets(%)(a)(c)........................................... (2.18) (2.98) (2.94)
Portfolio turnover rate(%).................................. 23 23 23
Average commission rate(d).................................. $.0600 $.0600 $.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.
(See Notes to Financial Statements)
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996, there were no
such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to 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 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 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 period ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $16,160.
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
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $3,592, $4,377 and $2,217 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 $1,499, $696 and $251 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 July 22, 1996 (Commencement) to December 31,
1996, for Class A, Class B, Class C and Class I were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES AMOUNT
- ------- ------- ----------
<S> <C> <C>
Sold........................................ 513,259 $7,659,940
Issued on reinvestment of distributions..... 995 16,325
Repurchased................................. (6,793) (109,073)
------- ----------
Net increase................................ 507,461 $7,567,192
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES AMOUNT
- ------- ------- ----------
<S> <C> <C>
Sold........................................ 228,288 $3,587,953
Issued on reinvestment of distributions..... 228 3,741
Repurchased................................. (20,207) (328,402)
------- ----------
Net increase................................ 208,309 $3,263,292
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES AMOUNT
- ------- ------- ----------
<S> <C> <C>
Sold........................................ 128,623 $2,040,762
Issued on reinvestment of distributions..... 178 2,937
Repurchased................................. (859) (14,041)
------- ----------
Net increase................................ 127,942 $2,029,658
======= ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS I SHARES AMOUNT
- ------- ------- ----------
<S> <C> <C>
Sold........................................ 1 $ 10
Repurchased................................. (1) (16)
------- ----------
Net decrease................................ -- $ (6)
======= ==========
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Science & Technology Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statements of operations, the statement of changes in net assets
and the financial highlights for the period July 22, 1996 (commencement) to
December 31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standard. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations, the changes in its
net assets and the financial highlights for the period July 22, 1996
(commencement) to December 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVTAX123196
<PAGE> 37
DECEMBER 31, 1996 IVY FUNDS
IVY BOND FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
A combination of moderate economic growth with stable inflation
provided the best of both worlds for corporate bond investors in 1996. Within
this environment, the Ivy Bond Fund performed very well. For the twelve months
ended December 31, 1996, the Ivy Bond Fund was up 8.06% on a net asset value
basis. This compares favorably to the general corporate bond fund average as
tracked by Morningstar Inc., which was up 3.64%. The Fund invested primarily
in corporate bonds, which provided better returns to investors than other fixed
income assets. (For the Fund's total return with sales charge, and performance
commentary, please refer to the following page.)
Looking at the US economy, we expect to see continued moderate
economic growth with low and contained inflation. We believe the Federal
Reserve Board will tighten monetary policy if it perceives an inflationary
threat from rising labor costs. Labor costs, the primary factor that drives
inflation, continue to be pressured by the ongoing substitution of capital (in
the form of technology) for labor, in both the manufacturing and service
industries. These costs have been declining for the past ten years in
developed markets and have just recently begun to creep up. Tighter labor
markets will result in higher wage costs; however, we don't expect these higher
costs to be passed on to consumers.
We believe the more likely scenario will be corporate profitability
will fall victim to these higher costs. If labor costs increase too much,
companies always have the option of moving operations to a lower cost location
and/or continuing to automate. This scenario is more likely to happen in a
world of low trade barriers, which is the world we live in now. Additionally,
if the Federal Reserve Board were to perceive rising labor costs as a threat to
price stability, the financial markets would expect preemptive tightening by
the Federal Reserve Board. Higher interest rates resulting from this action
would dampen economic growth, which would ultimately send interest rates lower.
Currently, however, we don't believe there is any threat on the horizon to a
positive environment for the bond market.
We expect interest rates to remain in a trading range over the next
year. And, we will continue our efforts to seek the best yield and return
opportunities for Ivy Bond Fund. The Ivy Bond Fund continues to be invested in
bonds rated BBB by Standard & Poor's or the equivalent rating by Moody's
Investors Services. These bonds are issued by a widely diversified group of
companies in many different industries. We believe the best values in the
corporate bond market, however, tend to be among those companies whose credit
ratings are below BBB. The Fund has and will continue to invest in these
bonds. Positioning in these bonds, together with higher rated bonds, has been
a key factor in the Fund's strong performance.
A portion of the Fund invests in US dollar denominated bonds issued by
companies in high-growth nations. Many of these bonds are issued by companies
in Latin America where governments have successfully engineered economic
reforms. These companies are able to tap the global capital markets to finance
long-term projects because they have achieved credibility in world markets
since the peso crisis in late 1994. These companies have consistently paid
their coupon interest as it has become due and defaults have been rare. These
bonds have made significant contributions to the overall performance of the Ivy
Bond Fund.
We believe the economic climate, both at home and abroad, has created
a favorable environment for bond investors. And, as always, we will continue
to utilize the broad spectrum of fixed income vehicles to provide the greatest
balance of volatility and return.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 38
IVY BOND FUND PERFORMANCE COMMENTARY
For the twelve months ended December 31, 1996, the Ivy Bond Fund was up 8.06% on
a total return basis. This compares very favorably to the Morningstar general
corporate bond fund category, which includes the Ivy Bond Fund and was up 3.64%
for the same period. While the Morningstar category also includes fixed income
securities of various quality ratings, the difference in the Fund's performance
is due primarily to the difference in bond quality weightings as compared to
Morningstar.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (9/85) OF A $10,000
INVESTMENT
(GRAPH)
ONE-, THREE-, FIVE- AND TEN-YEAR
CUMULATIVE PERFORMANCE
LOGO
The chart above reflects performance without the maximum
sales charge of 5.75%.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
IVY BOND FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge
Average Annual Class B** & C***
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
B: B: B: B:
1 Yr. 2.93% 2.93% 2.25% 7.25% 2.25% 7.25%
- ------------------------------------------------------------------------------------
5 Yr. 7.67% 7.66% -- -- -- --
- ------------------------------------------------------------------------------------
10 Yr. 9.30% 6.88% -- -- -- --
- ------------------------------------------------------------------------------------
B: B: B: B:
6.62% 7.59% 6.62% 7.59%
C: C: C: C:
Since Inception 8.73% 1.41% 7.81% 8.81% 7.81% 8.81%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 4.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The principal value of the Ivy Bond Fund will fluctuate and at
redemption may be worth more or less than the amount of the original investment.
The Morningstar Corporate Bond-General Fund index is an unmanaged index of
fixed-income securities, primarily corporate bonds of various quality ratings.
The index assumes reinvestment of dividends and, unlike Fund returns, does not
reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
- --------------------------------------------------------------------------------
<PAGE> 39
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CORPORATE BONDS -- 77.5% PRINCIPAL VALUE CORPORATE BONDS PRINCIPAL VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
360 Communications Co.,
7.50%, 03/01/06.......... $2,000,000 $ 1,980,000
Affinity Group Inc.,
11.50%, 10/15/03*........ 1,000,000 1,048,750
American President Co.
Ltd., 8.00%, 01/15/24.... 1,000,000 977,500
Cobb Theatres, 10.625%,
03/01/03*................ 1,000,000 1,051,250
Conseco Inc., 10.50%,
12/15/04................. 1,500,000 1,760,625
Cyprus Amax Minerals,
8.375%, 02/01/23......... 1,000,000 1,020,000
Delphi Financial Group
Inc., 8.00%, 10/01/03.... 2,500,000 2,478,125
Delta Air Lines, 9.59%,
01/12/17................. 1,500,000 1,749,375
Developers Diversified
Realty Corp., 7.28%,
11/24/05................. 1,000,000 960,000
Duty Free International
Inc., 7.00%, 01/15/04.... 2,000,000 1,895,000
Farmers Insurance Exchange,
8.625%, 05/01/24......... 1,500,000 1,550,625
Fort Howard Corp., 10.92%,
02/15/12*................ 1,500,000 1,516,875
Freeport-McMoran C&G,
7.50%, 11/15/06.......... 2,000,000 1,960,000
Great Atlantic & Pacific
Tea Inc., 7.70%,
01/15/04................. 1,000,000 952,500
HMC Acquisition Properties
Inc., 9.00%, 12/15/07*... 1,000,000 1,012,500
ISP Holdings Inc., 9.00%,
10/15/03*................ 1,000,000 1,016,250
Indianapolis Life Insurance
Co., 8.66%, 04/01/11..... 1,000,000 1,053,750
International Knife & Saw
144A, 11.375%,
11/15/06*................ 1,000,000 1,037,500
K-III Communication Corp.,
8.50%, 02/01/06*......... 1,000,000 987,500
Leucadia National Corp.,
8.25%, 06/15/05.......... 2,000,000 2,040,000
Long Island Lighting Co.,
8.625%, 04/15/04......... 2,000,000 2,050,000
Lumbermens Mutual Casualty
144A, 9.15%, 07/01/26.... 2,000,000 2,180,000
Maxus Energy Corp, 10.83%,
09/01/04*................ 1,000,000 1,067,500
Metrocall, Inc., 10.375%,
10/01/07*................ 500,000 428,750
Mitchell Energy &
Development Corp., 6.75%,
02/15/04................. 1,000,000 960,000
Motors and Gears Inc.,
10.75%, 11/15/06*........ 1,000,000 1,031,250
News America Holdings,
7.75%, 01/20/24.......... 2,000,000 1,907,500
News America Holdings,
7.70%, 10/30/25.......... 1,000,000 945,000
Ocwen Federal Bank, 12.00%,
06/15/05*................ 500,000 548,750
Overseas Shipholding Group,
Inc., 8.75%, 12/01/13.... 4,000,000 4,120,000
PDV America Inc., 7.875%,
08/01/03................. 3,000,000 2,932,500
Pegasus Media &
Communications, 12.50%,
07/01/05*................ 1,000,000 1,080,000
Pioneer-Standard, 8.50%,
08/01/06................. 3,000,000 3,052,500
RHG Finance Corp., 8.875%,
10/01/05................. 2,000,000 2,082,500
RJR Nabisco Inc., 8.75%,
07/15/07................. 3,600,000 3,573,000
RJR Nabisco Inc., 9.25%,
08/15/13................. 2,000,000 2,022,500
RSL Communications Ltd.,
12.25%, 11/15/06*........ 1,000,000 1,005,000
Shop Vac Corp. 144A,
10.625%, 09/01/03*....... 1,000,000 1,052,500
Sithe/Independence Funding,
8.50%, 06/30/07.......... 1,000,000 1,010,000
Sprint Spectrum, 11.00%,
08/15/06*................ 1,000,000 1,082,500
Stuart Entertainment 144A,
12.50%, 11/15/04*........ 1,000,000 1,017,500
TCI Communications, Inc.,
8.75%, 08/01/15.......... 1,000,000 985,000
TCI Communications, Inc.,
9.25%, 01/15/23.......... $2,000,000 $ 1,985,000
Terex Corp., 13.25%,
05/15/02*................ 1,000,000 1,077,500
Time Warner Inc., 8.18%,
08/15/07................. 750,000 772,500
Time Warner Inc., 9.125%,
01/15/13................. 1,500,000 1,614,375
Time Warner Inc., 9.15%,
02/01/23................. 2,000,000 2,167,500
Turner Broadcasting System,
8.40%, 02/01/24.......... 1,000,000 961,250
USX Marathon Group, 9.375%,
05/15/22................. 1,000,000 1,147,500
USX Marathon Group, 8.50%,
03/01/23................. 1,000,000 1,057,500
Unisys Corp., 11.75%,
10/15/04*................ 500,000 531,250
United Air Lines, 9.75%,
08/15/21................. 2,500,000 2,946,875
Willcox & Gibbs Inc.,
12.25%, 12/15/03*........ 2,000,000 1,980,000
------------
TOTAL CORPORATE BONDS
(Cost -- $78,146,851).... 80,423,625
------------
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS -- 6.4%
- ---------------------------
Federal National Mortgage
Assoc., 5.25%,
01/02/97................. 4,700,000 4,699,315
U.S. Treasury Note, 6.25%,
10/31/01................. 1,000,000 1,000,500
U.S. Treasury Note, 6.50%,
11/15/26................. 1,000,000 981,190
------------
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS
(Cost -- $6,687,283)..... 6,681,005
------------
U.S. DOLLAR DENOMINATED
FOREIGN BONDS -- 15.7%
- ---------------------------
APP International Finance,
11.75%, 10/01/05*........ 500,000 535,000
Acindar Industries, 11.30%
FRN, 11/12/98............ 500,000 487,500
Banco Ganadero S.A., 9.75%,
08/26/99................. 1,000,000 1,055,000
Bombril S.A., 8.00%,
08/26/98*................ 500,000 486,250
Buenos Aires Embotelladora
144A, 8.50%, 12/29/00*... 1,000,000 731,250
Cemex S.A. 144A, 12.75%,
07/15/06................. 500,000 558,750
Companhia Suzano Papel 144A
REGD, 10.25%,
10/06/01*................ 900,000 901,125
Comtel Brasiliera 144A,
10.75%, 09/26/04......... 400,000 411,000
General Electric Capital
Corp., FRN, 03/10/97..... 1,000,000 405,920(a)
Grupo Industrial Durango,
12.00%, 07/15/01*........ 500,000 538,125
Grupo Televisa S.A. 144A,
13.25%, 05/15/08*........ 1,000,000 663,750
Guangdong Enterprises,
8.75%, 12/15/03*......... 1,500,000 1,470,000
Inco Ltd., 9.60%,
06/15/22................. 1,000,000 1,101,250
Industrias Unidas, 8.50%,
01/27/99*................ 1,000,000 953,750
Iochpe-Maxion S.A. 144A,
12.375%, 11/08/02*....... 900,000 893,250
Mechala Group 144A, 12.75%,
12/30/99*................ 1,000,000 1,007,500
Metalurgica Gerdau S.A.,
10.25%, 11/23/01*........ 500,000 503,750
Metalurgica Gerdau S.A.,
11.125%, 05/24/04*....... 500,000 511,250
Petroleo Brasileiro S.A.
144A, 10.00%,
10/17/06*................ 1,125,000 1,119,375
Polysindo International
Finance, 11.375%,
06/15/06*................ 500,000 539,375
Singer Co. NV, 7.00%,
04/01/03................. 1,500,000 1,413,750
------------
TOTAL U.S. DOLLAR
DENOMINATED FOREIGN BONDS
(Cost -- $16,356,457).... 16,286,920
------------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 40
<TABLE>
<CAPTION>
COMMON STOCK AND RIGHTS -- 0.0% SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Pegasus Media Class B.................... 2,256 $ 31,025
Terex Corp. -- Appreciation Rights(c).... 4,000 8,000
------------
TOTAL COMMON STOCK AND RIGHTS
(Cost -- $12,500)...................... 39,025
------------
NUMBER OF
OPTIONS PURCHASED -- 0.1% CONTRACTS
- ----------------------------------------- ----------
U.S. Long Bond, March/112/Put
(Cost -- $70,687)...................... 500 47,656
------------
TOTAL INVESTMENTS -- 99.7%
(Cost -- $101,273,778)(b).............. 103,478,231
OTHER ASSETS, LESS LIABILITIES -- 0.3%... 321,060
------------
NET ASSETS -- 100%....................... $103,799,291
============
* Below investment grade security.
(a) Security valued in good faith by the Valuation Committee of the
Board of Trustees. The cost of this security at December 31,
1996 aggregated $687,870. See Note 1 of the Notes to the
Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK AND RIGHTS -- 0.0% SHARES VALUE
<S> <C> <C>
(b) Cost for Federal income tax purposes is $101,438,718.
(c) Non-income producing security.
FRN -- Floating Rate Note
REGD -- Registered
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation based on cost for
Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 3,397,790
Gross unrealized depreciation.................... (1,358,277)
------------
Net unrealized appreciation.................. $ 2,039,513
============
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $92,109,762 and
$103,552,516, respectively, for the period ended December 31, 1996.
Purchases and sales of U.S. Government and Government Agency
obligations aggregated $10,940,782 and $9,944,345, respectively, for
the period ended December 31, 1996.
</TABLE>
<PAGE> 41
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $101,273,778)..... $103,478,231
Cash........................................................ 10,914
Receivables
Fund shares sold.......................................... 18,589
Interest.................................................. 2,364,131
Other assets................................................ 61,194
------------
Total assets............................................ 105,933,059
------------
LIABILITIES
Payables
Distributions to shareholders............................. 1,352
Investments purchased..................................... 1,965,000
Fund shares repurchased................................... 1,184
Management fee............................................ 66,406
12b-1 service and distribution fees....................... 26,632
Other payables to related parties......................... 32,020
Accrued expenses............................................ 41,174
------------
Total liabilities....................................... 2,133,768
------------
NET ASSETS.................................................. $103,799,291
============
CLASS A
Net asset value and redemption price per share
($97,881,161 / 9,988,507 shares outstanding).............. $ 9.80
============
Maximum offering price per share ($9.80 x 100 / 95.25)*..... $ 10.29
============
CLASS B
Net asset value and offering price per share
($5,299,990 / 540,977 shares outstanding)**............... $ 9.80
============
CLASS C
Net asset value and offering price per share
($618,140 / 62,961 shares outstanding)**.................. $ 9.82
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $107,251,442
Accumulated net realized loss on investments.............. (5,667,549)
Accumulated net investment income......................... 10,945
Net unrealized appreciation (depreciation) on
Investments............................................. 2,227,484
Options................................................. (23,031)
------------
NET ASSETS.................................................. $103,799,291
============
</TABLE>
* On sales of more than $100,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 42
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $9,290,175
----------
EXPENSES
Management fee............................................ $781,647
Transfer agent............................................ 189,205
Administrative services fee............................... 104,220
Custodian fees............................................ 45,074
Blue Sky fees............................................. 27,003
Auditing and accounting fees.............................. 49,426
Shareholder reports....................................... 9,202
Fund accounting........................................... 95,017
Trustees' fees............................................ 4,539
12b-1 service and distribution fees....................... 299,723
Legal..................................................... 24,079
Other..................................................... 32,301
----------
Total expenses.......................................... 1,661,436
----------
NET INVESTMENT INCOME....................................... 7,628,739
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
Investments............................................. 647,584
Options................................................. (173,422)
Net unrealized depreciation during the period on
Investments............................................. (339,684)
Options................................................. (23,031)
----------
Net gain on investments................................. 111,447
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $7,740,186
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 43
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income..................................... $ 7,628,739 $ 8,001,078
Net realized gain (loss) on
Investments............................................. 647,584 (2,940,340)
Options................................................. (173,422) --
Net unrealized appreciation (depreciation) during the
period on
Investments............................................. (339,684) 13,121,035
Options................................................. (23,031) --
------------ ------------
Net increase resulting from operations................ 7,740,186 18,181,773
------------ ------------
Class A distributions
From net investment income................................ (7,282,279) (7,254,790)
In excess of net investment income........................ (143,137) --
From capital paid-in...................................... -- (1,327,021)
------------ ------------
Total distributions to Class A shareholders........... (7,425,416) (8,581,811)
------------ ------------
Class B distributions
From net investment income................................ (332,726) (213,541)
In excess of net investment income........................ (9,105) --
From capital paid-in...................................... -- (47,497)
------------ ------------
Total distributions to Class B shareholders........... (341,831) (261,038)
------------ ------------
Class C distributions
From net investment income................................ (13,734) --
In excess of net investment income........................ (1,753) --
------------ ------------
Total distributions to Class C shareholders........... (15,487) --
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (10,914,806) (10,437,361)
Class B................................................... 126,355 2,470,240
Class C................................................... 606,878 --
------------ ------------
Net decrease resulting from Fund share transactions... (10,181,573) (7,967,121)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... (10,224,121) 1,371,803
NET ASSETS
Beginning of period....................................... 114,023,412 112,651,609
------------ ------------
END OF PERIOD............................................. $103,799,291 $114,023,412
============ ============
ACCUMULATED NET INVESTMENT INCOME........................... $ 10,945 $ --
============ ============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 44
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
CLASS A FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
--------------------- ------------- ------------------------------------
1996 1995 1994 1994 1993 1992
SELECTED PER SHARE DATA ------- -------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95 $ 9.61
------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income...................... .72 .67(a) .33(a) .63 .55 .63(a)
Net realized and unrealized gain (loss) on
investments.............................. .03 .84 (.29) (.60) 1.00 .73
------- -------- -------- -------- -------- --------
Total from investment operations......... .75 1.51 .04 .03 1.55 1.36
------- -------- -------- -------- -------- --------
Less distributions
From net investment income................. .72 .63 .32 .61 .64 .63
In excess of net investment income......... .01 -- -- -- -- --
From net realized gain..................... -- -- -- .38 .52 .25
In excess of net realized gain............. -- -- .09 -- -- --
From capital paid-in....................... -- .11 -- -- -- .14
------- -------- -------- -------- -------- --------
Total distributions...................... .73 .74 .41 .99 1.16 1.02
------- -------- -------- -------- -------- --------
Net asset value, end of period............... $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95
======= ======== ======== ======== ======== ========
Total return(%).............................. 8.06(b) 17.41(b) .43(c) 0.00(b) 16.29(b) 14.77(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $97,881 $108,840 $110,232 $120,073 $132,721 $102,328
Ratio of expenses to average net assets
With expense reimbursement(%).............. -- 1.54 1.50(d) -- -- 1.50
Without expense reimbursement(%)........... 1.56 1.54 1.52(d) 1.45 1.49 1.55
Ratio of net investment income to average net
assets(%).................................. 7.36 7.09(a) 6.92(a)(d) 6.19 6.42 6.92(a)
Portfolio turnover rate(%)................... 90 93 44(d) 78 134 129
</TABLE>
(See Notes to Financial Statements)
<PAGE> 45
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX APRIL 1, 1994
CLASS B FOR THE YEAR ENDED MONTHS ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31, JUNE 30,
-------------------- ------------ -----------------
1996 1995 1994 1994
SELECTED PER SHARE DATA ------ ------ ------------ -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.78 $ 9.01 $ 9.38 $ 9.82
------ ------ ------ ------
Income (loss) from investment operations
Net investment income..................................... .64 .60(a) .30(a) .10
Net realized and unrealized gain on investments........... .04 .84 (.29) (.32)
------ ------ ------ ------
Total from investment operations........................ .68 1.44 .01 (.22)
------ ------ ------ ------
Less distributions
From net investment income................................ .64 .56 .29 .14
In excess of net investment income........................ .02 -- -- --
From net realized gain.................................... -- -- -- .08
In excess of net realized gain............................ -- -- .09 --
From capital paid-in...................................... -- .11 -- --
------ ------ ------ ------
Total distributions..................................... .66 .67 .38 .22
------ ------ ------ ------
Net asset value, end of period.............................. $ 9.80 $ 9.78 $ 9.01 $ 9.38
====== ====== ====== ======
Total return(%)............................................. 7.25(b) 16.54(b) .06(c) (2.24)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)
Ratio of expenses to average net assets..................... $5,300 $5,184 $2,420 $ 761
With expense reimbursement(%)............................. -- 2.29 2.25(d) --
Without expense reimbursement(%).......................... 2.29 2.29 2.27(d) 2.20(d)
Ratio of net investment income to average net assets(%)... 6.62 6.34(a) 6.17 (a)(d 5.44(d)
Portfolio turnover rate(%).................................. 90 93 44(d) 78
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT) TO
DECEMBER 31,
-----------------
1996
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $ 9.44
------
Income from investment operations
Net investment income..................................... .39
Net realized and unrealized gain on investments........... .43
------
Total from investment operations........................ .82
------
Less distributions
From net investment income................................ .39
In excess of net investment income........................ .05
------
Total distributions..................................... .44
------
Net asset value, end of period.............................. $ 9.82
======
Total return(%)............................................. 8.81(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 618
Ratio of expenses to average net assets(%).................. 2.35(d)
Ratio of net investment income to average net assets(%)..... 6.56(d)
Portfolio turnover rate(%).................................. 90
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS
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 -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996,
securities valued in good faith by the Valuation Committee of the Board amounted
to $405,920 (.39% 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. 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 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
$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. An additional distribution may be declared if necessary to
avoid the payment of a four percent Federal excise tax.
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 .75% of
its first $500 million of average net assets; .60% of its next
<PAGE> 47
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
$500 million of average net assets; and .40% of its average net assets in excess
of $1 billion. Effective January 1, 1997, the fee was lowered to 0.75% of the
first $100 million in average net assets, and 0.50% 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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $18,170.
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
$247,382, $50,248 and $2,093 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 $180,263, $8,467 and $475 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, Class C and Class I* were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,351,568 $ 13,152,817 1,092,290 $ 10,252,225
Issued on reinvestment of
distributions........... 478,725 4,613,419 551,438 5,173,367
Repurchased.............. (2,965,988) (28,681,042) (2,753,354) (25,862,953)
---------- ------------ ---------- ------------
Net decrease............. (1,135,695) $(10,914,806) (1,109,626) $(10,437,361)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 224,963 $ 2,188,764 359,904 $ 3,357,250
Issued on reinvestment of
distributions........... 27,331 263,390 20,582 194,470
Repurchased.............. (241,113) (2,325,799) (119,296) (1,081,480)
---------- ------------ ---------- ------------
Net increase............. 11,181 $ 126,355 261,190 $ 2,470,240
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 64,693 $ 624,316
Issued on reinvestment of
distributions........... 1,029 9,839
Repurchased.............. (2,761) (27,277)
---------- ------------
Net increase............. 62,961 $ 606,878
========== ============
</TABLE>
* There were no Class I shares outstanding during the periods.
