<PAGE> 1
June 30, 1998 IVY FUNDS(R)
IVY
INTERNATIONAL
SMALL
COMPANIES
FUND
SEMIANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the share-holders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
International small companies have performed well since the beginning of the
year, although they have continued to slightly underperform their large-cap
counterparts as they have for the past four years. Year to date, investors have
favored large-cap blue chip companies in Europe, much as they have in the US
bull market over the last few years. And, uncertainty in Asia has led many
investors to steer clear of less liquid names. In contrast, many small-cap names
in Latin America have fared much better than their larger-cap counterparts.
The largest regional weighting in the Ivy International Small Companies Fund (at
70% of total assets) continues to be Western Europe. This portion of the Fund
has performed particularly well as the European cyclical recovery has gained
momentum and European markets have rallied amid Economic and Monetary Union
(EMU) euphoria. Safilo, the Italian eyeglasses maker, and Grupo Anaya, a Spanish
publisher, are two portfolio holdings positioned to benefit from the cyclical
upturn currently gaining momentum in Europe. The Fund also has exposure to
southern European financial institutions, which continue to benefit from
EMU-related developments. Portugal's Seguros Mundial Confianca and Italy's Banca
Popolare di Milano, in particular, have made solid contributions to the Fund's
performance.
Despite strong performance from the European markets, we believe this portion of
the Fund continues to offer excellent value. Even though European small caps are
currently enjoying almost double the growth rates of larger-cap stocks, there
is, on average, a discount of almost 50% between European small caps and the
largest blue chips listed on European exchanges. We believe that as valuations
become more demanding among large-cap European issues, small caps could be due
for a period of outperformance.
Asian holdings represent almost 20% of the Fund. Small caps in Asia have not
escaped the regionwide turmoil. And, in many cases they have actually performed
worse than the broader indices as investors sought the liquidity of larger-cap
names. However, some companies, such as Li & Fung, which have benefited from
competitive devaluations in the region, have actually produced positive returns.
On average, small caps in Asia are currently trading at about a 20% discount to
the overall market indices, and in many cases the discount is significantly
greater. For example, Hong Kong-based luxury car distributor JIMH is currently
trading at five times this year's estimated earnings, two times cash flow, and
has a healthy balance sheet and generous dividend yield.
About 8% of the portfolio's holdings are currently allocated to Latin America.
Although the region has performed poorly since the beginning of the year, many
small-cap issues have outperformed broader indices. This is a marked contrast to
last year. In Brazil, for example, the broader market has been flat since
January 1, 1998, while small caps, supported by local investors, have performed
well.
Overall, we have found that small-cap companies often represent the best values
in our regional universes. We believe that compelling valuations could well
continue to drive strong performance of international small caps. In addition,
we believe that international small companies can add valuable diversification
to an investor's overall global investment program.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 2
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 99.00% SHARES VALUE
- -------------------------------------------
<S> <C> <C>
ASIA/PACIFIC -- 18.77%
- -------------------------------------------
AUSTRALIA -- 3.25%
BRL Hardy Limited.......................... 15,000 $ 48,301
Tyndall Australia Limited.................. 51,183 66,559
----------
114,860
----------
HONG KONG -- 6.74%
CDL Hotels International Ltd. ............. 80,000 23,746
Gold Peak Industries (Holdings) Ltd. ...... 53,000 18,126
Jardine International Motor Holdings
Co. ..................................... 48,000 17,655
Lamex Holdings Ltd. ....................... 130,000 5,033
Li & Fung.................................. 50,000 80,660
National Mutual Asia Ltd. ................. 54,000 34,497
Peregrine Investments Holdings
Limited(b)(c)............................ 36,000 --
Techtronic Industries Company.............. 166,000 34,277
Union Bank of Hong Kong Ltd. .............. 38,000 24,153
----------
238,147
----------
MALAYSIA -- 1.23%