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Bond Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02MCFIX123196
<PAGE> 49
DECEMBER 31, 1996 IVY FUNDS
IVY GLOBAL FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
Global economic expansion has created an increased demand for goods
and services from every corner of the world. As a result, investment
opportunities exist today that could not be imagined only a decade ago. Within
this environment, the Ivy Global Fund is positioned to capitalize on economic
growth world wide.
For the twelve months ended December 31, 1996, the total return of the
Ivy Global Fund was 16.21% on a net asset value basis. This compares favorably
to Morgan Stanley Capital International's (MSCI) World and EAFE (Europe,
Australia and Far East) indices, which were up 13.62% and 6.05% respectively
for the same period. (For the Fund's total return with sales charge, and
performance commentary, please refer to the following page.)
While we are not looking for a major correction in the US market,
valuations appear to be extended and we expect corporate profit growth will
slow. Accordingly, the Ivy Global Fund, with only 10% of its assets invested
in the US, is positioned to perform strongly when the countries comprising the
EAFE index take over leadership.
We believe the stage is set in Europe for corporate profit growth to
pick up. According to our research, core European countries should see lower
interest rates as their governments pursue loose monetary policy to spur
growth. Currently, 31% of the Fund's equity assets are allocated to Europe.
The two markets we favor the most are France, which has the greatest leverage
to lower rates, and Sweden, where we expect earnings growth to continue to be
strong.
The Ivy Global Fund's Asian investments (32%) are spread throughout
many countries where our research indicates economies are growing at double and
triple the rates of the world's more mature nations. The Fund's largest Asian
investment is in Hong Kong. Its transition to Chinese rule should go smoothly
as China takes every step to protect its own investments in Hong Kong and to
show the world it can manage on par with the British. Additionally, without
good relations with Hong Kong, China risks losing access to much needed foreign
direct investment and the possibility of peacefully integrating Taiwan. The
Fund continues to avoid Japan where valuations are simply too high and
prospects are questionable as the necessary reforms continue to be delayed.
According to our research, prospects for Latin America are improving
as a result of broad-based economic restructuring at various stages of
development in each of the major Latin American countries. The Ivy Global
Fund's investments in this region are concentrated in Argentina, Brazil and
Chile.
In Argentina, the current recovery is being led by export growth and
investment, rather than consumer spending. We see this as an indication that
recovery will be healthy and sustainable. Brazil remains one of the most
attractive Latin American markets in terms of corporate earnings growth and
valuations. And Chile, which is furthest along the economic reform curve, is
clearly one of the best managed countries in the region.
We believe the momentum that carried the broad US market for the past
few years is unsustainable and would encourage investors with a longer term
horizon to take a more global approach to investing.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 50
IVY GLOBAL FUND PERFORMANCE COMMENTARY
For the twelve months ended December 31, 1996 the total return of the Ivy Global
Fund was 16.21%. This compares to the MSCI World Index (including the US), which
was up 13.62% for the same period and the MSCI EAFE (non-US) Index which was up
6.05%. The Fund outperformed both indices because it is invested taking into
consideration the global efficient frontier. This has meant a higher
concentration of investments in high-growth nations than either MSCI index. This
strategy has historically optimized return while reducing risk. (The most
relevant comparison of the Ivy Global Fund is the MSCI World Index because of
the Fund's global perspective. Reference to EAFE is for comparative purposes
only.)
PERFORMANCE COMPARISONS OF THE
FUND SINCE INCEPTION (4/91)
OF A $10,000 INVESTMENT
CHART
ONE-, THREE-, FIVE-YEAR AND SINCE
INCEPTION CUMULATIVE PERFORMANCE
CHART
The chart above reflects performance at Net Asset Value.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
IVY GLOBAL FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge
Average Annual Class B** & C***
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
1 Yr. 9.53% 9.53% 10.30% 15.30% 10.30% 15.30%
- ------------------------------------------------------------------------------------
5 Yr. 9.30% 8.97% -- -- -- --
- ------------------------------------------------------------------------------------
B: B: B: B:
7.83% 8.78% 7.72% 8.67%
C: C: C: C:
Since Inception 9.44% 8.57% 2.07% 3.07% 2.07% 3.07%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The principal value of the Ivy Global Fund will fluctuate and at
redemption may be worth more or less than the amount of the original investment.
The MSCI is an unmanaged index of stocks which assumes reinvestment of dividends
and, unlike Fund returns, does not reflect any fees or expenses. It is not
possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
- --------------------------------------------------------------------------------
<PAGE> 51
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 91.4% SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
AFRICA -- 2.3%
- ----------------------------
SOUTH AFRICA -- 2.3%
Anglo American Corporation
of South Africa Ltd.
ADR....................... 6,400 $ 352,325
Rembrandt Group Ltd......... 35,300 315,078
South African Breweries
Ltd....................... 4,072 103,160
-----------
770,563
-----------
ASIA/PACIFIC -- 35.4%
- ----------------------------
AUSTRALIA -- 0.7%
Pacific Dunlop Limited...... 88,100 223,916
-----------
CHINA -- 1.1%
Shanghai Diesel Class B*.... 120,000 56,880
Shenzhen Konka Electronics
Group Ltd. Class B........ 260,000 294,118
-----------
350,998
-----------
HONG KONG -- 10.5%
Cheung Kong (Holdings)
Ltd....................... 99,000 879,929
Citic Pacific Ltd........... 90,000 522,431
Esprit Asia Holdings Ltd.... 534,000 236,451
HSBC Holdings............... 13,539 289,684
Hong Kong Telecommunications
Ltd. -- Sponsored ADR..... 11,400 185,250
Hopewell Holdings Ltd....... 156,833 101,379
National Mutual Asia Ltd.... 360,000 342,082
New World Development
Company Ltd............... 60,000 405,301
Peregrine Investment
Holdings Limited.......... 140,000 239,819
Peregrine Investment
Holdings Limited
Warrants*................. 14,000 4,480
Swire Pacific Ltd........... 29,500 281,270
-----------
3,488,076
-----------
INDIA -- 0.9%
The India Fund
Incorporated*............. 40,000 305,000
-----------
INDONESIA -- 1.6%
PT Astra International --
Foreign Registered........ 77,500 213,227
PT Mulia Industrindo --
Foreign Registered........ 96,600 100,178
Semen Gresik -- Foreign
Registered................ 66,000 212,317
-----------
525,722
-----------
KOREA -- 4.0%
Fidelity Advisor Korea
Fund*..................... 58,000 551,000
Hyundai Motor Company Ltd... 1,500 39,740
Hyundai Motor GDR........... 5,000 37,500
Keum Kang Development Ind.
Company*.................. 11,600 190,704
Korea Electric Power
Corporation............... 6,400 186,209
Korea Fund Inc.............. 16,000 240,000
Pohang Iron & Steel Company
Ltd....................... 500 28,708
Samsung Electronics Company
GDS*...................... 2,338 43,253
Samsung Electronics Company
Rights*................... 239 9,709
Samsung Heavy Industries.... 337 3,488
-----------
1,330,311
-----------
MALAYSIA -- 3.9%
Arab Malaysian
Corporation*.............. 59,000 294,357
DCB Holdings Berhad......... 60,000 205,503
Land & General Berhad....... 83,000 198,831
London & Pacific Insurance
Company Berhad............ 75,600 469,973
Technology Resources
Industries Berhad*........ 63,000 124,229
-----------
1,292,893
-----------
NEW ZEALAND -- 2.5%
Fletcher Challenge
Building.................. 21,500 66,078
Fletcher Challenge Energy... 21,500 62,281
Fletcher Challenge
Forests................... 12,202 20,432
Fletcher Challenge Paper.... 43,000 88,409
Lion Nathan Ltd............. 121,000 289,814
Tourism Holdings Limited.... 162,300 309,611
-----------
836,625
-----------
PHILIPPINES -- 1.7%
Bacnotan Cement
Corporation*.............. 150,000 $ 76,996
Benpres Holdings Corporation
GDR*...................... 24,100 180,750
Philippine National Bank*... 10,000 118,821
Universal Robina
Corporation............... 310,000 173,859
-----------
550,426
-----------
SINGAPORE -- 3.6%
Clipsal Industries Ltd...... 118,000 429,520
DBS Land Limited............ 71,000 261,399
Fraser & Neave Ltd.......... 15,200 156,475
Jardine Strategic Holdings
Ltd....................... 91,187 330,097
Jardine Strategic Holdings
Ltd. Warrants*............ 4,687 1,875
-----------
1,179,366
-----------
TAIWAN -- 1.7%
ROC Taiwan Fund*............ 28,000 287,000
Taiwan Fund Inc............. 13,000 289,250
-----------
576,250
-----------
THAILAND -- 3.2%
Bank Of Ayudhya Public
Company Limited........... 83,750 197,616
Krung Thai Bank Public
Company
Limited................... 90,000 173,752
Robinson Department Store
Public Company
Limited -- Foreign
Registered................ 177,000 343,437
Siam Cement Public Co. Ltd.
(The)..................... 5,600 175,600
Siam Makro Public Company
Limited -- Foreign
Registered................ 41,800 176,068
-----------
1,066,473
-----------
EUROPE -- 31.2%
- ----------------------------
AUSTRIA -- 0.7%
OMV AG...................... 2,000 225,286
-----------
FINLAND -- 1.1%
Enso OY -- R Shares......... 20,000 160,555
Scandinavian Broadcast
System S.A.*.............. 3,500 60,813
UPM -- Kymmene Corp......... 7,420 155,354
-----------
376,722
-----------
FRANCE -- 7.8%
Compagnie Financiere de
Paribas................... 7,189 485,237
Elf Gabon................... 650 165,665
Galeries Lafayette*......... 720 255,662
Groupe Danone............... 1,700 236,423
Lyonnaise Des
Eaux -- Dumez............. 3,554 330,124
Schneider S.A............... 8,704 401,653
Societe Generale............ 6,519 703,471
-----------
2,578,235
-----------
GERMANY -- 0.6%
Volkswagen AG............... 500 206,832
-----------
IRELAND -- 1.0%
Bank of Ireland............. 36,000 328,672
-----------
ITALY -- 1.7%
Banca Popolare Di Brescia... 73,250 395,998
Fiat Sp A*.................. 61,000 184,143
-----------
580,141
-----------
NETHERLANDS -- 1.9%
Akzo Nobel NV............... 1,100 150,081
Akzo Nobel NV ADR........... 900 60,750
Hunter Douglas NV........... 2,400 161,643
ING Groep NV................ 7,422 266,889
-----------
639,363
-----------
NORWAY -- 1.2%
Norsk Hydro Sponsored ADR... 3,900 209,138
UNI Storebrand Fria AS*..... 31,700 183,685
-----------
392,823
-----------
PORTUGAL -- 2.3%
Lusomundo -- SGPS S.A....... 9,400 108,138
Lusomundo -- SGPS S.A.
Preferred Shares.......... 13,000 118,570
Portugal Telecom S.A. ADR... 9,000 254,250
Sonae Industria E
Investimentos............. 9,100 287,800
-----------
768,758
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 52
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
SPAIN -- 2.1%
Telefonica de Espana S.A.
ADR....................... 10,300 $ 713,275
-----------
SWEDEN -- 5.8%
AssiDoman AB................ 6,600 183,655
Astra AB "B" Shares......... 6,400 308,376
Electrolux AB............... 5,600 324,779
S.K.F. AB Series "B"........ 12,400 293,291
Sandvik AB -- "B" Shares.... 13,500 365,772
Stora Kopparbergs Bergslags
Aktiebolag (STORA)........ 11,600 159,695
Trelleborg AB "B" Free
Shares.................... 21,700 287,616
-----------
1,923,184
-----------
SWITZERLAND -- 2.3%
Holderbank Financiere Glaris
AG........................ 190 135,278
Nestle AG REGD.............. 276 295,379
S.M.H. AG-PC -- REGD*....... 300 184,327
Swiss Bank Corportation
Bearer.................... 750 142,155
-----------
757,139
-----------
UNITED KINGDOM -- 2.7%
Bank of Scotland............ 40,000 211,174
Barclays PLC ADR............ 1,500 103,125
Cadbury Schweppes PLC ADR... 25,000 210,704
National Westminster Bank
PLC ADR................... 2,400 166,800
RTZ Corporation PLC ADR..... 3,089 197,696
-----------
889,499
-----------
NORTH AMERICA -- 13.8%
- ----------------------------
CANADA -- 3.7%
Alcan Aluminium Ltd......... 4,472 150,371
Brascan, Ltd................ 9,600 213,621
Dofasco Inc................. 12,000 226,753
Inco Limited................ 5,337 170,117
Methanex Corporation........ 25,000 227,082
Power Financial Corp........ 6,500 231,423
-----------
1,219,367
-----------
UNITED STATES -- 10.1%
Air Express International
Corp...................... 6,800 219,300
Aluminum Company of
America................... 2,600 165,750
American Standard Companies,
Inc.*..................... 5,000 191,250
Ameron International Corp... 4,200 216,825
Apria Healthcare Group,
Inc.*..................... 13,000 243,750
Basic Petroleum
International Ltd.*....... 8,600 283,800
Carnival Corporation........ 7,000 231,000
Developers Diversified
Realty Corporation........ 3,800 141,075
Ford Motor Company.......... 4,700 149,813
General Motors Corp......... 2,700 150,525
Homestead Village, Inc...... 678 12,204
Kimco Realty Corporation.... 4,200 146,475
Phelps Dodge Corp........... 2,700 182,250
Royal Caribbean Cruises
Ltd....................... 7,500 175,313
Security Capital Pacific
Trust..................... 5,400 123,525
Semi-Tech Corporation....... 34,000 125,269
Storage USA, Inc............ 3,700 139,212
Sunglass Hut International,
Inc.*..................... 27,000 195,750
United Dominion Realty
Trust..................... 8,700 134,850
Weingarten Realty
Investors................. 3,200 130,000
-----------
3,357,936
-----------
SOUTH AMERICA -- 8.7%
- ----------------------------
ARGENTINA -- 2.1%
CIADEA S.A.*................ 47,000 223,289
Perez Companc S.A.*......... 25,000 175,781
Telefonica De Argentina
S.A....................... 3,100 80,213
YPF S.A. Sponsored ADR...... 8,200 207,050
-----------
686,333
-----------
BRAZIL -- 3.4%
Brasmotor S.A............... 240,000 $ 66,635
Louis Dreyfus Citrus........ 4,300 140,612
Petroleo Brasileiro S.A.
(Petrobras)............... 1,700,000 270,763
Telecomunicacoes Brasileiras
S.A. ADR (Telebras)....... 8,300 634,950
-----------
1,112,960
-----------
CHILE -- 3.2%
Genesis Chile Fund.......... 21,700 797,475
Santa Isabel S.A. ADR....... 5,400 122,175
Vina Concha y Toro S.A.
ADR....................... 6,000 141,000
-----------
1,060,650
-----------
TOTAL EQUITY SECURITIES
(Cost -- $25,581,476)..... 30,313,794
-----------
BONDS -- 1.2% PRINCIPAL
- ---------------------------- ----------
Banco Commercial De
Portugal, 8.75%,
05/21/02(a)............... $ 80,000 103,226
International Knife & Saw
144A, 11.375%,
11/15/06(a)............... 300,000 311,250
-----------
TOTAL BONDS
(Cost -- $402,720)........ 414,476
-----------
TOTAL INVESTMENTS -- 92.6%
(Cost --$25,984,196)(b)... 30,728,270
OTHER ASSETS, LESS
LIABILITIES -- 7.4%....... 2,463,287
-----------
NET ASSETS -- 100%.......... $33,191,557
===========
</TABLE>
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
GDS -- Global Depository Share
NV -- Non-voting
REGD -- Registered
* Non-Income producing security.
(a) Below investment grade.
(b) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 6,541,989
Gross unrealized depreciation..................... (1,797,915)
-----------
Net unrealized appreciation................... $ 4,744,074
===========
</TABLE>
Purchases and sales of securities other than short-term obligations
aggregated $13,964,267 and $12,434,848, respectively, for the period
ended December 31, 1996.
Forward foreign currency exchange contracts at December 31, 1996
were:
<TABLE>
<CAPTION>
FORWARD CONTRACTS UNREALIZED
(CURRENCY/ PRINCIPAL VALUE OF APPRECIATION/
EXPIRATION/COMMITMENT) AMOUNT OBLIGATION (DEPRECIATION)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Deutch Marks/March 97/Sell........ 96,507 US $ (97,274) $ (767)
French Francs/March 97/Sell....... 2,504,114 US (2,533,545) (29,431)
Netherland Guilders/
March 97/Sell.................... 111,822 US (112,404) (582)
Swiss Francs/March 97/Sell........ 520,541 US (514,028) 6,513
----------- --------
Total forward foreign currency
contracts sold................... $(3,257,251) $(24,267)
=========== ========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 53
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $25,984,196)...... $30,728,270
Cash........................................................ 2,376,143
Receivables
Fund shares sold.......................................... 87,001
Dividends and interest.................................... 60,895
Other assets................................................ 33,735
-----------
Total assets............................................ 33,286,044
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 822
Open forward foreign currency contracts................... 24,267
Management fee............................................ 27,513
12b-1 service and distribution fees....................... 12,758
Other payables to related parties......................... 12,166
Accrued expenses............................................ 16,961
-----------
Total liabilities....................................... 94,487
-----------
NET ASSETS.................................................. $33,191,557
===========
CLASS A
Net asset value and redemption price per share
($24,152,486 / 1,834,549 shares outstanding).............. $ 13.17
===========
Maximum offering price per share ($13.17 x 100 / 94.25)*.... $ 13.97
===========
CLASS B
Net asset value and offering price per share
($8,968,089 / 683,398 shares outstanding)**............... $ 13.12
===========
CLASS C
Net asset value and offering price per share
($70,982 / 5,485 shares outstanding)**.................... $ 12.94
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $28,433,902
Accumulated net realized gain on investments.............. 14,462
Accumulated net investment income......................... 23,685
Net unrealized appreciation (depreciation) on
Investments and foreign currency transactions........... 4,743,775
Forward foreign currency contracts...................... (24,267)
-----------
NET ASSETS.................................................. $33,191,557
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 54
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $27,747 foreign taxes withheld.......... $ 780,034
Interest.................................................. 53,390
----------
833,424
----------
EXPENSES
Management fee............................................ $301,433
Transfer agent............................................ 68,182
Administrative services fee............................... 30,143
Custodian fees............................................ 61,257
Blue Sky fees............................................. 24,718
Auditing and accounting fees.............................. 19,716
Shareholder reports....................................... 6,010
Fund accounting........................................... 34,802
Trustees' fees............................................ 4,693
12b-1 service and distribution fees....................... 123,751
Legal..................................................... 21,770
Other..................................................... 9,781
----------
Total expenses.......................................... 706,256
----------
NET INVESTMENT INCOME....................................... 127,168
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on
Investments and foreign currency transactions........... 1,174,530
Forward foreign currency contracts...................... 386,726
Net unrealized appreciation during the period on
Investments and foreign currency transactions........... 2,597,411
Forward foreign currency contracts...................... 34,667
----------
Net gain on investment transactions..................... 4,193,334
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $4,320,502
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 55
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 127,168 $ 143,490
Net realized gain on investments and foreign currency
transactions............................................ 1,561,256 998,646
Net unrealized appreciation (depreciation) during the
period on
Investments and foreign currency transactions........... 2,597,411 1,649,554
Forward foreign currency contracts...................... 34,667 (41,767)
----------- -----------
Net increase resulting from operations.................. 4,320,502 2,749,923
----------- -----------
CLASS A DISTRIBUTIONS
From net investment income................................ (138,320) (71,425)
In excess of net investment income........................ (317,957) --
From net realized gain.................................... (832,444) (827,783)
In excess of net realized gain............................ -- (120,215)
----------- -----------
Total distributions to Class A shareholders............. (1,288,721) (1,019,423)
----------- -----------
CLASS B DISTRIBUTIONS
In excess of net investment income........................ (131,831) --
From net realized gain.................................... (310,417) (170,863)
In excess of net realized gain............................ -- (24,814)
----------- -----------
Total distributions to Class B shareholders............. (442,248) (195,677)
----------- -----------
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................................................... 730,562 591,261
Class B................................................... 3,726,274 1,665,995
Class C................................................... 73,059 --
----------- -----------
Net increase resulting from Fund share transactions..... 4,529,895 2,257,256
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 7,116,349 3,792,079
NET ASSETS
Beginning of period....................................... 26,075,208 22,283,129
----------- -----------
END OF PERIOD............................................. $33,191,557 $26,075,208
=========== ===========
ACCUMULATED NET INVESTMENT INCOME........................... $ 23,685 $ 53,270
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 56
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
CLASS A FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
-------------------- ------------ --------------------------------
1996 1995 1994 1994 1993 1992
SELECTED PER SHARE DATA ------- ------- ------------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 11.97 $ 11.23 $ 11.52 $ 10.62 $ 10.55 $ 9.40
------- ------- ------- ------- ------- ------
Income (loss) from investment operations
Net investment income............................ .08 .09(a) -- -- .03(a) .06(a)
Net realized and unrealized gain (loss) on
investment transactions........................ 1.86 1.25 (.10) 1.79 .44 1.79
------- ------- ------- ------- ------- ------
Total from investment operations............... 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..................... $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62 $10.55
======= ======= ======= ======= ======= ======
Total return(%).................................... 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)........... $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(%)................. 2.18 2.46 2.34(d) 2.42 2.76 2.97
Ratio of net investment income (loss) to average
net assets(%).................................... .58 .71(a) (.06)(a)(d) .01(a) .38(a) .82(a)
Portfolio turnover rate(%)......................... 43 53 23(d) 85 67 59
Average commission rate(e)......................... $ .0181 N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE SIX APRIL 1, 1994
CLASS B ENDED MONTHS ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31, JUNE 30,
------------------ ------------ -----------------
1996 1995 1994 1994
SELECTED PER SHARE DATA ------ ------ ------------ -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $11.97 $11.23 $11.52 $12.12
------ ------ ------ ------
Income (loss) from investment operations
Net investment loss....................................... (.02) -- (.03)(a) (.01)(a)
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.85 1.25 (.12) (.04)
------ ------ ------ ------
Total from investment operations........................ 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.............................. $13.12 $11.97 $11.23 $11.52
====== ====== ====== ======
Total return(%)............................................. 15.30(b) 11.25(b) (1.37)(c) .38(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $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(%).......................... 2.94 3.21 3.09(d) 3.17(d)
Ratio of net investment loss to average net assets(%)....... (.17) (.04)(a) (.81)(a)(d) (.74)(a)(d)
Portfolio turnover rate(%).................................. 43 53 23(d) 85
Average commission rate(e).................................. $.0181 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 57
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT) TO
DECEMBER 31,
-----------------
1996
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $ 13.31
--------
Income from investment operations
Net investment loss....................................... (.01)
Net realized and unrealized gain (loss) on investment
transactions............................................ .42
--------
Total from investment operations........................ .41
--------
Less distributions
In excess of net investment income........................ .30
From net realized gain.................................... .48
--------
Total distributions..................................... .78
--------
Net asset value, end of period.............................. $ 12.94
========
Total return(%)............................................. 3.07(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 71
Ratio of expenses to average net assets
without expense reimbursement(%).......................... 3.77(d)
Ratio of net investment income to average net
assets(%)(a).............................................. (1.01)(d)
Portfolio turnover rate(%).................................. 43
Average commission rate(e).................................. $ .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.
(See Notes to Financial Statements)
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996, there were no
such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund earned foreign source dividends of $822,901. These dividends were
subject to withholding tax in the amount of $27,747. The Fund intends to elect
to pass through to its shareholders their proportionate share of such taxes.
Shareholders may apply their proportionate share of such foreign taxes paid as
either a tax credit or itemized deduction.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$839,035 as capital gain dividends for its taxable year ended December 31, 1996.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
FORWARD FOREIGN CURRENCY 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
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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%
on its first $500 million of average net assets, and .75% of its 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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $23,164.
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
$59,251, $64,463 and $37 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 $53,345, $14,798 and $39 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------- ------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 486,908 $6,383,105 2,228,655 $24,282,852
Issued on reinvestment of
distributions................ 96,662 1,267,635 74,044 885,461
Repurchased................... (525,829) (6,920,178) (2,247,642) (24,577,052)
-------- ---------- ---------- -----------
Net increase.................. 57,741 $ 730,562 55,057 $ 591,261
======== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------- ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 350,672 $4,642,668 424,399 $ 4,741,733
Issued on reinvestment of
distributions................ 29,736 390,147 14,695 175,609
Repurchased................... (99,033) (1,306,541) (300,410) (3,251,347)
-------- ---------- ---------- -----------
Net increase.................. 281,375 $3,726,274 138,684 $ 1,665,995
======== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM
APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
---------------------
CLASS C SHARES AMOUNT
- ------- -------- ----------
<S> <C> <C>
Sold.......................... 5,866 $ 78,416
Issued on reinvestment of
distributions................ 219 2,832
Repurchased................... (600) (8,189)
-------- ----------
Net increase.................. 5,485 $ 73,059
======== ==========
</TABLE>
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02MCGLX123196
<PAGE> 61
DECEMBER 31, 1996 IVY FUNDS
IVY CANADA FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Market Commentary:
The Ivy Canada Fund has historically been positioned as a
country/sector fund focusing on metals, energy, precious metals and forest
products. Three of these four sectors came under pressure in 1996 providing
single-digit returns and yet within this more difficult environment, the Ivy
Canada Fund's total return for the twelve months ended December 31, 1996 was
23.86% on a net asset value basis. The Toronto Stock Exchange 300 (TSE 300), a
much broader index, was 27.93% for the same period. For the Fund's total
return with sales charge, and performance commentary, please refer to the
following page.)
According to our research, Canadian stocks began to outperform the US
in 1996, reflecting in just three years an improvement in the government
deficit, which went from being among the worst of the G-7 nations to among the
best. This remarkable improvement came largely through reductions in program
spending of Canadian provincial and federal governments and not through higher
taxes.
In addition to interest rates, which are at a 40-year low, and
inflation holding at about half the rate of the US, the Canadian dollar has
gotten steadily stronger. While improved, the Canadian dollar is still
considered undervalued which helped Canada post record levels of exports in
1996. In August, Canada posted its largest trade surplus ever led by exports of
vehicles and agriculture. At the same time, imports dropped, with imports from
the US failing most.
We believe global economic expansion will continue to provide strong
demand for Canadian resources and basic commodities. In addition to having
large petroleum reserves, Canada is a leading producer of nickel, zinc
and potash, as well as a major source of uranium, aluminum, titanium, cobalt,
gold, silver, copper, platinum, iron ore and lead. Canada's forests provide
more than one-third of the world's supply of newsprint. In an environment where
many financial assets have risen to lofty levels, it is encouraging to find
resources like papers and base metals can be bought today with the commodities
at multi-year lows.
Within the resource sectors, in addition to the rising trend in the
price of grains, gold and energy, there were a few spectacular discoveries made
by Canadian companies of nickel, copper, gold and diamonds, both in Canada and
elsewhere around the world.
With a vastly improved and more healthy economy, we believe Canada now
also offers attractive investment opportunities outside the resource sector.
These include, among others, banking and technology. The additional
diversification these industries will provide to the Ivy Canada Fund should help
reduce volatility implicit with investing in a country/sector fund.
Canada remains the greatest ally and trading partner of the US. And
because it's just next door, investors often overlook Canada as a viable
investment opportunity. We believe now may be a good time for investors to focus
on the opportunities Canada offers.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 62
IVY CANADA FUND PERFORMANCE COMMENTARY
The Ivy Canada Fund was up 23.86% in 1996. This compares favorably to the four
focus sectors in which the Fund is most heavily concentrated -- metals, energy,
precious metals and forest products. As a group, these sectors averaged 16% for
the twelve months ended December 31, 1996. The Fund did underperform the broader
TSE index, which was up 27.93% for the same period. The banking sector, a
component of the TSE 300, was up 56% and made a significant contribution to the
index's outperformance.
PERFORMANCE COMPARISONS OF THE
FUND SINCE INCEPTION (11/87)
OF A $10,000 INVESTMENT
CHART
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
IVY CANADA FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C***
Average Annual
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
1 Yr. 16.73% 16.73% 18.26% 23.26% 18.26% 23.26%
- ------------------------------------------------------------------------------------
5 Yr. 9.62% 9.55% -- -- -- --
- ------------------------------------------------------------------------------------
B: B: B: B:
3.93% 4.93% 3.80% 4.81%
C: C: C: C:
Since Inception 3.43% 3.00% 5.51% 6.51% 5.51% 6.51%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Canada Fund will
fluctuate and at redemption may be worth more or less than the amount of the
original investment.
The Toronto Stock Exchange 300 is an unmanaged index of Canadian stocks which
assumes reinvestment of dividends and, unlike Fund returns, does not reflect any
fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
- --------------------------------------------------------------------------------
<PAGE> 63
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 97.6% SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS -- 0.4%
Schneider Corporation Class
A........................... 8,500 $ 68,991
Sport Specific International,
Inc.*....................... 112,500 9,849
-----------
78,840
-----------
GOLD & PRECIOUS MINERALS -- 21.8%
Agnico-Eagle Mines, Ltd....... 25,000 351,110
Barrick Gold Corporation...... 15,000 429,540
Battle Mountain Canada........ 50,000 346,550
Dakota Mining Corp.*.......... 130,000 218,144
Goldcorp Inc. Class A*........ 20,000 171,451
Golden Knight Resources,
Inc.*....................... 100,000 481,522
Orvana Minerals
Corporation*................ 150,000 793,418
Prime Resources Group, Inc.... 50,000 353,846
REA Gold Corporation*......... 119,000 148,462
William Resources, Inc.*...... 500,000 514,353
-----------
3,808,396
-----------
INDUSTRIAL PRODUCTS -- 14.7%
Offshore Systems International
Ltd.*....................... 308,824 470,901
Offshore Systems International
Ltd. Special*............... 75,000 7,661(a)
PC Docs Group International,
Inc.*....................... 30,000 292,196
Simmonds Capital Ltd.*........ 100,000 310,071
Slater Industries Inc......... 56,200 610,935
Speedy Muffler King, Inc.*.... 50,000 410,388
Stelco Inc. Series A
Convertible*................ 75,000 459,635
-----------
2,561,787
-----------
MERCHANDISING -- 5.3%
Semi-Tech Corporation......... 250,000 921,094
-----------
METALS & MINERALS -- 18.4%
Aber Resources, Ltd.*......... 40,000 542,807
Breakwater Resources, Ltd.*... 163,000 310,385
Consolidated Eurocan Ventures
Ltd.*....................... 100,000 419,508
Inco Ltd...................... 12,500 398,989
Noranda Inc................... 30,000 668,660
Redfern Resources Ltd.*....... 105,500 134,699
Teck Corp. Class B............ 20,000 463,283
Western Garnet Company
Ltd.*....................... 70,000 275,781
-----------
3,214,112
-----------
OIL & GAS -- 15.3%
Canadian Conquest Exploration
Co Ltd.*.................... 75,000 134,060
Cimarron Petroleum Ltd.*...... 40,000 507,787
HCO Ltd. Energy*.............. 134,400 151,986
Hurricane Hydrocarbons Ltd.
Series 1*................... 50,000 156,860(a)
Hurricane Hydrocarbons Ltd.
Series 2*................... 125,000 360,230(a)
Morrison Petroleums Ltd....... 50,000 300,951
Olympia Energy, Inc Class
A*.......................... 725,000 333,235
Penn West Petroleum Ltd.*..... 20,000 204,282
Petro-Canada.................. 37,500 529,401
-----------
2,678,792
-----------
PAPER & FOREST PRODUCTS -- 17.9%
Ainsworth Lumber Company*..... 100,000 $ 445,043
Alliance Forest Products,
Inc.*....................... 35,000 619,231
Donohue, Inc.................. 44,500 803,540
St. Laurent Paperboard
Inc.*....................... 20,000 323,933
Sino-Forest Corp. Class A..... 200,000 180,936
Tembec Inc. Class A*.......... 20,000 131,324
Timberwest Forest Ltd......... 10,000 134,972
West Fraser Timber Co. Ltd.... 15,000 481,522
-----------
3,120,501
-----------
TRANSPORTATION & ENVIRONMENTAL -- 3.8%
CHC Helicopter Corporation
Class A..................... 150,000 656,621
-----------
TOTAL EQUITY SECURITIES
(Cost -- $17,528,111)....... 17,040,143
-----------
SHORT-TERM OBLIGATIONS -- 2.8% PRINCIPAL
- ------------------------------ --------
U.S. Treasury Bill, 4.94%,
03/27/97
(Cost -- $494,168).......... $500,000 494,168
-----------
TOTAL INVESTMENTS -- 100.4%
(Cost -- $18,022,279)(b).... 17,534,311
OTHER ASSETS, LESS
LIABILITIES -- (0.4%)....... (72,430)
-----------
NET ASSETS -- 100%............ $17,461,881
===========
</TABLE>
* 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 December 31, 1996 aggregated
$385,706. See Note 1 of the Notes to the Financial
Statements.
(b) Cost for Federal income tax purposes is
$18,200,315.
OTHER INFORMATION:
At December 31, 1996, net unrealized depreciation
based on cost for financial statement and Federal
income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation....... $ 2,240,190
Gross unrealized depreciation....... (2,906,194)
-----------
Net unrealized depreciation..... $ (666,004)
===========
</TABLE>
Purchases and sales of investments (excluding
short-term obligations) aggregated $9,963,758 and
$12,318,380 respectively, for the period ended
December 31, 1996.
(See Notes to Financial Statements)
<PAGE> 64
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $18,022,279)...... $17,534,311
Receivables
Fund shares sold.......................................... 29,058
Dividends and interest.................................... 10,852
Other assets................................................ 26,199
-----------
Total assets.............................................. 17,600,420
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 7,450
Fund shares repurchased................................... 40,049
Management and advisory fees.............................. 13,228
12b-1 service and distribution fees....................... 7,808
Other payables to related parties......................... 12,983
Due to custodian............................................ 45,727
Accrued expenses............................................ 11,294
-----------
Total liabilities......................................... 138,539
-----------
NET ASSETS.................................................. $17,461,881
===========
CLASS A
Net asset value and redemption price per share
($15,249,401 / 1,581,638 shares outstanding).............. $ 9.64
===========
Maximum offering price per share ($9.64 x 100 / 94.25)*..... $ 10.23
===========
CLASS B
Net asset value and offering price per share ($2,039,603 /
212,746 shares outstanding)**............................. $ 9.59
===========
CLASS C
Net asset value and offering price per share ($172,877 /
17,969 shares outstanding)**.............................. $ 9.62
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $17,906,958
Accumulated net realized gain on investments.............. 43,038
Net unrealized depreciation on investments and foreign
currency transactions................................... (488,115)
-----------
NET ASSETS.................................................. $17,461,881
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 65
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $12,691 foreign taxes withheld.......... $ 113,445
Interest.................................................. 73,283
----------
186,728
----------
EXPENSES
Management fee............................................ $ 93,270
Advisory fee.............................................. 65,289
Transfer agent............................................ 100,986
Administrative services fee............................... 18,654
Custodian fees............................................ 32,163
Blue Sky fees............................................. 25,096
Auditing and accounting fees.............................. 27,465
Shareholder reports....................................... 6,472
Fund accounting........................................... 33,091
Trustees' fees............................................ 4,655
12b-1 service and distribution fees....................... 83,396
Legal..................................................... 22,786
Other..................................................... 13,633
----------
Total expenses............................................ 526,956
----------
NET INVESTMENT LOSS......................................... (340,228)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 2,677,225
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 1,776,983
----------
Net gain on investment transactions..................... 4,454,208
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $4,113,980
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 66
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (340,228) $ (413,829)
Net realized gain on investments and foreign currency
transactions............................................ 2,677,225 1,423,512
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 1,776,983 20,707
----------- -----------
Net increase resulting from operations.................. 4,113,980 1,030,390
----------- -----------
Distributions from net realized gain
Class A................................................... (2,405,970) (519,054)
Class B................................................... (251,588) (23,912)
Class C................................................... (14,472) --
----------- -----------
Total distributions paid to shareholders................ (2,672,030) (542,966)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (5,559,037) (4,372,745)
Class B................................................... 906,002 343,265
Class C................................................... 178,392 --
----------- -----------
Net decrease resulting from Fund share transactions..... (4,474,643) (4,029,480)
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (3,032,693) (3,542,056)
NET ASSETS
Beginning of period....................................... 20,494,574 24,036,630
----------- -----------
END OF PERIOD............................................. $17,461,881 $20,494,574
=========== ===========
ACCUMULATED NET INVESTMENT LOSS............................. $ -- $ (185,467)
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 67
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
CLASS A YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
-------------------- ------------ ---------------------------------
1996 1995 1994 1994 1993 1992
SELECTED PER SHARE DATA ------- ------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43 $ 8.89
------- ------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment loss........................... (.21) (.19)(a) (.11) (.11) (.01) (.12)
Net realized and unrealized gain (loss) on
investment transactions..................... 2.29 .75 (.81) .24 3.35 (1.34)
------- ------- ------- ------- ------- -------
Total from investment operations............ 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.................. $ 9.64 $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43
======= ======= ======= ======= ======= =======
Total return(%)................................. 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)........ $15,249 $19,353 $23,296 $34,549 $30,971 $11,280
Ratio of expenses to average net assets(%)...... 2.79 2.90(f) 2.44(d) 2.05 2.63 2.70
Ratio of net investment loss to average net
assets(%)..................................... (1.78) (2.13)(a) (1.85)(d) (1.09) (1.41) (1.39)
Portfolio turnover rate(%)...................... 56 21 36(d) 62 32 2
Average commission rate(e)...................... $ .0134 N/A N/A N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 68
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE SIX APRIL 1, 1994
CLASS B YEAR ENDED MONTHS ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31, JUNE 30,
------------------ ------------ -----------------
1996 1995 1994 1994
SELECTED PER SHARE DATA ------ ------ ------------ -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.21 $ 8.90 $ 9.85 $10.16
------ ------ ------ ------
Income (loss) from investment operations
Net investment loss....................................... (.17) (.20)(a) (.09) (.02)
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.19 .71 (.86) (.29)
------ ------ ------ ------
Total from investment operations........................ 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.............................. $ 9.59 $ 9.21 $ 8.90 $ 9.85
====== ====== ====== ======
Total return(%)............................................. 23.26(b) 5.74(b) (9.64)(c) (3.05)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,040 $1,142 $ 741 $ 227
Ratio of expenses to average net assets(%).................. 3.30 3.50(f) 3.03(d) 2.68(d)
Ratio of net investment loss to average net assets (%)...... (2.30) (2.73)(a) (2.44)(d) (1.72)(d)
Portfolio turnover rate(%).................................. 56 21 36(d) 62
Average commission rate(e).................................. $.0134 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 69
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT) TO
DECEMBER 31,
-----------------
1996
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $10.67
------
Income from investment operations
Net investment loss....................................... (.14)
Net realized and unrealized gain on investment
transactions............................................ .72
------
Total from investment operations........................ .58
------
Less distributions
From net realized gain.................................... 1.63
------
Total distributions..................................... 1.63
------
Net asset value, end of period.............................. $ 9.62
======
Total return(%)............................................. 6.51(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 173
Ratio of expenses to average net assets(%).................. 3.15(d)
Ratio of net investment loss to average net assets(%)....... (2.15)(d)
Portfolio turnover rate(%).................................. 56
Average commission rate(e).................................. $.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.
(See Notes to Financial Statements)
<PAGE> 70
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996,
securities valued in good faith by the Valuation Committee of the Board amounted
to $524,751 (.03% of net assets) and have been noted as such in the investment
portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund earned Canadian source dividends of $113,445. These dividends were
subject to Canadian withholding tax in the amount of $12,691. The Fund intends
to elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may apply their proportionate share of such foreign taxes
paid as either a tax credit or itemized deduction.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$826,672 as capital gain dividends for its taxable period ended December 31,
1996.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in June. An additional
distribution may be declared in December if necessary to avoid the payment of a
four percent Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
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> 71
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. RELATED PARTIES
Mackenzie Financial Corporation (MFC) in Toronto, Ontario, Canada is the
Investment Advisor of the Fund. For its services, MFC receives a fee monthly at
the annual rate of .35% of the Fund's average net assets. The fee is collected
from the Fund and remitted to MFC by Mackenzie Investment Management Inc.
(MIMI), a subsidiary of MFC.
The Fund pays Ivy Management, Inc. (IMI), a wholly owned subsidiary of
MIMI, a management fee monthly at the annual rate of .50% of its average net
assets.
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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $12,272.
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 $68,732, $13,674 and $990 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 $94,309, $6,368 and $309 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. SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,404,805 $ 13,996,192 926,528 $ 8,132,834
Issued on reinvestment of
distributions........... 238,777 2,234,621 46,215 419,175
Repurchased.............. (2,163,206) (21,789,850) (1,490,048) (12,924,754)
---------- ------------ ---------- ------------
Net decrease............. (519,624) ($ 5,559,037) (517,305) ($ 4,372,745)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 180,509 $ 1,783,269 73,447 $ 630,818
Issued on reinvestment of
distributions........... 21,699 203,806 2,291 20,775
Repurchased.............. (113,445) (1,081,073) (35,009) (308,328)
---------- ------------ ---------- ------------
Net increase............. 88,763 $ 906,002 40,729 $ 343,265
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 49,422 $ 495,277
Issued on reinvestment of
distributions........... 795 7,533
Repurchased.............. (32,248) (324,418)
---------- ------------
Net increase............. 17,969 $ 178,392
========== ============
</TABLE>
<PAGE> 72
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Canada Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02MCCNX123196
<PAGE> 73
DECEMBER 31, 1996 IVY FUNDS
IVY LATIN AMERICA STRATEGY FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
The Latin American region, overall, performed well in 1996 gaining
22.2%, as measured by the Morgan Stanley Capital International (MSCI) Latin
America "Free" Index. Within this environment, the Ivy Latin America Strategy
Fund outperformed the index, returning 24.2% for the twelve months ended
December 31, 1996 on a net asset value basis. (For the Fund's total return with
sales charge, and performance commentary, please refer to the followingpage.)
Brazil was the region's best performing market in 1996, up 38% for
the year. Returns were concentrated mostly among large capitalization issues,
while smaller companies underperformed. We are continuing to find value in
the banking sector, electric and telephone utilities and select manufacturing
companies. The Ivy Latin America Strategy Fund has approximately 43% of its
portfolio invested in Brazil.
In 1996, tight monetary policy in Chile, directed at lowering
inflation, put a temporary damper on corporate profit growth and caused the
stock market to underperform the rest of the region. With these measures taking
hold, inflation is trending toward the central bank's target of 6.5%, and
interest rates have started to come down. Lower rates are likely to be the
catalyst to move stock prices higher and we believe Chile will continue on its
steady growth path. Chile represents 17% of the Ivy Latin America Strategy
Fund.
We used periods of market weakness to invest the Fund's cash position.
Specifically, we increased our exposure to Argentina to 20% of the portfolio.
The Argentine market experienced a dramatic sell off in the summer following
the news of Finance Minister Cavallo's resignation. This raised concerns over
the sustainability of the convertibility plan that forms the foundation of
Argentina's economic policy. Fears of the plan's collapse have subsided and at
the same time, positive economic statistics have been released, which has been
positive for the Merval. Real GDP grew 6.6% in the third quarter and by some
estimates is on track to grow faster than 5% in 1997.
The Ivy Latin America Strategy Fund remains significantly underweight
in Mexico (5% of assets) due to concerns over progress of economic reform and
political stability. On the macro-front, we are apprehensive about peso
weakness, a deteriorating trade balance, political instability, and lack of
progress on structural reform. In addition, we feel that many investors in
Mexico are not focusing on true economic earnings and instead are relying on
reported profits which are composed primarily of accounting gains. For many
Mexican companies, increases in 1996 earnings will have come largely from a
stronger peso rather than stronger operations. This invites the question: what
happens to reported earnings when the peso weakens?
Overall, we believe that structural reform in most Latin American
countries is well on track. Continued progress on privatization, an ongoing
focus on fiscal responsibility, and addressing much needed issues like labor
reform are setting the stage for what we expect to be a prolonged period of
stability and prosperity across much of the region. While there are no
guarantees and investing in Latin America is not without risk, we believe this
more favorable environment should be reflected in higher, more consistent
economic growth and investment returns.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 74
IVY LATIN AMERICA STRATEGY FUND
PERFORMANCE COMMENTARY
For the twelve months ended December 31, 1996, the Ivy Latin America Strategy
Fund outperformed its most relevant benchmark, the MSCI Latin America "Free"
Index, 24.2% compared to 22.2%. The Fund's outperformance is, in part,
attributable to the difference in country weightings to the index. Industry and
company selection were also a factor.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (11/94) OF A $10,000
INVESTMENT
CHART
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
IVY LATIN AMERICA STRATEGY FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C***
Average Annual
Total Return Average Annual Total Return
-------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
-------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
1 Yr. 17.07% 14.83% 18.26% 23.26% 16.04% 21.04%
- -----------------------------------------------------------------------------------
B: B: B: B:
(8.84)% (7.40)% (13.85)% (12.41)%
C: C: C: C:
Since Inception (9.13)% (14.38)% 5.66% 6.66% 4.66% 5.66%
- -----------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Latin America
Strategy Fund will fluctuate and at redemption may be worth more or less than
the amount of the original investment.
The Morgan Stanley Latin America "Free" index is an unmanaged index of stocks
which assumes reinvestment of dividends and, unlike Fund returns, does not
reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
- --------------------------------------------------------------------------------
<PAGE> 75
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 96.5% SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 19.6%
Acindar Ind Argentina
S.A.*...................... 54,000 $ 75,613
Astra Cia Argentina De Petro
(C.A.P.S.A.)............... 51,130 97,675
Banco Frances del Rio de la
Plata S.A.................. 3,128 29,252
Bansud S.A.*................. 14,400 172,542
Central Costanera S.A. 'B'... 15,500 47,438
Cia Naviera Perez Companc.... 11,706 82,308
CIADEA S.A.*................. 17,113 81,303
Comercial del Plata S.A.*.... 11,800 30,213
Disco S.A. ADR*.............. 2,000 56,500
Dragados y Construcciones
Argentina 'B'.............. 10,400 38,487
Inversiones y Representacion
(IRSA)..................... 18,107 58,134
Juan Minnetti S.A............ 11,924 49,613
Quilmes Industrial S.A.*..... 8,750 79,844
Telecom Argentina............ 1,500 60,562
Telefonica de Argentina S.A.
ADR........................ 3,000 77,625
Transportadora de Gas Sur.... 27,400 67,416
YPF S.A. Sponsored ADR....... 3,900 98,475
----------
1,203,000
----------
BRAZIL -- 42.9%
Aracruz Celulose S.A. ADR.... 7,700 63,525
Banco Bradesco S.A........... 14,936,032 108,236
Banco Nacional S.A........... 1,600,000 --(a)
Brasmotor S.A................ 280,000 77,740
Casa Anglo................... 650,000 19,705
Centrais Electricas
Brasileiras
S.A.(Electrobras).......... 457,000 169,764
Centrais Electricas de Santa
Catarina S.A. -- CELESC.... 83,201 77,668
Cia Brasileira de
Distribuicao Grupo Pao de
Acucar..................... 3,000,000 53,412
Cia Cervejaria Brahma
Rights..................... 91,551 50,044
Companhia Cimento Portland
Itau....................... 320,000 112,396
Companhia Energetica de Minas
Gerais (CEMIG)............. 1,480,000 50,421
Companhia Siderurgica de
Tubarao.................... 4,200,000 64,712
Companhia Paranaense de
Energia -- Copel........... 6,800,000 71,985
Companhia Paulista de Forca e
Luz -- CPFL................ 500,000 59,186
Companhia Paulista de Forca e
Luz -- CPFL Rights*........ 2,905 100
Companhia Vale do Rio Doce
Preferred Shares........... 2,900 55,818
Electricidade de Sao Paulo
S.A. --
Eletropaulo................ 500,000 73,862
Elevadores Atlas S.A. 144A... 6,200 60,860
Iochpe Maxion S.A. -- ADR*... 3,000 4,125
Iparanga Brasileira de
Petroleo................... 4,700,000 68,254
Itabanco..................... 326,000 141,180
Louis Dreyfus Citrus......... 1,300 42,510
Marco Polo S.A............... 610,000 102,146
OSA S.A...................... 9,700,000 53,256
Petroleo Brasileiro S.A.