KFC Holdings (Malaysia) Berhad(a).......... 26,000 13,791
Malayan Cement Berhad...................... 28,750 9,358
Sime UEP Properties Berhad................. 24,000 13,772
Sungei Way Holdings Bhd. .................. 42,000 6,481
----------
43,402
----------
NEW ZEALAND -- 3.59%
Fisher & Paykel Industries................. 20,800 52,905
Fletcher Challenge Building................ 23,000 28,654
Fletcher Challenge Forestry................ 920 516
Tourism Holdings Limited(a)................ 78,684 44,928
----------
127,003
----------
PHILIPPINES -- 0.91%
Alaska Milk Corporation(a)................. 440,000 19,626
Asian Terminals, Inc. ..................... 225,000 7,554
Metro Pacific Corp.(a)..................... 216,391 4,930
----------
32,110
----------
SINGAPORE -- 1.96%
Clipsal Industries Ltd .................... 22,000 19,690
Comfort Group Limited...................... 55,000 12,371
Elec & Eltek International Co. Ltd. ....... 11,000 37,180
----------
69,241
----------
THAILAND -- 1.09%
Circuit Electronic Industries Public
Company Limited -- Foreign
Registered(a)............................ 13,500 4,229
Delta Electronics (Thailand) Public Company
Limited -- Foreign Registered............ 3,750 21,277
K.R. Precision Public Company Limited --
Foreign Registered(a).................... 4,100 2,714
Robinson Department Store Public Company
Limited -- Foreign Registered(a)......... 180,200 5,197
S.G. Asia Credit Company PLC -- Foreign
Registered(a)............................ 25,200 5,004
----------
38,421
----------
EUROPE -- 71.27%
- -------------------------------------------
AUSTRIA -- 3.37%
BWT AG..................................... 560 118,976
----------
DENMARK -- 3.26%
Jyske Bank A/S............................. 600 70,776
Sydbank A/S................................ 800 44,554
----------
115,330
----------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -------------------------------------------
<S> <C> <C>
FINLAND -- 2.99%
Metsa-Serla OY -- Class B.................. 8,500 $ 82,111
Raisio Group plc........................... 1,300 23,458
----------
105,569
----------
FRANCE -- 14.62%
Assurances Banque Populaire................ 891 92,695
Bongrain S.A............................... 175 87,876
Galeries Lafayette......................... 65 64,828
MGI Coutier................................ 700 40,175
Scor....................................... 1,810 114,808
Unibail.................................... 900 116,407
----------
516,789
----------
GERMANY -- 7.31%
Dyckerhoff AG.............................. 215 75,040
Gerresheimer Glas AG....................... 3,800 57,052
Leica Camera AG............................ 5,185 61,759
Merck KGaA................................. 1,440 64,380
----------
258,231
----------
HUNGARY -- 1.39%
Danubius Hotel & Spa Rights(a)............. 1,200 24,134
Pick Szeged Rights......................... 425 24,846
----------
48,980
----------
ITALY -- 7.84%
Banca Popolare Di Milano................... 10,650 84,778
Industrie Natuzzi Spa -- Sponsored ADR..... 3,100 80,600
Safilo S.p.A............................... 15,300 111,672
----------
277,050
----------
NORWAY -- 2.09%
Norske Skogindustrier ASA.................. 910 28,106
Nycomed ASA................................ 6,150 45,683
----------
73,789
----------
PORTUGAL -- 4.92%
Colep -- Cia Portuguesa de Embalagens(a)... 4,100 54,357
Companhia de Seguros Mundial Confianca
S.A.(a).................................. 1,350 35,884
Lusomundo-SGPS S.A......................... 5,610 83,518
----------
173,759
----------
SPAIN -- 2.95%
Grupo Anaya S.A............................ 2,900 104,187
----------
SWEDEN -- 0.78%
S.K.F. AB Series "B"....................... 1,510 27,455
----------
SWITZERLAND -- 5.49%
Edipresse S.A.............................. 330 90,723
Fotolabo S.A............................... 315 103,421
----------
194,144
----------
UNITED KINGDOM -- 14.26%
Care U.K. PLC.............................. 45,955 182,105
Corporate Services Group PLC............... 26,380 104,976
Corporate Services Group PLC Rights(a)..... 6,595 1,265
Jarvis Hotels PLC.......................... 34,370 97,776
Kiln Capital PLC........................... 38,350 118,056
----------
504,178
----------
LATIN AMERICA -- 7.51%
- -------------------------------------------
ARGENTINA -- 1.47%
Bansud S.A.(a)............................. 4,340 34,255
Quilmes Industrial S.A..................... 1,830 17,843
----------
52,098
----------
</TABLE>
<PAGE> 3
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -------------------------------------------
<S> <C> <C>
BRAZIL -- 3.87%
Brasmotor S.A. Preferred................... 200,000 $ 18,329
Centrais Eletricas de Santa Cataruna S.A.