(Petrobras)................ 1,184,000 188,579
Refripar S.A................. 37,100,000 83,904
Tam Transport Aeros Reg...... 2,450,000 135,574
Telecomunicacoes Brasileiras
S.A. ADR (Telebras)........ 2,300 175,950
Telecomunicacoes de Minas
Gerais (Telemig)........... 364,861 45,120
Telecomunicacoes de Sao Paulo
S.A. (Telesp).............. 6,856 1,481
Telecomunicacoes de Sao Paulo
S.A. (Telesp) Preferred.... 310,000 $ 67,125
Telecomunicacoes do Parana
(Telepar).................. 80,000 44,739
Telecomunicacoes do Rio
Janeiro S.A. (Telerj)*..... 497,724 62,983
Uniao de Bancos
Brasileiros................ 4,959,694 161,807
Usinas Siderurgicas de Minas
Gerais (USIMINAS).......... 86,100,000 87,832
----------
2,635,999
----------
CHILE -- 16.6%
A.F.P. Provida S.A. ADR...... 3,100 58,125
Antofagasta Holdings PLC..... 9,900 57,602
Banco O'Higgins ADR.......... 1,700 39,312
Banco Santander Chile
Sponsored ADR.............. 4,200 63,000
Chilgener S.A. ADR........... 1,300 27,138
Cia de Telecomunicaciones de
Chile S.A. ADR*............ 700 70,788
Cristalerias de Chile
Sponsored ADR.............. 4,500 82,125
Empresa Nacional Electricidad
S.A.
Sponsored ADR.............. 3,400 52,700
Genesis Chile Fund........... 5,500 202,125
Laboratorio Chile S.A. ADR... 3,400 56,100
Madeco S.A. ADR.............. 1,700 41,225
Maderas y Sinteticos Sociedad
Anonima S.A. Sponsored
ADR........................ 4,300 60,200
Quimica Minera Chile S.A.
Sponsored ADR.............. 1,200 64,950
Santa Isabel S.A. ADR........ 2,700 61,088
Vina Concha y Toro S.A.
ADR........................ 3,600 84,600
----------
1,021,078
----------
COLOMBIA -- 4.2%
Banco Ganadero S.A. ADR...... 2,400 63,300
Banco Industrial Colombiano
ADR........................ 6,900 143,175
Cememtos Diamante ADR 144A... 4,100 53,300
----------
259,775
----------
MEXICO -- 5.1%
Banacci Series 'B'*.......... 4,000 8,364
Banacci Series 'L'*.......... 326 620
Cementos de Mexico S.A.
'B'........................ 19,800 76,966
Corporacion GEO, S.A. 'B'*... 22,912 107,837
Grupo Elektra, S.A. de C.V... 1,000 7,863
Groupo Posadas S.A. -- Series
A*......................... 193,500 99,552
Vitro Sociedad Anonima ADR... 2,400 13,200
----------
314,402
----------
PANAMA -- 3.3%
Banco Latinamericano de
Exportaciones S.A. -- E*... 1,700 86,275
Panamerican Beverages Inc.... 2,500 117,188
----------
203,463
----------
PERU -- 4.8%
Banco Wiese ADR.............. 10,200 59,925
CPT Telefonica del Peru
S.A. -- B*................. 42,500 79,092
Credicorp Limited............ 5,162 95,497
Southern Peru Copper Corp.... 4,100 59,963
----------
294,477
----------
TOTAL EQUITY
SECURITIES -- 96.5%
(COST -- $5,442,463)....... 5,932,194
----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 76
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CONVERTIBLE BONDS -- 0.6% PRINCIPAL VALUE
- ------------------------------------------------------
<S> <C> <C>
Inversiones y
Representaciones S.A.
(IRSA) "Parcks" 144A
Floating Rate, 4.50%,
07/04/03
(Cost -- $40,000).......... $ 40,000 $ 39,850
----------
TOTAL INVESTMENTS -- 97.1%
(Cost -- $5,482,463)(b).... 5,972,044
OTHER ASSETS, LESS
LIABILITIES -- 2.9%........ 179,725
----------
NET ASSETS -- 100%........... $6,151,769
==========
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 December 31, 1996 aggregated
$39,649. See Note 1 of the Notes to the Financial
Statements.
(b) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation
based on cost for financial statement and Federal
income tax purposes is as follows:
Gross unrealized appreciation........ $ 873,878
Gross unrealized depreciation........ (384,297)
----------
Net unrealized appreciation...... $ 489,581
==========
Purchases and sales of securities other than
short-term obligations aggregated $3,746,893 and
$762,161, respectively, for the period ended December
31, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 77
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $5,482,463)....... $5,972,044
Cash........................................................ 145,436
Receivables
Fund shares sold.......................................... 6,988
Dividends................................................. 10,117
Manager for expense reimbursement......................... 6,516
Deferred organization expenses.............................. 35,188
Other assets................................................ 4,301
----------
Total assets.............................................. 6,180,590
----------
LIABILITIES
Payables
Fund shares repurchased................................... 5,217
Management fee............................................ 5,159
12b-1 service and distribution fees....................... 2,691
Other payables to related parties......................... 3,836
Accrued expenses............................................ 11,918
----------
Total liabilities......................................... 28,821
----------
NET ASSETS.................................................. $6,151,769
==========
CLASS A
Net asset value and redemption price per share
($4,015,716/471,791 shares outstanding)................... $ 8.51
==========
Maximum offering price per share ($8.51 X 100/94.25)*....... $ 9.03
==========
CLASS B
Net asset value and offering price per share
($2,024,689/238,781 shares outstanding)**................. $ 8.48
==========
CLASS C
Net asset value and offering price per share
($111,364/13,169 shares outstanding)**.................... $ 8.46
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $5,662,800
Accumulated net realized loss on investments.............. (578)
Net unrealized appreciation on investments and foreign
currency transactions................................... 489,547
----------
NET ASSETS.................................................. $6,151,769
==========
</TABLE>
*On sales of more than $50,000 the offering price is reduced.
**Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 78
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $5,008 foreign taxes withheld........... $102,477
Interest.................................................. 800
--------
103,277
--------
EXPENSES
Management fee............................................ $42,550
Transfer agent............................................ 14,143
Administrative services fee............................... 4,255
Custodian fees............................................ 36,449
Blue Sky fee.............................................. 22,681
Auditing and accounting fees.............................. 14,811
Shareholder reports....................................... 3,345
Amortization of organization expenses..................... 12,489
Fund accounting........................................... 16,731
Trustees' fees............................................ 4,753
12b-1 service and distribution fees....................... 20,797
Legal..................................................... 21,964
Other..................................................... 3,593
--------
218,561
Expenses reimbursed by manager............................ (99,630)
Fees paid indirectly...................................... (15,167)
--------
Net expenses............................................ 103,764
--------
NET INVESTMENT LOSS......................................... (487)
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 58,873
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 660,305
--------
Net gain on investment transactions..................... 719,178
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $718,691
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 79
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ (487) $ 353
Net realized gain (loss) on investments and foreign
currency transactions................................... 58,873 (42,053)
Net unrealized appreciation (depreciation) during the
period on investments and foreign currency
transactions............................................ 660,305 (56,614)
---------- ----------
Net increase (decrease) resulting from operations....... 718,691 (98,314)
---------- ----------
Class A distributions
From net realized gain.................................... (17,179) --
From capital paid-in...................................... -- (7,792)
---------- ----------
Total distributions to Class A shareholders............. (17,179) (7,792)
---------- ----------
Class C distributions
From net realized gain.................................... (370) --
---------- ----------
Total distributions to Class C shareholders............. (370) --
---------- ----------
Fund share transactions (Note 5)
Class A................................................... 1,503,651 1,545,520
Class B................................................... 1,138,431 565,794
Class C................................................... 109,902 --
---------- ----------
Net increase resulting from Fund share transactions..... 2,751,984 2,111,314
---------- ----------
TOTAL INCREASE IN NET ASSETS................................ 3,453,126 2,005,208
NET ASSETS
Beginning of period....................................... 2,698,643 693,435
---------- ----------
END OF PERIOD............................................. $6,151,769 $2,698,643
========== ==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 80
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
CLASS A YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
--------------------- ----------------
1996 1995 1994
SELECTED PER SHARE DATA ------ ------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.88 $ 8.37 $ 10.00
------ ------- --------
Income (loss) from investment operations
Net investment income(a).................................. .01 .01 --
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.66 (1.45) (1.63)
------ ------- --------
Total from investment operations........................ 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.............................. $ 8.51 $ 6.88 $ 8.37
====== ======= ========
Total return(%)............................................. 24.22(c) (17.28)(c) (16.10)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $4,016 $ 2,015 $ 571
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 2.55 2.61 2.20(d)
Without expense reimbursement(%)(e)....................... 4.89 9.26 16.22(d)
Ratio of net investment income(%)(a)........................ .24 .22 .21(d)
Portfolio turnover rate(%).................................. 20 45 82(d)
Average commission rate(f).................................. $.0002 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
CLASS B YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
--------------------- ----------------
1996 1995 1994
SELECTED PER SHARE DATA ------ ------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.88 $ 8.37 $ 10.00
------ ------- --------
Income (loss) from investment operations
Net investment loss(a).................................... (.03) (.02) (.01)
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.63 (1.47) (1.62)
------ ------- --------
Total from investment operations........................ 1.60 (1.49) (1.63)
------ ------- --------
Net asset value, end of period.............................. $ 8.48 $ 6.88 $ 8.37
====== ======= ========
Total return(%)............................................. 23.26(c) (17.90)(c) (16.20)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,025 $ 684 $ 122
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 3.33 3.36 2.95(d)
Without expense reimbursement(%)(e)....................... 5.67 10.01 16.97(d)
Ratio of net investment loss to average net assets(%)(a).... (.54) (.53) (.54)(d)
Portfolio turnover rate(%).................................. 20 45 82(d)
Average commission rate(f).................................. $.0002 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 81
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT)
TO DECEMBER 31,
----------------
1996
SELECTED PER SHARE DATA ----------------
<S> <C>
Net asset value, beginning of period........................ $ 7.96
--------
Income from investment operations
Net investment loss(a).................................... (.02)
Net realized and unrealized gain on investment
transactions............................................ .55
--------
Total from investment operations........................ .53
--------
Less distributions
From net realized gain.................................... .03
--------
Total distributions..................................... .03
--------
Net asset value, end of period.............................. $ 8.46
========
Total return(%)............................................. 6.66(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 111
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 3.46(d)
Without expense reimbursement(%)(e)....................... 5.80(d)
Ratio of net investment loss to average net assets(%)(a).... (.68)(d)
Portfolio turnover rate(%).................................. 20
Average commission rate(f).................................. $ .0002
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Annualized.
(e) Beginning in 1995, total expenses include any fees paid
indirectly. The ratio of expenses to average net assets with
expense reimbursement has been restated for 1995.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 82
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996,
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 earned foreign source dividends of $108,235. These dividends were
subject to withholding tax in the amount of $5,008. The Fund intends to elect to
pass through to its shareholders their proportionate share of such taxes.
Shareholders may apply their proportionate share of such foreign taxes paid as
either a tax credit or itemized deduction.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities 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 cumula-
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
tive 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 year, custody fees were reduced by $15,167 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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $10,932.
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
$7,251, $13,229 and $317 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 $9,954, $4,049 and $140 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 321,787 $ 2,648,064 442,664 $ 2,994,237
Issued on reinvestment of
distributions................ 1,568 13,506 834 5,772
Repurchased................... (144,190) (1,157,919) (219,064) (1,454,489)
-------- ----------- -------- -----------
Net increase.................. 179,165 $ 1,503,651 224,434 $ 1,545,520
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 164,935 $ 1,349,112 86,962 $ 581,025
Repurchased................... (25,510) (210,681) (2,256) (15,231)
-------- ----------- -------- -----------
Net increase.................. 139,425 $ 1,138,431 84,706 $ 565,794
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
----------------------
CLASS C SHARES AMOUNT
- ------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 13,400 $ 111,758
Issued on reinvestment of
distributions................ 5 42
Repurchased................... (236) (1,898)
-------- -----------
Net increase.................. 13,169 $ 109,902
======== ===========
</TABLE>
<PAGE> 84
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Latin America Strategy Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVLAX123196
<PAGE> 85
DECEMBER 31, 1996 IVY FUNDS
IVY NEW CENTURY FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Market Commentary:
The Ivy New Century Fund performed well in 1996, outperforming its most
relevant benchmarks-the Morgan Stanley Capital International (MSCI) Emerging
Markets "Free" Index and its Lipper Analytical Services' peer group. For the
twelve months ended December 31, 1996 the Fund's total return on a net asset
value basis was 11.83%. This compares to 6.03% for the MSCI index and 11.21% for
its peer group. (For the Fund's total return with sales charge, and performance
commentary, please refer to the following page)
The Fund's greatest concentration of equities is in the high-growth
nations of Asia (52%) where our research confirms economies are growing at
double and triple the rates of the world's more mature nations. The largest
single country investment is in Hong Kong (21%). We believe its transition to
Chinese rule should go very smoothly as China will take every step to protect
its own investments in Hong Kong and to show the world it can manage on par with
the British. Additionally, without good relations with Hong Kong, China risks
losing access to much needed foreign direct investment and the possibility of
peacefully integrating Taiwan. Taiwan, an economy almost twice the size of Hong
Kong, is an important manufacturing center whose significance should not be
overlooked.
As for other Asian countries, we believe the "Asian Miracle" is not
over. Rather, we believe declining growth rates are primarily cyclical and not a
sudden end to the region's growth prospects. After three years of above- trend
growth, we believe this cyclical down-turn is necessary and expect regional
economies to re-emerge with improving fundamentals.
According to our research, prospects for Latin America are improving
as a result of broad-based economic restructuring at various stages of
development in each of the major Latin American countries. The Ivy New Century
Fund holds 23% of its assets in Latin America with the highest concentration
divided between Argentina, Brazil and Chile (5%, 6% and 8% respectively).
In Argentina, the current recovery is being led by export growth and
investment, rather than consumer spending. We see this as an indication that
recovery will be healthy and sustainable. Brazil remains one of the most
attractive Latin American markets in terms of corporate earnings growth and
valuations. And Chile, which is furthest along the economic reform curve, is
clearly one of the best managed countries in the region. The Ivy New Century
Fund remains underweight in Mexico (1%), where we believe valuations have yet to
reflect the true risk to investors.
We maintain our conviction that growth rates among the world's emerging
economies should, surpass those in the more developed world in the years to
come. Predicted low interest rates and low inflation in the US should be a
steadying force and may actually precipitate the redirection of investments
toward high-growth nations. Investors with longer term horizons and in pursuit
of higher returns should consider that historically there has been a direct
relationship between economic growth and stock market returns.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 86
IVY NEW CENTURY FUND PERFORMANCE COMMENTARY
With investor sentiment improving, the Ivy New Century Fund performed well in
1996. For the twelve months ended December 31, 1996 the Fund's total return was
11.83% as compared to 6.03% for the MSCI Emerging Markets "Free" Index. In the
Lipper universe of diversified emerging market funds, the average fund returned
11.21% for the same period. Country selection and respective weightings in the
Fund contributed to its strong performance. For example, Hong Kong, which
represents 22% of the Ivy New Century Fund was up 28.9% in 1996; the Fund's
allocation to Eastern and Central Europe (8%), where markets across the region
were strong, was also a factor.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (11/94) OF A $10,000
INVESTMENT
CHART
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy New Century Fund
will fluctuate and at redemption may be worth more or less than the amount of
the original investment.
The Morgan Stanley Emerging Markets "Free" index is an unmanaged index of stocks
which assumes reinvestment of dividends and, unlike Fund returns, does not
reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
ONE- AND TWO-YEAR CUMULATIVE PERFORMANCE
CHART
The chart above reflects performance at Net Asset Value.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
IVY NEW CENTURY FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C***
Average Annual
Total Return Average Annual Total Return
-------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
-------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
1 Yr. 5.40% 4.98% 5.95% 10.95% 5.61% 10.61%
- -----------------------------------------------------------------------------------
B: B: B: B:
(.81)% .57% (3.47)% (2.12)%
C: C: C: C:
Since Inception (1.39)% (4.10)% .73% 1.73% .63% 1.63%
- -----------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 87
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 95.8% SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
AFRICA -- 5.2%
- -----------------------------
SOUTH AFRICA -- 5.2%
Anglo American Corporation
S.A........................ 6,900 $ 379,851
Nampak Ltd................... 13,700 54,478
Rembrandt Group Ltd.......... 15,000 133,886
South African Breweries
Ltd........................ 14,735 373,297
----------
941,512
----------
ASIA/PACIFIC -- 51.9%
- -----------------------------
CHINA -- 2.1%
Huaneng Power International,
Inc. ADR*.................. 1,200 27,000
Inner Mongolia Erdos Cashmere
Products Co. 'B'........... 64,000 40,320
Qingling Motors Company
Ltd........................ 67,000 37,030
Shanghai Dazhong Taxi Company
'B'........................ 56,400 46,586
Shanghai Diesel Engine Co.
Ltd. 'B'*.................. 81,200 38,489
Shanghai Posts &
Telecommunications
Equipment 'B'.............. 43,000 18,146
Shanghai Shangling Electric
Appliances Co. Ltd. 'B'.... 101,600 44,094
Shenzen Konka Electronic
Group
Limited -- 'B'............. 42,900 48,529
Tingyi (Cayman Islands)
Holding Co.*............... 128,000 33,510
Zhenhai Refining and Chemical
Co. Limited................ 100,000 36,846
----------
370,550
----------
HONG KONG -- 21.2%
C.P. Pokphand................ 400,000 156,432
Cheung Kong (Holdings) Ltd... 47,000 417,744
Citic Pacific................ 29,000 168,339
Esprit Asia Holdings Ltd..... 350,000 154,977
Gold Peak Industries......... 306,000 209,670
Guangdong Investments........ 302,000 290,873
Guangdong Tannery Ltd*....... 9,600 2,420
HSBC Holdings................ 17,441 373,172
Hong Kong Telecommunications
Ltd........................ 11,700 190,125
Jardine Strategic............ 109,062 394,804
Jardine Strategic
Warrants*.................. 562 225
Li & Fung.................... 376,000 332,980
National Mutual Asia Ltd..... 228,000 216,652
New World Development Company
Ltd........................ 63,000 425,566
Peregrine Investment Holdings
Ltd........................ 121,000 207,272
Peregrine Investment Holdings
Ltd. Warrants*............. 14,900 4,768
Union Bank of Hong Kong
Ltd........................ 218,000 274,790
----------
3,820,809
----------
INDONESIA -- 3.5%
Astra
International -- Foreign
Registered................. 29,000 79,788
Bank Dagang Nasional
Indonesia.................. 86,250 87,619
PT Citatah -- Foreign
Registered*................ 65,000 45,397
PT Matahari Putra
Prima -- Foreign
Registered................. 73,000 84,974
PT Mulia
Industrindo -- Foreign
Registered................. 119,950 124,393
PT Telekomunikasi
Indonesia -- Foreign
Registered................. 46,000 79,344
PT Tempo Scan
Pacific -- Foreign
Registered................. 46,000 84,698
Semen Gresik -- Foreign
Registered................. 12,000 38,603
----------
624,816
----------
ISRAEL -- 1.9%
Koor Industries Ltd.......... 20,200 343,400
----------
KOREA -- 4.3%
Hana Bank.................... 1,708 $ 25,384
Hyundai Motor Company Ltd.
GDR........................ 6,362 47,715
Hyundai Motor Company Ltd.
GDR 144A................... 500 3,750
Keum Kang Development Ind.
Company*................... 3,800 62,472
Korea Electric Power
Corporation................ 10,400 213,200
Pohang Iron & Steel Ltd.
ADR........................ 9,800 198,450
Samsumg Electronics.......... 2,000 107,629
Samsung Electronics
Co. -- GDR*................ 31 1,259
Samsung Electronics
Co. -- GDR 144A REGD....... 662 12,247
Shinhan Bank................. 1,270 20,383
Ssangyong Oil Refining Co.
Ltd........................ 3,600 78,770
----------
771,259
----------
MALAYSIA -- 4.8%
Arab Malaysian Corporation
Berhad*.................... 15,000 74,836
Arab Malaysian Finance
Foreign.................... 29,000 161,908
DCB Holdings Berhad.......... 22,400 76,721
Genting Berhad............... 16,000 110,235
Land & General Berhad........ 32,000 76,658
Lion Land Berhad*............ 100,000 103,346
London & Pacific Insurance
Company Berhad............. 7,200 44,759
Malayan Banking Berhad....... 4,000 44,348
Technology Resources
Industries Berhad*......... 54,000 106,482
Tenaga Nasional Berhad....... 14,000 67,076
----------
866,369
----------
PHILIPPINES -- 3.0%
Bacnotan Cement
Corporation*............... 180,000 92,395
Benpres Holdings Corp.
GDR*....................... 15,000 112,500
Metropolitan Bank & Trust
Company.................... 4,500 111,217
Philippine National Bank..... 8,900 105,751
Universal Robina
Corporation................ 201,000 112,728
----------
534,591
----------
SINGAPORE -- 2.6%
Clipsal Industries Limited... 56,000 203,840
DBS Land Limited............. 26,000 95,724
Elec & Eltek International
Co. Ltd.................... 23,000 87,400
Jardine Matheson Holdings
Ltd........................ 13,500 89,100
----------
476,064
----------
TAIWAN -- 3.1%
ROC Taiwan Fund*............. 25,000 256,250
Taiwan Fund Inc.............. 13,750 305,938
----------
562,188
----------
THAILAND -- 5.3%
Asia Credit Company PLC...... 21,100 84,350
Bank of Ayudhya Ltd.......... 43,450 102,524
Bangkok Bank Public Company
Ltd........................ 9,500 91,888
Dhana Siam Finance &
Securities Public Company
Ltd........................ 32,000 76,131
Krung Thai Bank Public
Company Limited............ 34,300 66,219
Krung Thai Thanakit PLC...... 24,000 61,310
Nava Finance & Securities
Public Company Limited..... 35,000 48,118
Robinson Department Store
Public Company
Limited -- Foreign
Registered................. 104,000 201,794
Siam Cement Public Co. Ltd.
(The)...................... 3,300 103,479
Siam Makro Public Company
Limited -- Foreign
Registered................. 29,800 125,522
----------
961,335
----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 88
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
VIETNAM -- 0.1%
Beta Vietnam Fund*........... 1,850 $ 15,262
Beta Vietnam Fund
Warrants*.................. 370 925
The Vietnam Fund Limited*.... 1,100 9,075
----------
25,262
----------
EUROPE -- 13.3%
- -----------------------------
AUSTRIA -- 0.5%
Julius Meinl International
AG......................... 3,000 85,797
----------
CZECH REPUBLIC -- 2.1%
CKD Praha Holding a.s.*...... 4,600 69,098
Komercni Banka a.s.*......... 900 74,901
Komercni Banka I.F.*......... 1,300 32,849
Restitucni Invest Fund*...... 1,000 31,071
SPT Telekom a.s.............. 200 24,871
Skoda Plzen a.s.*............ 2,000 70,883
Zivnobanka -- Investicni
Fond....................... 4,400 74,982
----------
378,655
----------
FRANCE -- 0.5%
Lyonnaise Des Eaux S.A....... 749 69,573
Schneider S.A.*.............. 609 28,103
----------
97,676
----------
GERMANY -- 0.1%
Volkswagen AG................ 40 16,547
----------
HUNGARY -- 1.9%
BorsodChem Rt GDR*........... 6,000 147,900
Pick Szeged Rt............... 3,200 189,446
----------
337,346
----------
POLAND -- 0.3%
Bank Rozwoju Eksportu S.A.... 1,550 46,600
----------
PORTUGAL -- 2.3%
Companhia De Seguros Mundial
Confianca S.A.*............ 8,000 79,871
Investec-Consultoria
Internacional S.A.*........ 2,100 64,928
Lusomundo SGPS S.A.*......... 5,800 66,723
Lusomundo SGPS S.A. Preferred
Shares..................... 800 7,297
Portugal Telecom S.A. ADR.... 4,200 118,650
Sonae Industria E
Investimentos.............. 2,400 75,903
----------
413,372
----------
RUSSIA -- 2.5%
LUKoil Holding ADR........... 6,500 303,875
Mosenergo Sponsored ADR
144A....................... 5,200 152,750
----------
456,625
----------
SPAIN -- 0.8%
Telefonica de Espana ADR..... 2,200 152,350
----------
SWITZERLAND -- 1.4%
Holderbank Financiere Glarus
AG Bearer.................. 283 201,492
Nestle AG Registered......... 49 52,441
----------
253,933
----------
TURKEY -- 0.9%
Cimentas A.S................. 224,690 23,915
Otokar Otobus Karoseri....... 455,000 69,485
Turkiye Garanti Bankasi
A.S........................ 1,422,000 64,490
----------
157,890
----------
NORTH AMERICA -- 2.0%
- -----------------------------
MEXICO -- 0.6%
Banacci Series 'B'*.......... 7,200 15,055
Banacci Series 'L'*.......... 587 1,116
Cementos de Mexico S.A.
'B'........................ 3,600 13,994
Grupo Mexicano Series 'L'
ADS*....................... 1,400 2,275
Grupo Posadas S.A. -- 'A'*... 83,785 43,106
Telefonos de Mexico S.A. ADR
Class L.................... 1,000 33,000
----------
108,546
----------
UNITED STATES -- 1.4%
Amway Asia Pacific Ltd....... 1,700 $ 72,037
Basic Petroleum
International, Ltd......... 2,400 79,200
Semi-Tech Corporation........ 18,000 66,319
The Singer Company NV........ 1,300 29,088
----------
246,644
----------
SOUTH AND CENTRAL
AMERICA -- 23.4%
- -----------------------------
ARGENTINA -- 5.4%
Acindar Industria Argentina
S.A.*...................... 60,000 84,015
Bansud S.A.*................. 14,200 170,146
CIADEA S.A.*................. 47,960 227,850
Cia Naviera Perez
Compancciones 'B'.......... 18,920 133,031
Disco S.A. ADR*.............. 2,600 73,450
Inversiones y
Representaciones S.A.
(IRSA)..................... 22,000 70,632
Quilmes Industrial S.A....... 12,400 113,150
YPF S.A. Sponsored ADR....... 4,100 103,525
----------
975,799
----------
BRAZIL -- 6.1%
Aracruz Celulose S.A. ADR.... 7,700 63,525
Banco Nacional S.A........... 2,100,000 --(a)
Brasmotor S.A................ 360,000 99,952
Casa Anglo Brasileiras
S.A.*...................... 700,000 21,220
Centrais Electricas
Brasileiras S.A.
(Electrobras) -- B......... 138,000 51,264
Centrais Electricas de Santa
Catarina S.A. -- CELESC.... 25,000 23,338
Companhia Cimento Portland
Itau....................... 180,000 63,223
Companhia Energetica de Minas
Gerais (CEMIG)............. 800,000 27,254
Companhia Energetica de Sao
Paulo -- CESP.............. 900,000 35,087
Companhia Paranaense de
Energia -- Copel........... 2,200,000 23,289
Companhia Paulista de Forca e
Luz -- CPFL................ 270,000 31,960
Companhia Paulista de Forca e
Luz -- CPFL Rights*........ 1,568 54
Companhia Siderurgica de
Tubarao.................... 4,900,000 75,497
Electricidade de Sao Paulo
S.A. -- Eletropaulo........ 250,000 36,931
Itabanco..................... 266,000 115,196
Marcopolo S.A. -- B.......... 400,000 66,981
OSA S.A...................... 5,200,000 28,550
Petrobras.................... 610,000 97,156
Refripar S.A.*............... 24,000,000 54,278
Tam Transport Aereos......... 1,000,000 55,336
Telecomunicacoes Brasileiras
S.A. (Telebras) ADR........ 1,600 122,400
----------
1,092,491
----------
CHILE -- 7.7%
A.F.P. Provida S.A. ADR...... 2,000 37,500
Antofagasta Holdings PLC..... 10,700 62,257
Banco Santander Chile
Sponsored ADR.............. 2,000 30,000
Chilgener S.A. ADR........... 2,700 56,362
Embotelladora Andina S.A.
Sponsored ADR.............. 3,400 103,700
Empresa Nacional Electricidad
S.A. Sponsored ADR......... 4,900 75,950
Genesis Chile Fund........... 16,937 622,435
Laboratorio Chile ADR........ 4,000 66,000
Santa Isabel S.A. ADR........ 6,000 135,750
Sociedad Quimica y Minera de
Chile ADR.................. 1,400 75,775
Vina Concha y Toro S.A.
ADR........................ 5,500 129,250
----------
1,394,979
----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 89
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------------------------------
<S> <C> <C>
COLOMBIA -- 2.2%
Banco Ganadero S.A. ADR.... 4,700 $ 123,962
Banco Industrial Colombiano
ADR...................... 8,400 174,300
Cementos Diamante ADR
144A..................... 8,200 106,600
-----------
404,862
-----------
PANAMA -- 0.3%
Panamerican Beverages,
Inc -- A................. 1,200 56,250
-----------
PERU -- 1.7%
Banco Wiese ADR............ 18,800 110,450
CPT Telefonica del Peru
S.A. -- 'B'*............. 60,000 111,660
Credicorp Ltd.............. 4,890 90,465
-----------
312,575
-----------
TOTAL EQUITY SECURITIES
(Cost -- $16,312,592).... 17,287,092
-----------
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE CORPORATE BONDS -- 0.6% PRINCIPAL VALUE
- ----------------------------------------------------------------
<S> <C> <C>
(IRSA) "Parcks" 144A
Floating Rate, 4.50%,
07/04/03................. $ 60,000 $ 59,775
Piltel International
Holding Corp., 1.75%,
07/17/06................. 50,000 49,250
-----------
TOTAL CORPORATE BONDS
(Cost -- $110,000)....... 109,025
-----------
TOTAL INVESTMENTS -- 96.4%
(Cost -- $16,422,592)(b)... 17,396,117
OTHER ASSETS, LESS
LIABILITIES -- 3.6%...... 651,025
-----------
NET ASSETS -- 100%......... $18,047,142
===========
</TABLE>
ADR -- American Depository Receipt
ADS -- American Depository Share
GDR -- Global Depository Receipt
NV -- Non-voting
* Non-income producing security.
(a) Security valued in good faith by the Valuation Committee of the
Board of Trustees. The cost of this security at December 31, 1996
aggregated $42,742. See Note 1 of the Notes to the Financial
Statements.
(b) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation...................... $2,014,700
Gross unrealized depreciation...................... (1,041,175)
----------
Net unrealized appreciation.................... $ 973,525
==========
</TABLE>
Purchases and sales of securities other than short-term obligations
aggregated $15,413,487 and $2,700,980, respectively, for the period
ended December 31, 1996.
(See Notes to Financial Statements)
<PAGE> 90
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $16,422,592)...... $17,396,117
Cash........................................................ 602,356
Receivables
Fund shares sold.......................................... 61,644
Dividends and interest.................................... 32,166
Deferred organization expenses.............................. 27,929
Other assets................................................ 4,660
-----------
Total assets.............................................. 18,124,872
-----------
LIABILITIES
Payables
Investments purchased..................................... 31,309
Management fee............................................ 14,759
12b-1 service and distribution fees....................... 8,849
Other payables to related parties......................... 7,727
Accrued expenses............................................ 15,086
-----------
Total liabilities......................................... 77,730
-----------
NET ASSETS.................................................. $18,047,142
===========
CLASS A
Net asset value and redemption price per share
($9,924,633/981,082 shares outstanding)................... $ 10.12
===========
Maximum offering price per share ($10.12 X 100/94.25)*...... $ 10.74
===========
CLASS B
Net asset value and offering price per share
($6,268,911/624,281 shares outstanding)**................. $ 10.04
===========
CLASS C
Net asset value and offering price per share
($1,853,598/184,186 shares outstanding)**................. $ 10.06
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $17,120,124
Accumulated net realized loss on investments.............. (46,396)
Net unrealized appreciation on investments and foreign
currency transactions................................... 973,414
-----------
NET ASSETS.................................................. $18,047,142
===========
</TABLE>
*On sales of more than $50,000 the offering price is reduced.
**Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
Investment income
Dividends, net of $10,373 foreign taxes withheld.......... $213,717
Interest.................................................. 1,594
--------
215,311
--------
Expenses
Management fee............................................ $109,125
Transfer agent............................................ 25,994
Administrative services fee............................... 10,912
Custodian fees............................................ 54,121
Blue Sky fee.............................................. 22,521
Auditing and accounting fees.............................. 14,436
Shareholder reports....................................... 3,898
Amortization of organization expenses..................... 9,900
Fund accounting........................................... 25,951
Trustees' fees............................................ 4,750
12b-1 service and distribution fees....................... 56,539
Legal..................................................... 21,812
Other..................................................... 4,342
--------
364,301
Expenses reimbursed by manager............................ (67,600)
Fees paid indirectly...................................... (27,390)
--------
Net expenses............................................ 269,311
--------
NET INVESTMENT LOSS......................................... (54,000)
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (46,120)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 948,226
--------
Net gain on investment transactions..................... 902,106
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $848,106
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 91
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ (54,000) $ 1,544
Net realized gain (loss) on investments and foreign
currency transactions................................... (46,120) 36,055
Net unrealized appreciation during the period on
investments............................................. 948,226 112,073
----------- ----------
Net increase resulting from operations.................. 848,106 149,672
----------- ----------
Class A distributions
From net investment income................................ -- (1,544)
In excess of net investment income........................ (984) --
From net realized gain.................................... -- (28,547)
In excess of net realized gain............................ -- (9,760)
----------- ----------
Total distributions to Class A shareholders............. (984) (39,851)
----------- ----------
Class B distributions
In excess of net investment income........................ (623) --
From net realized gain.................................... -- (7,427)
----------- ----------
Total distributions to Class B shareholders............. (623) (7,427)
----------- ----------
Class C distributions
In excess of net investment income........................ (186) --
----------- ----------
Total distributions to Class C shareholders............. (186) --
----------- ----------
Fund share transactions (Note 4)
Class A................................................... 5,914,397 2,771,336
Class B................................................... 5,096,850 774,690
Class C................................................... 1,808,893 --
----------- ----------
Net increase resulting from Fund share transactions..... 12,820,140 3,546,026
----------- ----------
TOTAL INCREASE IN NET ASSETS................................ 13,666,453 3,648,420
NET ASSETS
Beginning of period....................................... 4,380,689 732,269
----------- ----------
END OF PERIOD............................................. $18,047,142 $4,380,689
=========== ==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 92
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
CLASS A YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
-------------------- ----------------
1996 1995 1994
SELECTED PER SHARE DATA ------ ------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.05 $ 8.64 $ 10.00
------ ------ --------
Income (loss) from investment operations
Net investment income (loss)(a)........................... (.02) .01 --
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.09 .54 (1.36)
------ ------ --------
Total from investment operations........................ 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.............................. $10.12 $ 9.05 $ 8.64
====== ====== ========
Total return(%)............................................. 11.83(b) 6.40(b) (13.50)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $9,925 $3,435 $ 611
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 2.45 2.55 2.20(d)
Without expense reimbursement(%)(e)....................... 2.82 7.18 20.74(d)
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. (.23) .24 .52(d)
Portfolio turnover rate(%).................................. 27 14 --
Average commission rate(f).................................. $.0018 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 1, 1994
CLASS B YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
------------------- ----------------
1996 1995 1994
SELECTED PER SHARE DATA ------ ----- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.05 $8.64 $ 10.00
------ ----- --------
Income (loss) from investment operations
Net investment loss(a).................................... (.06) (.02) --
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.05 .51 (1.36)
------ ----- --------
Total from investment operations........................ .99 .49 (1.36)
------ ----- --------
Less distributions
From net realized gain.................................... -- .08 --
------ ----- --------
Total distributions..................................... -- .08 --
------ ----- --------
Net asset value, end of period.............................. $10.04 $9.05 $ 8.64
====== ===== ========
Total return (%)............................................ 10.95(b) 5.62(b) (13.60)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $6,269 $ 945 $ 121
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 3.20 3.30 2.95(d)
Without expense reimbursement(%)(e)....................... 3.57 7.93 21.49(d)
Ratio of net investment loss to average net assets(%)(a).... (.98) (.51) (.23)(d)
Portfolio turnover rate(%).................................. 27 14 --
Average commission rate(f).................................. $.0018 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 93
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT)
TO DECEMBER 31,
----------------
1996
SELECTED PER SHARE DATA ----------------
<S> <C>
Net asset value, beginning of period........................ $ 9.89
------
Income from investment operations
Net investment loss(a).................................... (.02)
Net realized and unrealized gain on investment
transactions............................................ .19
------
Total from investment operations........................ .17
------
Net asset value, end of period.............................. $10.06
======
Total return(%)............................................. 1.73(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,854
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 3.16(d)
Without expense reimbursement(%)(e)....................... 3.53(d)
Ratio of net investment loss to average net assets(%)(a).... (.94)(d)
Portfolio turnover rate(%).................................. 27
Average commission rate(f).................................. $.0018
</TABLE>
(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 any fees paid
indirectly. The ratio of expenses to average net assets with
expense reimbursement has been restated for 1995.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(See Notes to Financial Statements)
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996,
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 earned foreign source dividends of $230,738. These dividends were
subject to withholding tax in the amount of $10,373. The Fund intends to elect
to pass through to its shareholders their proportionate share of such taxes.
Shareholders may apply their proportionate share of such foreign taxes paid as
either a tax credit or itemized deduction.
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. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to investments in foreign
denominated securities, passive foreign investment companies, and certain
securities sold at a loss. As a result, Net investment income (loss) and Net
realized gain (loss) on investments and foreign currency transactions for a
reporting period may
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 expenses. For the year, custody fees
were reduced by $27,390 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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $28,765.
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
$17,525, $35,654 and $3,360 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 $16,682, $8,634 and $678 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- --------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................ 770,476 $ 7,578,070 347,829 $3,107,775
Issued on reinvestment of
distributions.................. -- -- 4,320 38,927
Repurchased..................... (169,014) (1,663,673) (43,244) (375,366)
-------- ----------- ------- ----------
Net increase.................... 601,462 $ 5,914,397 308,905 $2,771,336
======== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- --------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................ 605,573 $ 5,942,047 95,175 $ 816,806
Issued on reinvestment of
distributions.................. 39 388 798 7,193
Repurchased..................... (85,800) (845,585) (5,547) (49,309)
-------- ----------- ------- ----------
Net increase.................... 519,812 $ 5,096,850 90,426 $ 774,690
======== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
-----------------------
CLASS C SHARES AMOUNT
- ------- -------- -----------
<S> <C> <C> <C> <C>
Sold............................ 186,226 $ 1,829,278
Issued on reinvestment of
distributions.................. 14 142
Repurchased..................... (2,054) (20,527)
-------- -----------
Net increase.................... 184,186 $ 1,808,893
======== ===========
</TABLE>
<PAGE> 96
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy New Century Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVCAX123196
<PAGE> 97
DECEMBER 31, 1996 (IVY FUNDS LOGO)
IVY MONEY MARKET FUND
MARKET COMMENTARY:
Overall, fixed income markets in 1996 were marked by unfulfilled
expectations and interest rate volatility. Following a quarter point decrease
in the discount rate in January 1996, there were several indicators pointing to
increased economic growth--increased wage pressure, higher petroleum and grain
prices, a strong dollar and full employment--and bond markets responded by
pushing interest rates higher.
Later in the year, market participants watched guardedly for inflation
to rear its head. However, US Gross Domestic Product (GDP) and the Consumer
Price Index (CPI) continued to reflect moderate growth which resulted in
interest rates coming down, only to rise again by year end.
Looking at the US economy, we expect to see continued moderate economic
growth with low and contained inflation. We believe the Federal Reserve Board
will tighten monetary policy if it perceives an inflationary threat from rising
labor costs. Labor costs, the primary factor that drives inflation, continue to
be pressured by the ongoing substitution of capital (in the form of technology)
for labor, in both the manufacturing and service industries. These costs have
been declining for the past ten years in developed markets and have just
recently begun to creep up. Tighter labor markets will result in higher wage
costs; however, we don't expect these higher costs to be passed down to
consumers.
We believe the more likely scenario will be corporate profitability
will fall victim to these higher costs. If labor costs increase too much,
companies always have the option of moving operations to a lower cost location
and/or continuing to automate. This scenario is more likely to happen in a
world of low trades barriers, which is the world we live in now. Additionally,
if the Federal Reserve Board were to perceive rising labor costs as a threat to
price stability, the financial markets would expect preemptive tightening by
the Federal Reserve Board. Higher interest rates resulting from this action
would dampen economic growth, which would ultimately send interest rates lower.
We expect interest rates to remain in a trading range over the next
year. And, we will continue our efforts to seek the best yield opportunities
for Ivy Money Market Fund.
IVY MANAGEMENT INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
<PAGE> 98
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMERCIAL PAPER -- 34.4% PRINCIPAL VALUE
- ------------------------------------------------------
<S> <C> <C>
Abbott Laboratories, 5.25%,
01/24/97................. $ 850,000 $ 849,876
Associates Corp. of North
America,
5.28%, 01/03/97.......... 700,000 697,741
Chevron Oil Finance
Company, 5.33%,
02/05/97................. 900,000 895,470
Clorox Co., 5.25%,
03/06/97................. 900,000 891,731
Colonial Pipeline Co.,
5.28%, 01/10/97.......... 800,000 799,061
General Electric Capital
Corp., 5.29%, 01/27/97... 900,000 896,694
Kellogg Co., 5.25%,
01/29/97................. 1,000,000 1,004,825
National Rural Utilities,
5.25%,
03/05/97................. 800,000 792,767
Prudential Funding Corp.,
5.30%, 01/06/97.......... 850,000 849,499
Yale University, 5.25%,
03/04/97................. 900,000 891,994
-----------
TOTAL COMMERCIAL PAPER
(Cost -- $8,569,658)..... 8,569,658
-----------
U.S. GOVERNMENT
AGENCIES AND
OBLIGATIONS -- 55.4%
- ---------------------------
Federal National Mortgage
Association, 5.25%,
01/02/97................. 7,100,000 7,100,000
Federal National Mortgage
Association, 5.45%,
01/15/97................. 1,700,000 1,696,654
Student Loan Marketing
Association, 4.76%,
01/02/97(a).............. 1,000,000 999,355
Tennessee Valley Authority,
5.16%, 01/22/97.......... $ 2,000,000 $ 1,994,267
U.S. Treasury Bill, 4.95%,
01/09/97................. 2,000,000 1,998,075
-----------
TOTAL U.S. GOVERNMENT
AGENCIES AND OBLIGATIONS
(Cost -- $13,788,351).... 13,788,351
-----------
TOTAL INVESTMENTS -- 89.8%
(Cost -- $22,358,009)(b)... 22,358,009
OTHER ASSETS, LESS
LIABILITIES -- 10.2%..... 2,549,042
-----------
NET ASSETS -- 100%......... $24,907,051
===========
</TABLE>
(a) Floating rate note; reflects variable rate as of the latest
reset date, December 17, 1996.
(b) Cost is the same for Federal income tax purposes.
(See Notes to Financial Statements)
<PAGE> 99
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $22,358,009)...... $22,358,009
Cash........................................................ 2,529,035
Receivables -- Manager for expense reimbursement............ 26,555
Other assets................................................ 25,766
-----------
Total assets.............................................. 24,939,365
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 4,296
Management fee............................................ 6,800
Other payables to related parties......................... 14,111
Accrued expenses............................................ 7,107
-----------
Total liabilities......................................... 32,314
-----------
Net assets.................................................. $24,907,051
===========
CLASS A
Net asset value, offering price, and redemption price per
share ($21,359,067/21,359,067 shares outstanding)......... $ 1.00
===========
CLASS B
Net asset value and offering price per share
($3,474,373/3,474,373 shares outstanding)*................ $ 1.00
===========
CLASS C
Net asset value and offering price per share ($73,611/73,611
shares outstanding)*...................................... $ 1.00
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $24,907,051
-----------
NET ASSETS.................................................. $24,907,051
===========
</TABLE>
* Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $1,065,070
----------
EXPENSES
Management fee............................................ $ 80,302
Transfer agent............................................ 109,444
Administrative services fee............................... 20,075
Custodian fees............................................ 15,865
Blue Sky fees............................................. 38,502
Auditing and accounting fees.............................. 11,428
Shareholder reports....................................... 4,983
Fund accounting........................................... 27,774
Trustees' fees............................................ 4,628
Legal..................................................... 31,132
Other..................................................... 25,496
----------
369,629
Expenses reimbursed by manager............................ (199,546)
----------
Net expenses............................................ 170,083
----------
NET INVESTMENT INCOME AND INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................................... $ 894,987
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 100
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income....................................... $ 894,987 $ 1,359,236
----------- -----------
Net increase resulting from operations...................... 894,987 1,359,236
----------- -----------
Distributions to shareholders from net investment income
Class A................................................... (794,505) (1,359,236)
Class B................................................... (95,901) --
Class C................................................... (4,581) --
----------- -----------
Total distributions to shareholders..................... (894,987) (1,359,236)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (3,249,695) (2,218,643)
Class B................................................... 3,474,373 --
Class C................................................... 73,611 --
----------- -----------
Net increase (decrease) resulting from fund share
transactions........................................... 298,289 (2,218,643)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 298,289 (2,218,643)
NET ASSETS
Beginning of period....................................... 24,608,762 26,827,405
----------- -----------
END OF PERIOD............................................. $24,907,051 $24,608,762
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 101
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
SELECTED PER SHARE DATA ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from investment operations
Net investment income(a).................................. .04 .05 .04 .02 .03
Less distributions
From net investment income................................ (.04) (.05) (.04) (.02) (.03)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return(%)............................................. 4.47 4.80 4.21 2.42 2.81
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $21,359 $24,609 $26,827 $25,782 $18,839
Ratio of expenses to average net assets
With expense reimbursement(%)............................. .86 .85 .85 .85 .85
Without expense reimbursement(%).......................... 1.86 1.39 1.24 1.56 1.45
Ratio of net investment income to average net
assets(%)(a).............................................. 4.47 4.91 3.29 2.22 2.75
</TABLE>
<TABLE>
<CAPTION>
CLASS B FOR THE YEAR ENDED
DECEMBER 31,
------------------
1996
SELECTED PER SHARE DATA ------------------
<S> <C>
Net asset value, beginning of period........................ $ 1.00
------
Income from investment operations
Net investment income(a).................................. .05
Less distributions
From net investment income................................ (.05)
------
Net asset value, end of period.............................. $ 1.00
======
Total return(%)............................................. 4.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $3,474
Ratio of expenses to average net assets
With expense reimbursement(%)............................. .77
Without expense reimbursement(%).......................... 1.77
Ratio of net investment income to average net
assets(%)(a).............................................. 4.57
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
CLASS C (COMMENCEMENT)
TO DECEMBER 31,
-------------------
1996
SELECTED PER SHARE DATA -------------------
<S> <C>
Net asset value, beginning of period........................ $ 1.00
------
Income from investment operations
Net investment income(a).................................. .03
Less distributions
From net investment income................................ (.03)
------
Net asset value, end of period.............................. $ 1.00
======
Total return(%)............................................. 4.78(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 74
Ratio of expenses to average net assets
With expense reimbursement(%)............................. .56(c)
Without expense reimbursement(%).......................... 1.56(c)
Ratio of net investment income to average net
assets(%)(a).............................................. 4.78(c)
</TABLE>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return.
(c) Annualized.
Note: The seven day yield as of December 31, 1996 was 4.38%. The
thirty day yield as of December 31, 1996 was 4.40%.
(See Notes to Financial Statements)
<PAGE> 102
NOTES TO FINANCIAL STATEMENTS
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
0.85% 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 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 IMSC a monthly fee plus certain out-of-pocket expenses. Such fees
and expenses of $99,400, $9,798 and $246 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>
YEAR ENDED YEAR ENDED
CLASS A DECEMBER 31, 1996 DECEMBER 31, 1995
- ------- ----------------- -----------------
<S> <C> <C>
Sold............................ 67,870,418 67,708,114
Issued on reinvestment of
distributions.................. 682,663 1,245,290
Repurchased..................... (71,802,776) (71,172,047)
----------- -----------
Net decrease.................... (3,249,695) (2,218,643)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FROM JANUARY 1, 1996
(COMMENCEMENT) TO
CLASS B DECEMBER 31, 1996
- ------- --------------------
<S> <C>
Sold.............................................. 24,768,901
Issued on reinvestment of distributions........... 68,338
Repurchased....................................... (21,362,866)
-----------
Net increase...................................... 3,474,373
===========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
CLASS C DECEMBER 31, 1996
- ------- --------------------
<S> <C>
Sold.............................................. 668,573
Issued on reinvestment of distributions........... 2,270
Repurchased....................................... (597,232)
-----------
Net increase...................................... 73,611
===========
</TABLE>
<PAGE> 103
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Money Market Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IMMFX123196
<PAGE> 104
DECEMBER 31, 1996 IVY FUNDS
IVY CHINA REGION FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
The Ivy China Region Fund performed well in 1996, returning 20.5% on a
net asset value basis. This compares to a total return of 11.1% for the Lipper
Analytical Services universe of Pacific ex-Japan funds. The performance of the
Ivy China Region Fund was driven by Hong Kong, which on average represented
about 50% of the Fund's assets in 1996 and was up 35% for the year. The Hang
Seng Index (Hong Kong) performed well on the back of a strong US stock market,
low US interest rates, improving corporate earnings in Hong Kong, and a gradual
change in the perception of investors of Hong Kong/China risk. (For the Fund's
total return with sales charge, and performance commentary, please refer to the
following page.)
The strategy for the Ivy China Region Fund remained unchanged
throughout the year. At year end, approximately 67% of its assets were invested
in Hong Kong, 16% in mainland Chinese companies, 6% in Taiwan, and the rest
(11%) in Southeast Asian companies selected for what we believe to be their
outstanding value or their exposure to the China region.