(CELESC)................................. 24,000 17,845
Elevadores Atlas S.A. 144A................. 1,600 26,975
OSA S.A. Preferred......................... 2,800,000 12,298
Rossi Residencial.......................... 3,800 17,338
Tam Transport Aeros Regionais S.A.
Preferred................................ 710,000 44,198
----------
136,983
----------
CHILE -- 2.17%
A.F.P. Provida S.A.-Sponsored ADR.......... 1,600 26,700
Cristalerias de Chile Sponsored ADR........ 2,100 27,300
Vina Concha Y Toro S.A. ADR................ 800 22,800
----------
76,800
----------
NORTH AMERICA -- 1.45%
- -------------------------------------------
CANADA -- 1.45%
Methanex Corporation(a).................... 5,870 51,294
----------
TOTAL INVESTMENTS -- 99.00%
(Cost -- $3,814,736)(d).................. 3,498,796
OTHER ASSETS, LESS LIABILITIES -- 1.00%.... 35,403
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
----------
NET ASSETS -- 100%......................... $3,534,199
==========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Perigrine Investments Holdings Limited has filed for liquidation
under the laws of Hong Kong.
(c) Securities valued in good faith by the Valuation Committee of
the Board of Trustees. The cost of these securities aggregated
$54,301. See Note 1 to the Financial Statements.
(d) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $ 677,076
Gross unrealized depreciation...................... (993,016)
----------
Net unrealized depreciation.................... $ (315,940)
==========
Purchases and sales of securities other than short-term obligations
aggregated $321,835 and $426,356, respectively, for the period ended
June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $3,814,736)....... $3,498,796
Receivables
Fund shares sold.......................................... 3,215
Dividends and interest.................................... 27,472
Manager for expense reimbursement......................... 13,495
Deferred organization expenses.............................. 34,230
Other assets................................................ 14,064
----------
Total assets.............................................. 3,591,272
----------
LIABILITIES
Payables
Fund shares repurchased................................... 18,841
Management fee............................................ 2,975
12b-1 service and distribution fees....................... 2,506
Other payables to related parties......................... 2,939
Due to custodian............................................ 18,189
Accrued expenses............................................ 11,623
----------
Total liabilities......................................... 57,073
----------
NET ASSETS.................................................. $3,534,199
==========
CLASS A
Net asset value and redemption price per share
($1,021,562/106,902 shares outstanding)................... $ 9.56
==========
Maximum offering price per share ($9.56 X 100/94.25)*....... $ 10.14
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($1,090,468/114,977 shares outstanding)............. $ 9.48
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,422,169/149,472 shares outstanding)............. $ 9.51
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $3,774,109
Undistributed net realized gain on investments and foreign
currency transactions................................... 57,767
Undistributed net investment income....................... 18,363
Net unrealized depreciation on investments and foreign
currency transactions................................... (316,040)
----------
NET ASSETS.................................................. $3,534,199
==========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 4
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $6,139 foreign taxes withheld........... $ 71,712
--------
EXPENSES
Management fee............................................ $18,870
Transfer agent............................................ 5,532
Administrative services fee............................... 1,887
Custodian fees............................................ 19,211
Blue Sky fees............................................. 17,127
Auditing and accounting fees.............................. 7,781
Shareholder reports....................................... 1,663
Amortization of organization expenses..................... 4,936
Fund accounting........................................... 10,052
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 14,933
Legal..................................................... 12,717
Other..................................................... 1,596
--------
120,540
Expenses reimbursed by manager............................ (60,236)
Fees paid indirectly...................................... (8,575)
--------
Net expenses............................................ 51,729
--------
NET INVESTMENT INCOME....................................... 19,983
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 54,889
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 281,780
--------
Net gain on investment transactions..................... 336,669
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $356,652
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 19,983 $ (18,011)
Net realized gain on investments and foreign currency
transactions............................................ 54,889 29,248
Net unrealized appreciation (depreciation) during the
period on investments
and foreign currency transactions....................... 281,780 (597,820)
---------- ----------
Net increase (decrease) resulting from operations....... 356,652 (586,583)
---------- ----------
Distributions to shareholders from net realized gain
Class A................................................... -- (10,611)
Class B................................................... -- (5,916)
Class C................................................... -- (6,491)
---------- ----------
Total distributions to shareholders..................... -- (23,018)
---------- ----------
Fund share transactions (Note 4)
Class A................................................... (75,013) 1,166,547
Class B................................................... (18,468) 1,178,634
Class C................................................... (302,905) 1,838,353
---------- ----------
Net (decrease) increase resulting from Fund share
transactions........................................... (396,386) 4,183,534
---------- ----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (39,734) 3,573,933
NET ASSETS
Beginning of period....................................... 3,573,933 --
---------- ----------