The Fund's investments in mainland China also performed well as local
investors aggressively participated in both Shanghai and Shenzhen markets. The
B-shares in Shanghai and Shenzhen also performed well. Peoples Republic of China
(PRC) investors, who found better value in foreign shares than their domestic
A-shares, bought B-shares throughout the year, driving prices higher. Also, as
China's credit policy loosened in 1996, investors were buying stocks in
anticipation of better corporate profits in the months ahead.
Elsewhere in Asia, recent reports of failing export growth have raised
concern the region, where export strength forms the backbone of economic policy,
may not only be losing competitiveness but may, in fact, be at the start of a
structural economic slowdown. Given the tremendous economic success Asia has
experienced in only 20 or 30 years, we believe it is unlikely progress will stop
here.
According to our research, the Likelihood of Asian countries making a
successful transition from low value-added manufacturing to high value-added
manufacturing has been increased by governmental leaders' greater emphasis on
education, the increasing requirement for technology transfer agreements by
corporations and economic policy makers' insistence on domestic savings programs
to fund future development. These factors, combined with the tremendous work
ethic found throughout the region, should allow Asia to continue on its
prosperous path.
We remain optimistic on the prospects for the China region. We believe
Hong Kong's transition back to Chinese rule on July 1, 1997 will be smooth and
investor sentiment should improve as the date approaches. Our research indicates
Hong Kong is still trading at a 30-40% discount to the rest of the region and we
believe this discount could narrow as investors increasingly perceive China as
an opportunity, not a threat. The combination of a price/earnings ratio
expansion from 13 to 20 (a level reached several times in the past 20 years when
optimism was high) and corporate earnings growth of at least 20% per annum could
make Hong Kong one of the best performing markets in the world in the coming
years.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 105
IVY CHINA REGION FUND PERFORMANCE COMMENTARY
For the twelve months ended December 31, 1996, the Ivy China Region Fund
outperformed the Lipper Analytical Services universe of Pacific ex-Japan funds.
The total return of the Fund was 20.5% as compared to 11.1% for the Lipper
universe. The Fund's outperformance is due primarily to the strong performance
of the markets of Hong Kong, China and Taiwan and its higher concentration of
investments in these three countries. The Lipper category is more broadly
diversified throughout the region.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (10/93) OF A $10,000
INVESTMENT
(GRAPH)
ONE- AND TWO-YEAR
CUMULATIVE PERFORMANCE
(GRAPH)
The chart above reflects performance at Net Asset Value.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
IVY CHINA REGION FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C***
Average Annual
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
1 Yr. 13.57% 13.22% 14.67% 19.67% 14.32% 19.30%
- ------------------------------------------------------------------------------------
B: B: B: B:
.28% 1.21% (.15)% .78%
C: C: C: C:
Since Inception .07% (.38)% 8.39% 9.39% 8.39% 9.39%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy China Region
Fund will fluctuate and at redemption may be worth more or less than the amount
of the original investment.
The International Finance Corporation China Region Index and the International
Finance Corporation China Region Index with Hong Kong are unmanaged indices and
assume the reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses. The IFC with Hong Kong represents the market cap weighting
of the IFC China index and includes the Hang Seng index. It is not possible to
invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
- --------------------------------------------------------------------------------
<PAGE> 106
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 100.6% SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
AMERICAS -- 0.4%
- ---------------------------
UNITED STATES -- 0.4%
Amway Asia Pacific Ltd..... 2,500 $ 105,938
-----------
ASIA / PACIFIC -- 100.2%
- ---------------------------
CHINA -- 15.8%
China Southern Glass
Co. -- Class B........... 305,890 189,822
Huaneng Power
International, Inc.
ADR*..................... 15,000 337,500
Inner Mongolia Erdos
Cashmere Products
Co. -- Class B........... 276,000 173,880
Qinling Motors Company
Ltd...................... 1,100,000 607,951
Shanghai Dazhong Taxi
Company -- Class B....... 390,000 322,140
Shanghai Diesel Engine Co.
Ltd. -- Class B*......... 648,000 307,152
Shanghai Erfangji Company
Limited -- Class B*...... 907,500 156,090
Shanghai Industrial Sewing
Machine Co. Ltd. -- Class
B........................ 600,000 114,000
Shanghai Narcissus Electric
Appliances Industrial
Company Ltd. -- Class
B*....................... 467,500 98,175
Shanghai Post & Telecom
Eq. -- Class B........... 393,000 165,846
Shanghai Shangling Electric
Appliances Co.
Ltd. -- Class B*......... 312,000 135,408
Shanghai Yaohua Pilkington
Glass Class B*........... 200,000 95,200
Shenzhen China
Bicycles -- Class B...... 865,800 376,094
Shenzhen Konka Electronics
Group Limited -- Class
B........................ 260,000 294,118
Tingyi (Cayman Island)
Holding Co.*............. 810,000 212,056
Zhenhai Refining and
Chemical Company
Limited.................. 900,000 331,610
-----------
3,917,042
-----------
HONG KONG -- 67.0%
Asia Satellite Telecom
ADR*..................... 4,000 93,500
C.P. Pokphand.............. 1,242,000 485,721
Chen Hsong Holdings*....... 450,000 273,433
Cheung Kong (Holdings)
Ltd...................... 123,000 1,093,246
Cheung Kong Infrastructure
Holdings*................ 36,000 95,410
China Travel International
Investment Hong Kong
Ltd...................... 762,000 337,408
China Travel International
Investment Hong Kong Ltd.
Warrants*................ 102,400 20,387
Citic Pacific Ltd.......... 161,000 934,571
Consoldiated Electric Power
Asia Ltd................. 375 880
Esprit Asia Holdings Ltd... 696,000 308,184
Founder Hong Kong Ltd.*.... 290,000 111,539
Giordano Holdings Ltd...... 476,000 406,154
Gold Peak Industries....... 923,000 632,437
Guangdong Investments...... 799,000 769,561
Guangdong Tannery Ltd.*.... 39,950 10,071
HSBC Holdings.............. 46,867 1,002,779
Hang Seng Bank............. 27,900 339,056
Henderson Land Development
Company Ltd.............. 52,000 524,370
Hong Kong & China Gas
Company Ltd.............. 186,000 359,496
Hong Kong Land Holdings
Ltd...................... 152,000 422,560
Hong Kong
Telecommunications
Limited.................. 299,600 482,226
Jardine International Motor
Holdings Co.............. 136,000 181,978
Jardine Strategic Holdings
Ltd...................... 100,250 362,905
Jardine Strategic Holdings
Warrants*................ 13,250 5,300
Johnson Electric Holdings
Ltd...................... 237,000 655,695
Kumagai Gumi (Hong Kong)
Ltd...................... 300,000 349,063
Kumagai Gumi (Hong Kong)
Ltd. Warrants*........... 60,000 25,598
Lamex Holdings............. 76,000 27,511
Li & Fung.................. 615,800 545,344
M.C. Packaging (Hong Kong)
Ltd...................... 648,000 $ 224,098
Manhattan Card Company
Ltd...................... 868,000 440,453
Melco International
Development Ltd.*........ 15,900 5,550
National Mutual Asia Ltd... 440,000 418,100
New World Development
Company Ltd.............. 80,000 540,401
New World Infrastructure
Ltd.*.................... 133 389
Peregrine Investment
Holdings Limited......... 262,000 448,804
Peregrine Investment
Holdings Limited
Warrants*................ 26,200 8,383
Realty Development 'A'..... 5,000 20,814
Semi-Tech (Global)......... 78,000 129,076
Shangri-La Asia Ltd........ 230,000 340,466
Sime Darby (Hong Kong)..... 92,000 115,966
Siu-Fung Ceramics Holdings,
Ltd.
(with 444,130 rights).... 1,110,327 81,821
Sun Hung Kai Properties
Ltd...................... 42,800 524,279
Swire Pacific Ltd Class
A........................ 59,500 567,308
Techtronic Industries Co... 1,888,000 280,698
Tsingtao Brewery Co. Ltd
Series H................. 600,000 228,830
Union Bank of Hong Kong
Ltd...................... 355,000 447,479
Wharf (Holdings) Ltd....... 80,000 399,225
Wo Kee Hong Holdings Ltd... 562,000 45,774
Wo Kee Hong Holdings Ltd
Warrants*................ 112,400 1,250
Yue Yuen Industrial
Holdings................. 1,146,000 437,065
-----------
16,562,612
-----------
INDONESIA -- 2.2%
Bank Niaga*................ 60,000 142,222
PT Astra International..... 28,000 77,037
PT Chareon Pokphand
Indonesia................ 48,000 42,413
Semen Gresik -- Foreign
Registered............... 84,000 270,222
-----------
531,894
-----------
KOREA -- 4.0%
Daewoo Corporation......... 400 3,051
Hyundai Motor Co, Ltd...... 2,500 66,233
Keum Kang Development Ind.
Company*................. 8,800 144,672
Korea Electric Power
Corporation.............. 6,300 183,300
Korea Fund Inc............. 10,100 151,500
L.G. Electronics (with 422
rights).................. 8,000 101,242
Pohang Iron & Steel Co.
Ltd...................... 2,000 114,831
Samsung Electronics
Co. -- GDR............... 640 11,840
Samsung Electronics
Co. -- GDR 144A
Registered*.............. 296 12,025
Samsung Electronics
Co. -- New Common........ 1,423 75,761
Samsung Heavy Industries... 509 5,268
Shinhan Bank............... 8,000 128,397
-----------
998,120
-----------
MALAYSIA -- 1.5%
Leader Universal
Holdings -- Class A...... 61,666 129,412
London & Pacific Insurance
Company.................. 38,200 237,473
-----------
366,885
-----------
SINGAPORE -- 2.0%
Clipsal Industries
Limited.................. 100,000 364,000
Elec & Eltek International
Co. Ltd.................. 35,000 133,000
-----------
497,000
-----------
TAIWAN -- 6.3%
ROC Taiwan Fund*........... 70,600 723,650
Taiwan Fund Inc............ 38,000 845,500
-----------
1,569,150
-----------
THAILAND -- 1.1%
Bank of Ayudhya -- Foreign
Registered............... 68,750 162,222
Krung Thai Bank Public
Company Limited.......... 50,000 96,529
-----------
258,751
-----------
</TABLE>
(See Notes to Financial Statements)
<PAGE> 107
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
VIETNAM -- 0.3%
The Vietnam Fund
Limited*................. 7,800 $ 64,350
-----------
TOTAL EQUITY SECURITIES
(Cost -- $23,362,298)(a)... 24,871,742
-----------
CONVERTIBLE CORPORATE
BONDS -- 0.9% PRINCIPAL
- --------------------------- -----------
Piltel International
Holding Corp., 1.75%,
07/17/06
(Cost -- $240,000)....... $ 240,000 236,400
-----------
TOTAL INVESTMENTS -- 101.5%
(Cost -- $23,602,298)(a)... 25,108,142
OTHER ASSETS, LESS
LIABILITIES -- (1.5%).... (374,601)
-----------
NET ASSETS -- 100%......... $24,733,541
===========
* Non-income producing security.
(a) Cost for Federal income tax purposes is
$23,773,646.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation based on cost for
Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $5,004,799
Gross unrealized depreciation...................... (3,670,303)
----------
Net unrealized appreciation.................... $1,334,496
==========
Purchases and sales of securities other than short-term obligations
aggregated $6,477,333 and $4,955,833, respectively, for the period
ended December 31, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 108
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $23,602,298)...... $25,108,142
Cash........................................................ 85,451
Receivables
Investments sold.......................................... 1,095,832
Fund shares sold.......................................... 16,086
Dividends and interest.................................... 30,597
Manager for expense reimbursement......................... 9,024
Other assets................................................ 26,325
-----------
Total assets.............................................. 26,371,457
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 183
Investments purchased..................................... 1,571,540
Fund shares repurchased................................... 1,506
Management fee............................................ 21,074
12b-1 service and distribution fees....................... 11,652
Other payables to related parties......................... 16,301
Accrued expenses............................................ 15,660
-----------
Total liabilities......................................... 1,637,916
-----------
NET ASSETS.................................................. $24,733,541
===========
CLASS A
Net asset value and redemption price per share
($15,289,612/1,484,596 shares outstanding)................ $ 10.30
===========
Maximum offering price per share ($10.30 X 100/94.25)*...... $ 10.93
===========
CLASS B
Net asset value and offering price per share
($8,994,683/875,128 shares outstanding)**................. $ 10.28
===========
CLASS C
Net asset value and offering price per share
($449,246/43,873 shares outstanding)**.................... $ 10.24
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $24,826,143
Accumulated net realized loss on investments.............. (1,598,521)
Net unrealized appreciation on investments and foreign
currency transactions................................... 1,505,919
-----------
NET ASSETS.................................................. $24,733,541
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 109
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $10,099 foreign taxes withheld.......... $ 582,858
Interest.................................................. 6,056
-----------
588,914
-----------
EXPENSES
Management fee............................................ $233,804
Transfer agent............................................ 105,576
Administrative services fee............................... 23,381
Custodian fees............................................ 32,492
Blue Sky fees............................................. 24,939
Auditing and accounting fees.............................. 14,186
Shareholder reports....................................... 5,750
Fund accounting........................................... 35,038
Trustees' fees............................................ 4,628
12b-1 service and distribution fees....................... 122,631
Legal..................................................... 22,799
Other..................................................... 18,880
-----------
644,104
Expenses reimbursed by manager............................ (65,675)
-----------
Net expenses............................................ 578,429
-----------
NET INVESTMENT INCOME....................................... 10,485
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (1,001,126)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 5,263,221
-----------
Net gain on investment transactions..................... 4,262,095
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 4,272,580
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 110
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 10,485 $ 269,887
Net realized loss on investments and foreign currency
transactions............................................ (1,001,126) (304,802)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 5,263,221 370,010
----------- -----------
Net increase resulting from operations.................. 4,272,580 335,095
----------- -----------
Class A distributions
From net investment income................................ (46,722) (209,871)
In excess of net investment income........................ (30,983) --
In excess of net realized gain............................ -- (20,020)
----------- -----------
Total distributions to Class A shareholders............. (77,705) (229,891)
----------- -----------
Class B distributions
From net investment income................................ -- (60,016)
In excess of net realized gain............................ -- (12,354)
----------- -----------
Total distributions to Class B shareholders............. -- (72,370)
----------- -----------
Class C distributions
In excess of net investment income........................ (3,703) --
----------- -----------
Total distributions to Class C shareholders............. (3,703) --
----------- -----------
Fund share transactions (Note 5)
Class A................................................... (231,044) (329,623)
Class B................................................... 597,206 (459,143)
Class C................................................... 416,039 --
----------- -----------
Net increase (decrease) resulting from Fund share
transactions........................................... 782,201 (788,766)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 4,973,373 (755,932)
NET ASSETS
Beginning of period....................................... 19,760,168 20,516,100
----------- -----------
END OF PERIOD............................................. $24,733,541 $19,760,168
=========== ===========
ACCUMULATED NET INVESTMENT INCOME........................... $ -- $ 1,382
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 111
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
CLASS A (COMMENCEMENT)
FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
--------------------------------- ----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA ------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.58 $ 8.61 $ 11.55 $ 10.00
------- ------- ------- --------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .03 .14 .05 (.01)
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.74 (.01) (2.91) 1.57
------- ------- ------- --------
Total from investment operations........................ 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.............................. $ 10.30 $ 8.58 $ 8.61 $ 11.55
======= ======= ======= ========
Total return(%)............................................. 20.50(c) 1.59(c) (24.88)(c) 15.65(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $15,290 $12,855 $13,180 $ 8,371
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 2.20 2.20 2.20 1.98(d)
Without expense reimbursement(%).......................... 2.48 2.73 2.76 2.45(d)
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .32 1.61 .55 (.91)(d)
Portfolio turnover rate(%).................................. 22 25 4 --
Average commission rate(e).................................. $ .0050 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
CLASS B (COMMENCEMENT)
FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
--------------------------------- ----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA ------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.58 $ 8.61 $ 11.55 $ 10.00
------- ------- ------- --------
Income (loss) from investment operations
Net investment income (loss)(a)........................... (.04) .08 (.02) (.02)
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.74 (.02) (2.92) 1.57
------- ------- ------- --------
Total from investment operations........................ 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.............................. $ 10.28 $ 8.58 $ 8.61 $ 11.55
======= ======= ======= ========
Total return(%)............................................. 19.67(c) .83(c) (25.45)(c) 15.50(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 8,995 $ 6,905 $ 7,336 $ 3,565
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 2.95 2.95 2.95 2.74(d)
Without expense reimbursement(%).......................... 3.23 3.48 3.51 3.20(d)
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. (.43) .86 (.20) (1.66)(d)
Portfolio turnover rate(%).................................. 22 25 4 --
Average commission rate(e).................................. $ .0050 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 112
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT)
TO DECEMBER 31,
----------------
1996
SELECTED PER SHARE DATA ----------------
<S> <C>
Net asset value, beginning of period........................ $ 9.44
------
Income from investment operation
Net investment loss(a).................................... --
Net realized and unrealized gain on investment
transactions............................................ .89
------
Total from investment operations........................ .89
------
Less distributions
In excess of net investment income........................ .09
------
Total distributions..................................... .09
------
Net asset value, end of period.............................. $10.24
======
Total return(%)............................................. 9.39(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 449
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 2.71(d)
Without expense reimbursement(%).......................... 2.99(d)
Ratio of net investment loss to average net assets(%)(a).... (.19)(d)
Portfolio turnover rate(%).................................. 22
Average commission rate(e).................................. $.0050
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Annualized.
(e) 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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 113
NOTES TO FINANCIAL STATEMENTS
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
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996, there were no
such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund earned foreign source dividends of $594,890. These dividends were
subject to withholding tax in the amount of $10,099. The Fund intends to elect
to pass through to its shareholders their proportionate share of such taxes.
Shareholders may apply their proportionate share of such foreign taxes paid as
either a tax credit or itemized deduction.
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. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
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> 114
NOTES TO FINANCIAL STATEMENTS (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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $11,936.
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
$37,038, $84,812 and $781 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 $67,527, $37,886 and $163 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,537,034 $ 14,512,385 1,416,644 $ 11,904,966
Issued on reinvestment of
distributions........... 6,616 68,426 23,477 201,191
Repurchased.............. (1,556,713) (14,811,855) (1,473,931) (12,435,780)
---------- ------------ ---------- ------------
Net decrease............. (13,063) $ (231,044) (33,810) $ (329,623)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 998,886 $ 9,546,623 575,358 $ 5,085,871
Issued on reinvestment of
distributions........... -- -- 7,766 66,561
Repurchased.............. (928,212) (8,949,417) (631,083) (5,611,575)
---------- ------------ ---------- ------------
Net increase (decrease).. 70,674 $ 597,206 (47,959) $ (459,143)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------- ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 50,214 $ 474,632
Issued on reinvestment of
distributions........... 324 3,314
Repurchased.............. (6,665) (61,907)
---------- ------------
Net increase............. 43,873 $ 416,039
========== ============
</TABLE>
<PAGE> 115
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy China Region Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVCRX123196
<PAGE> 116
DECEMBER 31, 1996 IVY FUNDS
IVY EMERGING GROWTH FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
Although 1996 was once again a good year for domestic stocks, it was
one in which investors favored large capitalization stocks rather than the
smaller, high-growth companies Ivy Emerging Growth Fund focuses on. The Wall
Street Journal recently reported, "Because IBM, Intel, Microsoft, Coke, GE, and
Cisco have a massive stock market valuation of $640 billion combined, their
performance overshadows that of the average stock. Birinyi Associates calculates
that without its 50 largest stocks, the S&P 500 would have been up an ordinary
9.4%. . . Within this environment, the Ivy Emerging Growth Fund had a total
return of 18.52%, on a net asset value basis, for the twelve months ended
December 31, 1996. For the same period the Fund's two most relevant benchmarks,
the Russell 2000 Index and NASDAQ Industrials returned 16.49% and 15.03%
respectively; the S&P 500 returned 23.22%. (For the Fund'S total return with
sales charge and performance commentary, please refer to the following page.)
Our research indicates the division in performance between the large-
and small-capitalization sectors has significantly reduced the premium being
paid for superior earnings growth. As the pendulum swings back, we believe
emerging growth stocks could go through a catch-up period, provided the broader
market is able to retain its recent gains.
An important factor that helped the Ivy Emerging Growth Fund's
performance was the decision to increase the weighting in technology stocks
during the second half of the year. At the beginning of 1996, it became apparent
there was excess inventory for personal computers and semiconductors, and
particularly memory circuits. This excess diminished earnings visibility and
pressured valuations, even in sectors that were unaffected by the inventory
cycle. However, by mid- to late-summer there was evidence of a gradual
improvement, and many of our new additions benefited as the earnings outlook
picked up.
The health care sector proved to be a more difficult area. Following a
strong year in 1995, most biotech stocks languished in 1996. However, we remain
optimistic on this sector because of the large number of new compounds in late
stage clinical trials. We have and continue to use a basket approach to mitigate
company-specific risk. Medical device stocks and health care information stocks
also faced tough sledding as a number fell short of investor expectations.
The investment thesis of the Fund remains constant: we believe over the
long term, companies that deliver superior earnings growth will provide above
average investment returns. Hence, the portfolio is composed of companies our
research indicates should have earnings growth of 25% or higher over the next
several years. We believe the smaller companies will provide this kind of growth
because it's easier to grow from a small base. For example, a new product that
generates $10 million in sales will have a significant impact on a small
company, but practically gets lost in the rounding with a Fortune 100 company.
Another advantage of smaller companies is that they are often more flexible and
quicker to respond to change. Our goal is to build a portfolio of opportunistic
companies that are out in front of change, taking advantage of it rather than
being victimized by it. We believe this approach, if properly executed, should
reward investors who have a long-term perspective and can accept above-average
volatility.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 117
IVY EMERGING GROWTH FUND PERFORMANCE COMMENTARY
Within an environment where the focus of investors was on larger capitalization
stocks, the Ivy Emerging Growth Fund outperformed two relevant benchmarks -- the
Russell 2000 and NASDAQ Industrials indices. For the twelve months ended
December 31, 1996, the total return of the Fund was 18.52% as compared to 16.49%
for the Russell 2000 and 15.03% for the NASDAQ Industrials. The Fund's
outperformance of these indices can be attributed primarily to an increased
allocation to the technology sector during the second half of 1996.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (4/93) OF A $10,000
INVESTMENT
(GRAPH)
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy Emerging Growth
Fund will fluctuate and at redemption may be worth more or less than the amount
of the original investment.
The S&P 500, NASDAQ and Russell 2000 indices are unmanaged indices of stocks
which assume reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B and Class C shares will vary relative to
that of Class A shares based on differences in their respective sales loads and
fees.
ONE-, TWO-, THREE-YEAR AND SINCE
INCEPTION CUMULATIVE PERFORMANCE
CHART
The chart above reflects performance at Net Asset Value.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
IVY EMERGING GROWTH FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C***
Average Annual
Total Return Average Annual Total Return
--------------------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb. w/o Reimb.
--------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
1 Yr. 11.71% 11.71% 12.65% 17.65% 12.65% 17.65%
- ------------------------------------------------------------------------------------
B: B: B: B:
17.44% 18.10% 17.38% 18.04%
C: C: C: C:
Since Inception 26.69% 26.65% (5.48)% (4.48)% (5.48)% (4.48)%
- ------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 118
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCKS -- 95.5% SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
BIOTECHNOLOGY -- 6.8%
Alkermes, Inc.*............. 20,800 $ 483,600
Autoimmune Inc.*............ 18,300 281,363
Biochem Pharma, Inc.*....... 17,100 859,275
Centocor, Inc.*............. 8,000 286,000
Connective Therapeutics,
Inc.*..................... 12,000 99,000
Depotech Corp.*............. 7,000 114,625
Ergo Science Corporation*... 24,000 315,000
Geltex Pharmaceuticals,
Inc.*..................... 25,300 613,525
Gliatech, Inc.*............. 22,200 172,050
Liposome Company Inc.*...... 94,200 1,801,575
NeoRx Corporation*.......... 38,300 157,987
NeoRx Corporation Units*.... 23,000 14,375
Neurex Corporation*......... 37,000 629,000
Neurocrine Biosciences,
Inc.*..................... 13,500 135,000
Vertex Pharmaceuticals
Inc.*..................... 6,700 269,675
ViroPharma Inc.*............ 26,500 231,875
-----------
6,463,925
-----------
BUSINESS & FINANCIAL
SERVICES -- 16.3%
American Residential
Services, Inc.*........... 1,300 35,262
Applied Graphics
Technologies, Inc.*....... 35,000 1,019,375
BISYS Group, Inc.*.......... 14,188 525,843
CCC Information Services
Group..................... 7,700 123,200
CFI Proservices Inc.*....... 21,800 310,650
Capital One Financial
Corporation............... 10,500 378,000
Capmac Holdings*............ 8,900 294,812
Children's Comprehensive
Services, Inc.*........... 46,600 611,625
Cohr, Inc.*................. 21,300 575,100
Copart, Inc.*............... 15,600 204,750
Corrections Corp. of
America*.................. 31,400 961,625
Cotelligent Group, Inc.*.... 27,000 651,375
Credit Acceptance Corp.*.... 10,800 253,800
Daisytek International
Corporation*.............. 17,700 725,700
Desktop Data, Inc.*......... 23,200 446,600
Employee Solutions, Inc.*... 20,000 410,000
Fair Issac and Company
Inc....................... 13,600 532,100
Federal Agricultural
Mortgage Corp. -- Class
C*........................ 14,350 441,262
Gartner Group, Inc. -- Class
A*........................ 14,000 545,125
Green Tree Financial Corp... 11,200 432,600
Intelligroup, Inc.*......... 9,100 100,100
Investment Technology Group,
Inc.*..................... 28,000 539,000
Lightbridge, Inc.*.......... 42,300 362,194
Litchfield Financial Corp... 46,727 689,223
Meta Group, Inc.*........... 6,600 178,200
Metris Companies Inc.*...... 3,300 79,200
Oxford Resources
Corp. -- Class A*......... 7,200 222,300
PMT Services, Inc.*......... 20,000 350,000
Profit Recovery Group
International, Inc.
(The)*.................... 47,300 756,800
Quickresponse Services
Inc.*..................... 20,500 584,250
Rental Service Corp.*....... 10,400 286,000
Sykes Enterprises,
Inc.*(a).................. 16,500 618,750
United Waste Systems
Inc.*..................... 20,800 715,000
Whittman-Hart, Inc.*........ 20,600 527,875
-----------
15,487,696
-----------
COMPUTER SOFTWARE -- 14.7%
Applix, Inc.*............... 13,500 295,312
Aspect Development, Inc.*... 11,600 316,100
Baan Company, NV(a)......... 11,500 399,625
CBT Group PLC ADR*.......... 10,700 580,475
Carnegie Group, Inc.*....... 74,200 519,400
Checkfee Corporation*....... 29,100 498,338
Citrix Systems, Inc.*....... 8,800 343,750
Dendrite International,
Inc.*..................... 31,400 259,050
Indus Group, Inc.*.......... 19,600 504,700
Informix Corp.*............. 4,500 91,688
Interlink Computer Sciences,
Inc.*..................... 82,000 1,373,500
JDA Software Group, Inc.*... 11,900 339,150
Legato Systems, Inc.*....... 11,000 358,875
McAfee Associates, Inc.*.... 11,625 511,500
MySoftware Company*......... 24,900 105,825
Optika Imaging Systems,
Inc.*..................... 106,700 535,167
Peoplesoft, Inc.*........... 11,000 527,313
Planning Sciences
International PLC*........ 31,700 $ 380,400
Project Software &
Development, Inc.*........ 10,250 434,344
Rational Software
Corporation*.............. 6,900 272,981
Red Brick Systems, Inc.*.... 17,000 391,000
Remedy Corporation*......... 4,200 225,750
Renaissance Solutions,
Inc.*..................... 10,200 456,450
SPSS, Inc.*................. 10,800 301,050
SQA, Inc.*.................. 5,300 176,225
Saville Systems Ireland
ADR*...................... 9,800 398,125
Security Dynamics
Technologies, Inc.*....... 9,400 296,100
Segue Software*............. 10,100 184,325
Select Software Tools
ADR*...................... 25,000 456,250
Systemsoft Corporation*..... 37,800 562,275
Veritas Software Corp.*..... 20,100 999,975
Versant Object Technology
Corp.*.................... 26,800 499,150
Viasoft, Inc.*.............. 6,800 321,300
White Pine Software,
Inc.*..................... 16,000 116,000
-----------
14,031,468
-----------
CONSUMER PRODUCTS &
SERVICES -- 5.8%
CHS Electronics, Inc.*...... 41,200 705,550
Central European Media
Enterprises Ltd.*(a)...... 14,700 466,725
Comcast UK Cable Partners
Ltd.*..................... 29,000 395,125
Cuc International, Inc.*.... 33,648 799,140
Extended Stay America,
Inc.*..................... 26,400 531,300
International Speedway
Corp. --
Class A*.................. 34,000 697,000
Metro Networks, Inc.*....... 18,200 459,550
Northland Cranberries,
Inc. -- Class A........... 12,600 289,800
Premier Parks, Inc.*........ 14,000 449,750
Sylvan Learning Systems,
Inc.*..................... 19,050 542,925
TRM Copy Centers Corp.*..... 22,400 218,400
-----------
5,555,265
-----------
HEALTHCARE -- 18.3%
Access Health, Inc.*........ 14,300 639,925
Advanced Health
Corporation*.............. 23,400 292,500
Aksys, Ltd.*................ 12,500 107,813
American Medical
Response*................. 14,300 464,750
American Medserve Corp.*.... 7,900 122,450
Biofield Corporation........ 13,200 202,950
Biopsys Medical, Inc.*...... 13,000 282,750
Cambridge Heart, Inc.*...... 15,300 172,125
Cardiovascular Dynamics..... 23,500 305,500
Compdent Corporation*....... 16,400 578,100
Cytec Corporation*.......... 11,200 302,400
Digene Corporation*......... 23,400 245,700
EP Medsystems Inc.*......... 40,500 187,312
Endosonics Corporation*..... 10,900 166,225
Endovascular Technologies,
Inc.*..................... 16,800 163,800
Express Scripts,
Inc. -- Class A*.......... 10,800 387,450
FemRx, Inc.*................ 18,200 81,900
First Commonwealth*......... 26,400 521,400
Health Management
Associates, Inc.*......... 24,000 540,000
Health Systems Design
Corp.*.................... 17,600 156,200
Heartstream, Inc.*.......... 14,400 180,000
HemaSure, Inc.*............. 27,200 170,000
Home Health Corporation of
America*.................. 19,300 211,094
Horizon Mental Health
Management, Inc.*......... 27,300 757,575
IDX Systems Corporation*.... 10,500 300,563
Intelligent Medical Imaging,
Inc.*..................... 19,700 123,125
Medpartners/Mullikin,
Inc.*..................... 9,700 203,700
MedQuist, Inc.*............. 4,600 113,850
Molecular Devices
Corporation*.............. 47,400 737,663
NCS Healthcare Inc. -- Class
A*........................ 8,600 250,475
Norland Medical Systems,
Inc.*..................... 18,900 127,575
Omnicare, Inc............... 6,400 205,600
Orthodontic Centers of
America, Inc.*............ 66,000 1,056,000
OrthoLogic Corp.*........... 18,000 101,250
PhyCor, Inc.*............... 10,250 290,844
Physician Support Systems,
Inc.*..................... 47,300 910,525
Physicians Resource Group,
Inc.*..................... 17,000 301,750
Renal Treatment Centers
Inc.*..................... 34,800 887,400
Serologicals Corporation*... 24,400 863,150
Spine-Tech, Inc.*........... 13,300 332,500
Sunquest Information
Systems, Inc.*............ 17,300 246,525
</TABLE>
(See Notes to Financial Statements)
<PAGE> 119
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ------------------------------------------------------
<S> <C> <C>
Total Renal Care Holdings,
Inc.*..................... 20,600 $ 746,750
United Dental Care, Inc.*... 11,500 349,312
Uromed Corporation*......... 54,000 526,500
Vencor, Inc.*............... 8,400 265,650
VidaMed, Inc.*.............. 52,600 677,225
Vivus, Inc.*................ 16,000 580,000
-----------
17,437,851
-----------
MISCELLANEOUS
TECHNOLOGY -- 3.9%
Conductus, Inc.*............ 22,900 148,850
Gemstar International Group
Ltd.*..................... 43,300 757,750
IKOS Systems, Inc.*......... 31,200 624,000
Periphonics Corp.*.......... 21,000 614,250
RadiSys Corporation*........ 13,500 658,125
Synopsys, Inc.*............. 16,000 740,000
Trident International,
Inc.*..................... 10,800 175,500
Truevision, Inc.*........... 9,600 25,200
-----------
3,743,675
-----------
NETWORK & TELECOMMUNICATION
EQUIPMENT -- 8.2%
3Com Corporation*........... 10,000 733,750
ACT Networks, Inc.*......... 11,800 430,700
Aware, Inc.*................ 39,200 396,900
Cabletron Systems Inc.*..... 9,200 305,900
Cascade Communications
Corp.*.................... 5,400 297,675
Cisco Systems, Inc.*........ 10,100 642,613
DSP Communications, Inc.*... 22,200 430,125
Digital Microwave
Corporation*.............. 7,600 211,850
Harmonic Lightwaves,
Inc.*..................... 24,100 370,538
P-COM, Inc.................. 16,100 476,962
Pairgain Technologies,
Inc.*..................... 16,600 505,263
Premisys Communications,
Inc.*..................... 13,000 438,750
Proxim, Inc.*............... 36,200 832,600
QUALCOMM, Inc.*............. 11,100 442,612
Sawtek Inc.*................ 14,900 590,413
VideoServer, Inc.*.......... 10,300 437,750
Xylan Corporation*.......... 9,600 271,200
-----------
7,815,601
-----------
PHARMACEUTICALS -- 3.8%
Anesta Corp................. 31,100 598,675
Calypte Biomedical Corp.*... 26,800 221,100
Cephalon, Inc.*............. 10,000 205,000
Cima Labs Inc.*............. 18,000 110,250
Dura Pharmaceuticals,
Inc.*..................... 9,900 472,725
Ethical Holdings
Ltd -- ADR*(a)............ 18,500 107,531
Genzyme Corporation*........ 7,400 160,950
NABI, Inc.*................. 26,630 233,012
Penederm Inc.*.............. 28,800 356,400
Sepracor, Inc.*............. 27,200 452,200
Sonus Pharmaceuticals,
Inc.*..................... 24,500 728,875
-----------
3,646,718
-----------
RESTAURANTS -- 1.0%
Boston Chicken, Inc.*....... 9,100 326,462
Planet Hollywood
International, Inc.*...... 31,800 628,050
-----------
954,512
-----------
RETAIL -- 5.6%
Barnes & Noble, Inc.*....... 9,500 256,500
CompUSA, Inc.*.............. 26,000 536,250
Corporate Express, Inc.*.... 26,860 790,691
Gadzooks, Inc.*............. 17,000 310,250
Hot Topic, Inc.*............ 15,400 304,150
Just for Feet, Inc.*........ 15,700 412,125
K & G Men's Center, Inc.*... 13,900 361,400
Party City Corp.*........... 16,800 285,600
Petco Animanl Supplies,
Inc.*..................... 20,700 429,525
PetsMart Inc.*.............. 19,700 430,938
Sports Authority, Inc.*..... 12,600 274,050
West Marine Inc.*........... 11,800 333,350
Whole Foods Market, Inc.*... 12,600 283,500
Wild Oats Markets Inc.*..... 14,600 270,100
-----------
5,278,429
-----------
SEMICONDUCTORS &
EQUIPMENT -- 6.4%
ASM Lithography Holding
NV*(a).................... 8,000 $ 398,500
Altera Corporation*......... 7,500 545,156
ANADIGICS, Inc.*............ 7,700 302,225
Analog Devices*............. 22,200 752,025
Atmel Corporation*.......... 5,200 172,250
Benchmarq Microelectronics,
Inc.*..................... 26,500 566,437
Elantec Semiconductor,
Inc.*..................... 11,500 50,492
Etec Systems, Inc.*......... 8,700 332,775
GaSonics International
Corporation*.............. 9,600 98,400
Integrated Process Equipment
Corp.*.................... 10,000 180,000
Lattice Semiconductor
Corporation*.............. 14,000 644,000
Maxim Integrated Products,
Inc.*..................... 13,600 588,200
Pri Automation, Inc.*....... 4,800 218,400
S3 Incorporated*............ 29,400 477,750
Trident Microsystems,
Inc.*..................... 23,000 388,125
Ultratech Stepper, Inc.*.... 14,300 339,625
-----------
6,054,360
-----------
TELECOMMUNICATION
SERVICES -- 3.3%
Aerial Communications,
Inc.*..................... 32,000 260,000
Arch Communications Group,
Inc.*..................... 33,800 316,875
Cellularvision USA, Inc.*... 20,900 146,300
Faxsav Incorporated*........ 26,000 143,000
Omnipoint Corporation*...... 16,700 321,475
Paging Network, Inc.*....... 42,900 654,225
Transaction Network
Services, Inc.*........... 27,000 310,500
Western Wireless Corp.*..... 40,200 557,775
WinStar Communications,
Inc.*..................... 22,500 472,500
-----------
3,182,650
-----------
TRANSPORTATION -- 1.4%
Genesee & Wyoming
Inc. -- Class A*.......... 18,900 656,775
Railtex Inc.*............... 19,800 499,950
Wisconsin Central
Transportation Corp.*..... 5,400 213,975
-----------
1,370,700
-----------
TOTAL COMMON STOCKS
(COST -- $76,951,291)..... 91,022,850
-----------
CONVERTIBLE BONDS -- 1.0% PRINCIPAL
- ---------------------------- ----------
Boston Chicken Inc., 0.00%,
06/01/15.................. $1,300,000 414,375
RAC Financial 144A, 7.25%,
08/15/03.................. 384,000 505,440
-----------
TOTAL CONVERTIBLE BONDS
(COST -- $793,483)........ 919,815
-----------
TOTAL INVESTMENTS -- 96.5%
(COST --$77,744,774)(B)... 91,942,665
OTHER ASSETS, LESS
LIABILITIES -- 3.5%....... 3,339,790
-----------
NET ASSETS -- 100%.......... $95,282,455
===========
</TABLE>
ADR -- American 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 December 31, 1996, net unrealized appreciation
based on cost for financial statement and Federal
income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation....... $20,458,092
Gross unrealized depreciation....... (6,260,201)
-----------
Net unrealized appreciation..... $14,197,891
===========
</TABLE>
Purchases and sales of securities other than
short-term obligations aggregated $89,665,015 and
$48,155,112, respectively, for the period ended
December 31, 1996.
(See Notes to Financial Statements)
<PAGE> 120
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $77,744,774)...... $91,942,665
Cash........................................................ 3,626,918
Receivables
Fund shares sold.......................................... 265,067
Dividends and interest.................................... 10,589
Other assets................................................ 27,271
-----------
Total assets.............................................. 95,872,510
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 10,675
Investments purchased..................................... 406,439
Fund shares repurchased................................... 11,288
Management fee............................................ 66,977
12b-1 service and distribution fees....................... 45,645
Other payables to related parties......................... 38,300
Accrued expenses............................................ 10,731
-----------
Total liabilities......................................... 590,055
-----------
NET ASSETS.................................................. $95,282,455
===========
CLASS A
Net asset value and redemption price per share
($55,943,565/2,108,267 shares outstanding)................ $ 26.54
===========
Maximum offering price per share ($26.54 X 100/94.25)*...... $ 28.16
===========
CLASS B
Net asset value and offering price per share
($35,321,104/1,341,255 shares outstanding)**.............. $ 26.33
===========
CLASS C
Net asset value and offering price per share
($4,017,786/152,842 shares outstanding)**................. $ 26.29
===========
NET ASSETS CONSIST OF:
Capital paid-in............................................. $81,084,564
Net unrealized appreciation on investments.................. 14,197,891
-----------
NET ASSETS.................................................. $95,282,455
===========
</TABLE>
*On sales of more than $50,000 the offering price is reduced.
**Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 121
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 17,415
Interest.................................................. 326,958
-----------
344,373
-----------
EXPENSES
Management fee............................................ $657,579
Transfer agent............................................ 206,456
Administrative services fee............................... 77,362
Custodian fees............................................ 18,263
Blue Sky fees............................................. 34,322
Auditing and accounting fees.............................. 15,404
Shareholder reports....................................... 7,514
Fund accounting........................................... 89,558
Trustees' fees............................................ 4,572
12b-1 service and distribution fees....................... 381,001
Legal..................................................... 22,558
Other..................................................... 34,401
-----------
Total expenses.......................................... 1,548,990
-----------
NET INVESTMENT LOSS......................................... (1,204,617)
-----------
Net realized and unrealized gain on investment transactions
Net realized gain on
Investments............................................. 6,351,407
Options................................................. 632,731
Net unrealized appreciation during the period on
investments............................................. 3,324,364
-----------
Net gain on investments..................................... 10,308,502
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 9,103,885
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 122
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $(1,204,617) $ (591,193)
Net realized gain on investments and options.............. 6,984,138 4,445,572
Net unrealized appreciation during the period on
investments............................................. 3,324,364 8,767,787
----------- -----------
Net increase resulting from operations................ 9,103,885 12,622,166
----------- -----------
Total distributions from net realized gain
Class A................................................. (4,081,929) (2,804,408)
Class B................................................. (2,600,466) (1,010,602)
Class C................................................. (300,431) --
----------- -----------
Total distributions paid to shareholders.............. (6,982,826) (3,815,010)
----------- -----------
Fund share transactions (Note 4)
Class A................................................. 13,997,698 11,258,356
Class B................................................. 21,421,702 6,867,492
Class C................................................. 4,300,951 --
----------- -----------
Net increase resulting from Fund share transactions... 39,720,351 18,125,848
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 41,841,410 26,933,004
NET ASSETS
Beginning of period....................................... 53,441,045 26,508,041
----------- -----------
END OF PERIOD............................................. $95,282,455 $53,441,045
=========== ===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 123
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE MARCH 3, 1993
CLASS A YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
------------------------------------- -----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA ------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 24.12 $ 18.38 $ 17.93 $ 10.00
------- ------- ------- --------
Income from investment operations
Net investment loss....................................... (.35) (.24) (.24)(a) (.07)(a)
Net realized and unrealized gain on investment
transactions............................................ 4.84 7.90 .82 8.29
------- ------- ------- --------
Total from investment operations........................ 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.............................. $ 26.54 $ 24.12 $ 18.38 $ 17.93
======= ======= ======= ========
Total return(%)............................................. 18.52(b) 42.07(b) 3.29(b) 45.33(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $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(%).......................... 1.76 1.95 2.22 2.33(d)
Ratio of net investment loss to average net assets(%)....... (1.31) (1.39) (1.72)(a) (1.30)(a)(d)
Portfolio turnover rate(%).................................. 68 86 67 41(d)
Average commission rate(f).................................. $ .0601 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE OCTOBER 23, 1993
CLASS B YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
------------------------------------- -----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA ------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 24.12 $ 18.38 $ 17.93 $ 18.21
------- ------- ------- --------
Income (loss) from investment operations
Net investment loss....................................... (.40) (.35) (.29)(a) (.04)(a)
Net realized and unrealized gain on investment
transactions............................................ 4.68 7.85 .74 .03
------- ------- ------- --------
Total from investment operations........................ 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.............................. $ 26.33 $ 24.12 $ 18.38 $ 17.93
======= ======= ======= ========
Total return(%)............................................. 17.65(b) 41.03(b) 2.51(b) (.05)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $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(%).......................... 2.52 2.70 2.97 3.08(d)
Ratio of net investment loss to average net assets(%)....... (2.07) (2.14) (2.47)(a) (2.05)(a)(d)
Portfolio turnover rate(%).................................. 68 86 67 41(d)
Average commission rate(f).................................. $ .0601 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 124
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT) TO
DECEMBER 31,
-----------------
1996
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $ 29.69
--------
Loss from investment operations
Net investment loss....................................... (.14)
Net realized and unrealized loss on investment
transactions............................................ (1.19)
--------
Total from investment operations........................ (1.33)
--------
Less distributions
From net realized gain.................................... 2.07
--------
Total distributions..................................... 2.07
--------
Net asset value, end of period.............................. $ 26.29
========
Total return(%)............................................. (4.48)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 4,018
Ratio of expenses to average net assets without expense
reimbursement(%).......................................... 2.52(d)
Ratio of net investment loss to average net assets(%)....... (2.07)(d)
Portfolio turnover rate(%).................................. 68
Average commission rate(f).................................. $ .0601
</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 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.
(See Notes to Financial Statements)
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996, there were no
such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may write (sell) 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.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$6,982,826 as capital gain dividends for its taxable year ended December 31,
1996.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $69,834.
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
$130,888, $240,031 and $10,082 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 $137,457, $66,252 and $2,747 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- ------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold...................... 1,862,227 $ 52,011,901 1,087,467 $ 25,161,914
Issued on reinvestment of
distributions............ 143,930 3,817,355 110,103 2,622,547
Repurchased............... (1,533,721) (41,831,558) (730,995) (16,526,105)
---------- ------------ --------- ------------
Net increase.............. 472,436 $ 13,997,698 466,575 $ 11,258,356
========== ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold...................... 1,132,341 $ 31,331,078 566,894 $ 12,816,329
Issued on reinvestment of
distributions............ 87,254 2,290,484 37,942 903,781
Repurchased............... (458,058) (12,199,860) (297,917) (6,852,618)
---------- ------------ --------- ------------
Net increase.............. 761,537 $ 21,421,702 306,919 $ 6,867,492
========== ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
-------------------------
CLASS C SHARES AMOUNT
- ------- ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 156,680 $ 4,416,153
Issued on reinvestment of
distributions............ 6,883 180,948
Repurchased............... (10,721) (296,150)
---------- ------------
Net increase.............. 152,842 $ 4,300,951
========== ============
</TABLE>
<PAGE> 127
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Emerging Growth Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVEGX123196
<PAGE> 128
DECEMBER 31, 1996 IVY FUNDS
IVY INTERNATIONAL FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
MARKET COMMENTARY:
For the twelve months ended December 31, 1996 the total return of the
Ivy International Fund was 19.72% on a net asset value basis. For the same
period the Morgan Stanley Capital International Europe, Australasia and Far East
(MSCI EAFE) Index was up 6.05%. (For the Fund's total return with sales charge,
and market commentary, please refer to the following page)
The Ivy International Fund continues to focus on the mature European
economies (56% of the portfolio) where many markets achieved record levels in
1996. These included the United Kingdom and France which account for 14% and 10%
of the portfolio respectively. We believe the stage is set for corporate profit
growth to pick up in Europe. In Sweden, which represents 9% of the Fund,
earnings growth is expected to be strong.
The latter part of 1996 was also dominated by a strong US dollar. The
strength of the dollar meant good performance for exporters, such as Michelin,
Canon and BAT (British American Tobacco), whose earnings streams have a dollar
component.
Fiscal discipline dominated the discussions for European countries
trying to meet the Maastricht requirements for membership into the European
Monetary Union. This resulted in lower interest rates and inflation, and lower
government deficits pervading Europe. Unemployment remained high, however. The
Fund manager believes France may have the greatest leverage to lower interest
rates.
In the Far East, the Ivy International Fund was buoyed by the strong
performance of the Hong Kong market. Hong Kong, which represents 4% of the Fund,
was bolstered by a strong US stock market, low US interest rates and improving
corporate earnings. Additionally, investors' perception of the risk of investing
in Hong Kong, as the date nears for relinquishment of British sovereignty of
Hong Kong to the Chinese, became more positive. The Fund holds only a 7%
allocation in Japan, where the focus is on companies with a strong exporting
base.
The Fund manager remains positive on the outlook for LUKoil, the
Russian oil company. He believes LUKoil still represents good value as analysts
are pointing out the per barrel price of oil through a share of LUKoil is about
$0.90 as compared to $6 or $7 per barrel for Exxon.
The Fund maintains a 5% allocation in Latin America (2% in Argentina
and 3% in Brazil). In Argentina, economic recovery is being led by export growth
and investment rather than consumer spending. We believe this will lead to a
healthier, more sustainable recovery. Brazil remains one of the most attractive
Latin markets in terms of earnings growth and valuations.
In 1997, the US market came out of the starting blocks in strong
fashion and yet we don't believe the upward momentum will be sustainable
throughout the year. We are not looking for a major correction, although
valuations appear to be extended and corporate profit growth could slow. While
there are no guarantees, at the same time, we believe the stage is set in Europe
and elsewhere around the world to provide investors with the opportunity for
greater returns.
IVY MANAGEMENT, INC.
<TABLE>
<S> <C> <C> <C>
BOARD OF TRUSTEES LEGAL COUNSEL TRANSFER AGENT MANAGER
John S. Anderegg, Jr. Dechert Price & Rhoads Ivy Mackenzie Ivy Management, Inc.
Paul H. Broyhill Boston, MA Services Corp. Boca Raton, FL
Keith J. Carlson P.O. Box 3022
Stanley Channick OFFICERS Boca Raton, FL 33431-0922 DISTRIBUTOR
Frank W. DeFriece, Jr. Michael G. Landry, Chairman 1-800-777-6472 Ivy Mackenzie
Roy J. Glauber Keith J. Carlson, President Distributors, Inc.
Michael G. Landry James W. Broadfoot, Vice President AUDITORS Via Mizner Financial Plaza
Joseph G. Rosenthal C. William Ferris, Coopers & Lybrand L.L.P. 700 South Federal Highway
Richard Silverman Secretary/Treasurer Fort Lauderdale, FL Boca Raton, FL 33432
J. Brendan Swan
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
[LOGO] IVY MACKENZIE
<PAGE> 129
IVY INTERNATIONAL FUND PERFORMANCE COMMENTARY
The Ivy International Fund was up 19.72% for the twelve months ended December
31, 1996 as compared to 6.05% for the MSCI EAFE Index. The Fund's outperformance
is primarily attributable to its higher concentration in European economies and
Hong Kong, and its underweighting in Japan as compared to EAFE. In addition to
country selection, company selection was another factor contributing to the
Fund's outperformance in 1996.
PERFORMANCE COMPARISONS OF THE FUND
SINCE INCEPTION (4/86) OF A $10,000
INVESTMENT
CHART
All charts and tables reflect past results and assume reinvestment of dividends
and distributions from capital gains. Future results will, of course, be
different. The investment return and principal value of the Ivy International
Fund will fluctuate and at redemption may be worth more or less than the amount
of the original investment.
The Morgan Stanley Capital International Europe, Australasia, Far East (EAFE)
index is an unmanaged index of stocks which assumes reinvestment of dividends
and, unlike Fund returns, does not reflect any fees or expenses. It is not
possible to invest in an index. The Lipper Average International Index
represents the performance of the average international fund as measured by
Lipper Analytical Services, Inc.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of the Fund's Class B, Class C and Class I shares will vary
relative to that of Class A shares based on differences in their respective
sales loads and fees.
ONE-, THREE-, FIVE- AND TEN-YEAR
CUMULATIVE PERFORMANCE
CHART
The chart above reflects performance without the maximum
sales charge of 5.75%.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
FOR PERIOD ENDING 12/31/96
Class A*-with sales charge Class B** & C*** Class I
Average Annual
Total Return Average Annual Total Return
-----------------------------------------------------------------------
w/ w/o w/ w/o w/ w/o
Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
-----------------------------------------------------------------------
w/ CDSC w/o w/ CDSC w/o
CDSC CDSC
-------------------------------
B: B: B: B:
1 Yr. 12.84% 12.84% 13.76% 18.76% 13.76% 18.76% 20.06% 20.06%
- ---------------------------------------------------------------------------------------------
5 Yr. 14.42% 14.40% -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------
10 Yr. 14.77% 14.76% -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------
B: B: B: B:
12.09% 12.82% 12.09% 12.82%
C: C: C: C:
Since Inception 14.90% 14.89% 10.45% 11.45% 10.45% 11.45% 13.34% 13.34%
- ---------------------------------------------------------------------------------------------
</TABLE>
*Class A performance figures include the maximum sales charge of 5.75%.
**Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 5%.
***Class C performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC) up to a maximum of 1%.
Total returns in some periods were higher due to reimbursement of the Fund's
expenses. See Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE> 130
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 90.1% SHARES VALUE
- -------------------------------------------------------------------
<S> <C> <C>
AFRICA -- 3.9%
- --------------------------------------
SOUTH AFRICA -- 3.9%
Anglo American Corporation
of South Africa Ltd................. 26,900 $ 1,480,867
Anglo American Corporation
of South Africa Ltd. ADR............ 275,000 14,987,500
Gencor Limited........................ 476,400 1,731,439
Gencor Limited ADR.................... 5,000,000 17,500,000
Malbak GDS -- NPV (Reg S) ADR......... 486,240 1,947,391
Malbak Limited ORD ADR 144A........... 526,760 2,308,789
Pepkor Limited ADR 144A REGD.......... 320,251 1,964,964
South African Breweries Limited....... 261,554 6,626,227
South African Breweries Limited ADR... 228,378 5,709,450
--------------
54,256,627
--------------
ASIA -- 23.6%
- --------------------------------------
HONG KONG -- 3.6%
China Light & Power................... 3,250,000 14,453,789
Hong Kong Telecommunications Ltd...... 8,167,301 13,145,824
Swire Pacific -- Class A.............. 2,100,000 20,022,635
Television Broadcasting Ltd........... 321,000 1,282,341
Tsingtao Brewery Company Ltd., Series
H................................... 3,850,000 1,468,327
--------------
50,372,916
--------------
JAPAN -- 7.4%
Bridgestone Corp...................... 950,000 18,006,375
Canon Inc............................. 900,000 19,850,090
Fuji Photo Film -- ORD................ 550,000 18,101,145
Matsushita Electric Industrial Co..... 800,000 13,026,621
Nintendo Corp Ltd..................... 20,000 1,428,448
Sega Enterprises...................... 18,000 604,807
Sharp Corp............................ 1,000,000 14,215,559
Sony Corp............................. 275,000 17,982,682
--------------
103,215,727
--------------
MALAYSIA -- 4.3%
Malayan Banking Berhad................ 2,000,000 22,173,774
Sime Darby Berhad..................... 5,000,000 19,699,023
Telekom Malaysia Berhad............... 2,000,000 17,818,211
--------------
59,691,008
--------------
RUSSIA -- 4.1%
LUKoil Oil Co. ADR 144A............... 819,644 37,720,017
Mosenergo ADR 144A.................... 655,000 19,240,625
--------------
56,960,642
--------------
SINGAPORE -- 4.2%
Hong Kong Land Holdings Ltd........... 7,400,000 20,572,000
Jardine Matheson Holdings Ltd......... 1,291,600 8,524,560
Keppel Corporation Ltd................ 2,000,000 15,584,575
United Overseas Bank Foreign
Registered.......................... 1,307,920 14,586,270
--------------
59,267,405
--------------
AUSTRALIA -- 1.3%
- --------------------------------------
AUSTRALIA -- 1.3%
CRA Limited........................... 322,500 5,058,902
News Corp. Ltd. ADR................... 425,000 8,871,875
Western Mining Corporation Holdings... 405,843 2,556,175
Western Mining Holdings ADR........... 82,812 2,080,652
--------------
18,567,604
--------------
EUROPE -- 56.2%
- --------------------------------------
DENMARK -- 2.6%
ISS International Service Systems B... 600,000 15,765,633
Novo Nordisk AS -- Class B............ 110,000 20,698,750
--------------
36,464,383
--------------
FRANCE -- 10.4%
AXA S.A............................... 300,000 $ 19,043,087
BIC................................... 70,000 10,475,621
Banque Nationale de Paris............. 402,521 15,547,279
Compagnie Financiere de Paribas....... 267,257 18,039,089
Elf Aquitaine S.A..................... 200,000 18,169,798
Eurotunnel S.A.*...................... 5,000,000 6,588,139
Lyonnaise des Eaux-Dumez.............. 122,611 11,389,084
Michelin Class B REGD................. 250,000 13,469,618
Rhone Poulenc S.A..................... 457,968 15,583,504
Total S.A............................. 207,995 16,883,695
--------------
146,188,914
--------------
NETHERLANDS -- 4.1%
ABN Amro Holding NV................... 250,000 16,245,244
Hunter Douglas NV..................... 72,402 4,876,367
ING Groep NV.......................... 486,135 17,481,037
Royal Dutch Petroleum ADR............. 115,000 19,636,250
--------------
58,238,898
--------------
NORWAY -- 4.6%
Bergesen.............................. 650,000 15,880,028
Kvaerner Industrier Series A.......... 500,000 24,313,357
Norsk Hydro Sponsored ADR............. 350,000 18,768,750
Saga Petroleum Series A Free.......... 300,000 5,003,618
--------------
63,965,753
--------------
SPAIN -- 2.5%
Banco Bilboa Vizcaya REGD............. 100,000 5,389,197
Banco Intercontinental................ 130,000 20,118,389
Repsol S.A............................ 249,200 9,540,770
--------------
35,048,356
--------------
SWEDEN -- 9.2%
AGA AB Series B Free.................. 800,000 11,950,747
Ericsson L.M. Telephone Series B
Free................................ 600,000 18,541,233
Kinnevik AB Series B Free............. 230,870 6,356,678
Nobel Biocare AB...................... 816,346 14,346,977
Pharmacia & Upjohn SDS................ 500,000 20,467,119
Skandia Forsakrings AB................ 500,000 14,132,930
Swedish Match AB Fuerer*.............. 5,000,000 17,574,628
Trelleborg AB Series B Free........... 300,000 3,976,260
Volvo AB Series B Free................ 1,000,000 22,041,513
--------------
129,388,085
--------------
SWITZERLAND -- 8.8%
CS Holding Bearer..................... 127,035 13,008,892
Clariant AG REGD...................... 40,000 17,069,816
Electowatt AG Bearer.................. 35,000 13,893,430
Nestle AG REGD........................ 15,000 16,053,223
Novartis AG REGD...................... 13,796 15,751,360
SCHW Ruckversicher REGD............... 11,655 12,403,913
SGS Holdings Bearer................... 6,000 14,701,490
Sulzer AG REGD........................ 10,775 6,203,132
Swiss Bank Corporation REGD........... 72,121 13,669,850
Swiss Bank Corporation Warrants
06/30/00*........................... 5,605 15,445
Von Roll AG REGD*..................... 11,200 191,015
--------------
122,961,566
--------------
UNITED KINGDOM -- 14.0%
B.A.T. Industries plc................. 2,500,000 20,728,121
Barclay's Bank ORD.................... 422,628 7,236,049
Barclay's Bank 144A REGD.............. 48,237 825,893
British Gas plc....................... 5,000,000 19,209,343
British Petroleum ORD................. 1,260,683 15,112,635
British Petroleum 144A REGD........... 28,655 343,506
Cadbury Schweppes plc ADR............. 445,414 15,199,753
Guinness plc.......................... 2,500,000 19,572,994
Imperial Tobacco Group plc............ 1,750,000 11,290,302
</TABLE>
(See Notes to Financial Statements)
<PAGE> 131
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -------------------------------------------------------------------
<S> <C> <C>
RTZ Corporation REGD.................. 1,006,425 $ 16,129,294
Rolls-Royce........................... 4,281,133 18,865,230
Royal Bank Scotland Group ORD......... 762,276 7,350,761
Smithkline Beecham plc ADR............ 200,000 13,600,000
Waste Management International plc
ADR................................. 1,300,000 10,237,500
Whitbread PLC......................... 1,500,000 20,176,227
--------------
195,877,608
--------------
SOUTH AMERICA -- 5.1%
- --------------------------------------
ARGENTINA -- 2.0%
Telecom de Argentina S.A. Class B..... 1,125,000 4,635,816
Telefonica de Argentina S.A. Class
B................................... 2,250,000 5,896,038
YPF ADR Class D....................... 700,000 17,675,000
--------------
28,206,854
--------------
BRAZIL -- 3.1%
Centrais Electricas Brasileiras
S.A.(Electrobras)................... 27,000,000 10,029,834
Petrobras REGD NV..................... 115,000,000 18,316,331
Telebras REGD NV...................... 200,000,000 15,397,941
--------------
43,744,106
--------------
TOTAL EQUITY SECURITIES
(Cost -- $1,027,692,261)............ 1,261,416,452
--------------
CONVERTIBLE BONDS -- 0.2% PRINCIPAL
- -------------------------------------- -----------
Liberty Life International 144A
Registered, 6.50%, 09/30/04
(Cost -- $2,476,805)................ $ 2,500,000 2,856,250
--------------
COMMERCIAL PAPER -- 9.4%
- --------------------------------------
American Express, 5.35%, 01/02/97..... 10,000,000 10,000,000
American Express, 5.35%, 01/03/97..... 11,489,000 11,489,000
American Express, 6.30%, 01/03/97..... 13,000,000 13,000,000
American Express, 5.40%, 01/10/97..... 8,682,000 8,682,000
Exxon Credit Corp., 7.00%, 01/02/97... 12,351,000 12,351,000
General Electric Capital, 5.58%,
01/08/97............................ $13,222,000 $ 13,222,000
General Electric Capital, 5.50%,
01/13/97............................ 9,000,000 9,000,000
General Electric Capital, 5.50%,
01/14/97............................ 7,220,000 7,220,000
Prudential Funding, 6.00%, 01/02/97... 11,722,000 11,722,000
Prudential Funding, 5.56%, 01/06/97... 10,000,000 10,000,000
Prudential Funding, 5.56%, 01/07/97... 11,543,000 11,543,000
Prudential Funding, 5.62%, 01/09/97... 12,721,000 12,721,000
--------------
TOTAL COMMERCIAL PAPER
(Cost -- $130,950,000).............. 130,950,000
--------------
TOTAL INVESTMENTS -- 99.7%
(Cost -- $1,161,119,066)(a)......... 1,395,222,702
OTHER ASSETS, LESS
LIABILITIES -- 0.3%................. 3,987,247
--------------
NET ASSETS -- 100%.................... $1,399,209,949
==============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
NV -- Non-voting
ORD -- Ordinary
REGD -- Registered
* Non-income producing security.
(a) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At December 31, 1996, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $260,427,166
Gross unrealized depreciation.................... (26,323,530)
------------
Net unrealized appreciation.................. $234,103,636
============
Purchases and sales of securities other than short-term obligations
aggregated $707,091,132 and $127,110,348, respectively, for the
period ended December 31, 1996.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 132
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $1,161,119,066)... $1,395,222,702
Cash........................................................ 12,364,487
Receivables
Fund shares sold.......................................... 6,162,755
Dividends and interest.................................... 2,631,427
Other assets................................................ 110,374
--------------
Total assets............................................ 1,416,491,745
--------------
LIABILITIES
Payables
Distributions to shareholders............................. 84,559
Investments purchased..................................... 14,902,885
Fund shares repurchased................................... 112,640
Management fee............................................ 1,120,740
12b-1 service and distribution fees....................... 513,129
Other payables to related parties......................... 263,035
Accrued expenses............................................ 284,808
--------------
Total liabilities....................................... 17,281,796
--------------
NET ASSETS.................................................. $1,399,209,949
==============
CLASS A
Net asset value and redemption price per share
($989,254,133 / 27,563,350 shares outstanding)............ $ 35.89
==============
Maximum offering price per share ($35.89 x 100 / 94.25)*.... $ 38.08
==============
CLASS B
Net asset value and offering price per share
($312,161,127 / 8,736,831 shares outstanding)**........... $ 35.73
==============
CLASS C
Net asset value and offering price per share
($44,450,301 / 1,249,468 shares outstanding)**............ $ 35.58
==============
CLASS I
Net asset value, offering price, and redemption price per
share ($53,344,388 / 1,486,226 shares outstanding)........ $ 35.89
==============
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,165,072,805
Net unrealized appreciation on investments and foreign
currency transactions................................... 234,137,144
--------------
NET ASSETS.................................................. $1,399,209,949
==============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Redemption price per share is equal to the net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 133
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $2,852,046 foreign taxes withheld....... $ 16,485,734
Interest.................................................. 5,582,845
------------
22,068,579
------------
EXPENSES
Management fee............................................ $9,157,858
Transfer agent............................................ 1,264,586
Administrative services fee............................... 885,033
Custodian fees............................................ 979,211
Blue Sky fees............................................. 66,730
Auditing and accounting fees.............................. 60,997
Shareholder reports....................................... 42,380
Fund accounting........................................... 173,986
Trustees' fees............................................ 3,970
12b-1 service and distribution fees....................... 3,496,847
Legal..................................................... 35,258
Other..................................................... 243,332
------------
Total expenses.......................................... 16,410,188
------------
NET INVESTMENT INCOME....................................... 5,658,391
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 25,065,630
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 140,672,710
------------
Net gain on investment transactions..................... 165,738,340
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $171,396,731
============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 134
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 5,658,391 $ 3,429,650
Net realized gain on investments and foreign currency
transactions............................................ 25,065,630 1,769,828
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 140,672,710 44,011,142
-------------- ------------
Net increase resulting from operations.................. 171,396,731 49,210,620
-------------- ------------
CLASS A DISTRIBUTIONS
From net investment income................................ (4,882,162) (3,301,120)
From net realized gain.................................... (17,087,565) (1,495,008)
In excess of net realized gain............................ -- (423,723)
-------------- ------------
Total distributions to Class A shareholders............. (21,969,727) (5,219,851)
-------------- ------------
CLASS B DISTRIBUTIONS
From net investment income................................ -- (26,475)
In excess of net investment income........................ (430,044) --
From net realized gain.................................... (5,538,963) (233,428)
In excess of net realized gain............................ -- (69,587)
-------------- ------------
Total distributions to Class B shareholders............. (5,969,007) (329,490)
-------------- ------------
CLASS C DISTRIBUTIONS
In excess of net investment income........................ (243,273) --
From net realized gain.................................... (791,253) --
-------------- ------------
Total distributions to Class C shareholders............. (1,034,526) --
-------------- ------------
CLASS I DISTRIBUTIONS
From net investment income................................ (395,163) (102,055)
In excess of net investment income........................ (23,513) --
From net realized gain.................................... (932,968) (41,392)
In excess of net realized gain............................ -- (12,102)
-------------- ------------
Total distributions to Class I shareholders............. (1,351,644) (155,549)
-------------- ------------
Fund share transactions (Note 4)
Class A................................................... 404,645,714 208,491,878
Class B................................................... 211,044,612 39,727,936
Class C................................................... 42,991,790 --
Class I................................................... 35,796,386 7,284,014
-------------- ------------
Net increase resulting from Fund share transactions..... 694,478,502 255,503,828
-------------- ------------
TOTAL INCREASE IN NET ASSETS................................ 835,550,329 299,009,558
NET ASSETS
Beginning of period....................................... 563,659,620 264,650,062
-------------- ------------
END OF PERIOD............................................. $1,399,209,949 $563,659,620
============== ============
ACCUMULATED NET INVESTMENT INCOME........................... $ -- $ 5,823
============== ============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 135
FINANCIAL HIGHLIGHTS(A)
<TABLE>
<CAPTION>
CLASS A
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
SELECTED PER SHARE DATA -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 30.67 $ 27.60 $ 27.71 $ 18.88 $ 19.37
-------- -------- -------- -------- --------
Income from investment operations
Net investment income..................................... .20 .25 .07 .12 .27(b)
Net realized and unrealized gain (loss) on investment
transactions............................................ 5.85 3.22 1.01 9.01 (.26)
-------- -------- -------- -------- --------
Total from investment operations........................ 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.............................. $ 35.89 $ 30.67 $ 27.60 $ 27.71 $ 18.88
======== ======== ======== ======== ========
Total return(%)(c).......................................... 19.72 12.65 3.92 48.37 .07
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $989,254 $475,989 $229,586 $172,539 $109,637
Ratio of expenses to average net assets(%).................. 1.65 1.52 1.58 1.61 1.71(e)
Ratio of net investment income to average net assets(%)..... .76 .97 .30 .56 1.36(b)
Portfolio turnover rate(%).................................. 14 6 7 19 20
Average commission rate(g).................................. $ .0092 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 23, 1993
CLASS B (COMMENCEMENT) TO
FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------ -----------------
1996 1995 1994 1993
SELECTED PER SHARE DATA -------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 30.67 $ 27.60 $ 27.71 $25.86
-------- -------- -------- ------
Income from investment operations
Net investment income (loss).............................. (.01) .01 (.10) (.01)
Net realized and unrealized gain on investment
transactions............................................ 5.76 3.20 .91 2.12
-------- -------- -------- ------
Total from investment operations........................ 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.............................. $ 35.73 $ 30.67 $ 27.60 $27.71
======== ======== ======== ======
Total return(%)............................................. 18.76(c) 11.62(c) 2.96(c) 7.65(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $312,161 $ 74,650 $ 30,143 $2,846
Ratio of expenses to average net assets(%).................. 2.45 2.44 2.50 2.59(f)
Ratio of net investment income (loss) to average net
assets(%)................................................. (.04) .05 (.62) (.42)(f)
Portfolio turnover rate(%).................................. 14 6 7 19
Average commission rate(g).................................. $ .0092 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 136
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1996
CLASS C (COMMENCEMENT) TO
DECEMBER 31,
-----------------
1996
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $ 32.68
--------
Income from investment operations
Net investment income..................................... --
Net realized and unrealized gain on investment
transactions............................................ 3.74
--------
Total from investment operations........................ 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.............................. $ 35.58
========
Total return(%)............................................. 11.45(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $44,450
Ratio of expenses to average net assets(%).................. 2.44(f)
Ratio of net investment loss to average net assets(%)....... (.03)(f)
Portfolio turnover rate(%).................................. 14
Average commission rate(g).................................. $ .0092
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 6, 1994
CLASS I FOR THE YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, DECEMBER 31,
-------------------- -----------------
1996 1995 1994
SELECTED PER SHARE DATA ------- ------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 30.67 $ 27.60 $29.06
------- ------- ------
Income (loss) from investment operations
Net investment income..................................... .27 .30 .03
Net realized and unrealized gain (loss) on investment
transactions............................................ 5.88 3.22 (.49)
------- ------- ------
Total from investment operations........................ 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.............................. $ 35.89 $ 30.67 $27.60
======= ======= ======
Total return(%)............................................. 20.06(c) 12.85(c) (1.64)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $53,344 $13,020 $4,921
Ratio of expenses to average net assets(%).................. 1.25 1.35 1.41(f)
Ratio of net investment income to average net assets(%)..... 1.16 1.14 .47(f)
Portfolio turnover rate(%).................................. 14 6 7
Average commission rate(g).................................. $ .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.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 137
NOTES TO FINANCIAL STATEMENTS
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 for which market quotations are readily
available are valued at market. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
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 December 31, 1996, there were no
such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code, as
amended, and distribute all of its taxable income to its shareholders.
Therefore, no provision has been recorded for Federal income or excise taxes.
The Fund earned foreign source dividends of $18,933,984. These dividends
were subject to withholding tax in the amount of $2,852,046. The Fund intends to
elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may apply their proportionate share of such foreign taxes
paid as either a tax credit or itemized deduction.
Pursuant to Section 852 of the Internal Revenue Code, the fund designates
$13,569,925 as capital gain dividends for its taxable year ended December 31,
1996.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December. An additional
distribution may be declared if necessary to avoid the payment of a four percent
Federal excise tax.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable are translated
at the closing daily rate of exchange; and, (ii) purchases and sales of
investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. The Fund does not isolate that portion of net gain or loss on
investments which is due to changes in foreign exchange rates from that which is
due to changes in market prices of securities held. Such fluctuations are
included with net realized and unrealized gain or loss on investments. Exchange
gains or losses from currency translation of other assets and liabilities, if
significant, are reported as a separate component of Net realized and unrealized
gain (loss) on investment transactions.
Section 988 of the Internal Revenue Code provides that gains and losses on
certain transactions attributable to fluctuations in foreign currency exchange
rates must be treated as ordinary income or loss. Accordingly, distributions for
financial statement purposes may differ from the characterization of such
distributions determined on a Federal income tax basis.
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
<PAGE> 138
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 year ended December 31, 1996, the net amount of underwriting
discount retained by IMDI was $394,656.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net asset value of Class A, Class B and Class C shares issued after December 31,
1991. Class B and Class C shares are also subject to an ongoing distribution fee
at an annual rate of .75% of the average net asset value attributable to Class B
and Class C shares. IMDI may use such distribution fee for purposes of
advertising and marketing shares of the Fund. Such fees of $1,671,153,
$1,724,796, $100,898 and $0 for Class A, Class B, Class C and Class I,
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 $918,907, $305,940, $17,102 and $22,637 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold.................... 16,070,230 $ 537,452,973 9,867,336 $284,977,224
Issued on reinvestment
of distributions....... 534,854 19,195,195 158,854 4,677,883
Repurchased............. (4,561,167) (152,002,454) (2,826,332) (81,163,229)
---------- ------------- ---------- ------------
Net increase............ 12,043,917 $ 404,645,714 7,199,858 $208,491,878
========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold.................... 6,659,639 $ 222,635,747 1,620,201 $ 47,706,315
Issued on reinvestment
of distributions....... 91,688 3,275,938 9,355 286,570
Repurchased............. (448,268) (14,867,073) (288,093) (8,264,949)
---------- ------------- ---------- ------------
Net increase............ 6,303,059 $ 211,044,612 1,341,463 $ 39,727,936
========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 30, 1996
(COMMENCEMENT) TO
DECEMBER 31, 1996
--------------------------
CLASS C SHARES AMOUNT
- ------- ---------- -------------
<S> <C> <C> <C> <C>
Sold.................... 1,260,097 $ 43,344,404
Issued on reinvestment
of distributions....... 9,696 344,991
Repurchased............. (20,325) (697,605)
---------- -------------
Net increase............ 1,249,468 $ 42,991,790
========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- -------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- ------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold.................... 1,105,814 $ 37,145,203 254,153 $ 7,521,113
Issued on reinvestment
of distributions....... 35,847 1,286,548 3,993 119,081
Repurchased............. (79,940) (2,635,365) (11,973) (356,180)
---------- ------------- ---------- ------------
Net increase............ 1,061,721 $ 35,796,386 246,173 $ 7,284,014
========== ============= ========== ============
</TABLE>
<PAGE> 139
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy International Fund (the Fund)
We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of December 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997
02IVINX123196