END OF PERIOD............................................. $3,534,199 $3,573,933
========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 18,363 $ --
========== ==========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 5
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
CLASS A 1998* 1997
SELECTED PER SHARE DATA ------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.66 $10.00
------ ------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .07(f) (.01)
Net realized and unrealized gain (loss) on investment
transactions............................................ .83(f) (1.24)
------ ------
Total from investment operations........................ .90 (1.25)
------ ------
Less distributions
From net realized gain.................................... -- .09
------ ------
Total distributions..................................... -- .09
------ ------
Net asset value, end of period.............................. $ 9.56 $ 8.66
====== ======
Total return(%)............................................. 10.39(c) (12.52)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,022 $ 992
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.66(g) 2.50
Without expense reimbursement(%).......................... 5.85(g) 4.87
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. 1.59(g) (.11)
Portfolio turnover rate(%).................................. 9 10
Average commission rate(e).................................. $.0050 $.0030
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
CLASS B 1998* 1997
SELECTED PER SHARE DATA ------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.63 $10.00
------ ------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .04(f) (.05)
Net realized and unrealized gain (loss) on investment
transactions............................................ .81(f) (1.27)
------ ------
Total from investment operations........................ .85 (1.32)
------ ------
Less distributions
From net realized gain.................................... -- .05
------ ------
Total distributions..................................... -- .05
------ ------
Net asset value, end of period.............................. $ 9.48 $ 8.63
====== ======
Total return(%)............................................. 9.85(c) (13.19)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,090 $1,007
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 3.43(g) 3.31
Without expense reimbursement(%).......................... 6.62(g) 5.68
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .82(g) (.91)
Portfolio turnover rate(%).................................. 9 10
Average commission rate(e).................................. $.0050 $.0030
</TABLE>
(See Notes to Financial Statements)
<PAGE> 6
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
CLASS C 1998* 1997
SELECTED PER SHARE DATA ------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.65 $ 10.00
------ -------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .04(f) (.06)
Net realized and unrealized gain (loss) on investment
transactions............................................ .82(f) (1.25)
------ -------
Total from investment operations........................ .86 (1.31)
------ -------
Less distributions
From net realized gain.................................... -- .04
------ -------
Total distributions..................................... -- .04
------ -------
Net asset value, end of period.............................. $ 9.51 $ 8.65
====== =======
Total return(%)............................................. 9.94(c) (13.14)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,422 $ 1,574
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 3.38(g) 3.23
Without expense reimbursement(%).......................... 6.57(g) 5.60
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .87(g) (.83)
Portfolio turnover rate(%).................................. 9 10
Average commission rate(e).................................. $.0050 $ .0030
</TABLE>
<TABLE>
<S> <C>
(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) Total expenses include fees paid indirectly through an
expense offset arrangement, if any.
(e) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(f) Based on average shares outstanding
(g) Annualized
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Small Companies Fund (the "Fund"), is a diversified
series of shares of Ivy Fund. The shares of beneficial interest are assigned no
par value and an unlimited number of shares of Class A, Class B, Class C,
Advisor Class and Class I are authorized. Ivy Fund was organized as a
Massachusetts business trust under a Declaration of Trust dated December 21,
1983 and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the Board), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of June 30, 1998, such securities were
determined to have no value by the Valuation Committee 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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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, certain securities
sold at a loss, and non-deductible organization expenses. As a result, Net
investment income (loss) and Net realized gain (loss) on investments and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accordingly, the Fund may
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement with its custodian
whereby a 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 $8,575 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
receives a fee monthly at the annual rate of 1.00% of the Fund's average net
assets. Currently, IMI voluntarily limits the Fund's total operating expenses
(excluding taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.95% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $453.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class and Class I. Class B and Class C shares are also
subject to an ongoing distribution fee at an annual rate of .75% of the average
net assets attributable to Class B and Class C. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$1,313, $5,549 and $8,071, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI,
is the transfer and shareholder servicing agent for the Fund. For those
services, the Fund pays a monthly fee plus certain out-of-pocket expenses. Such
fees and expenses of $1,582, $1,771 and $2,179, 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>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------- --------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ------- --------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................... 13,664 $ 135,010 137,090 $1,381,448
Issued on reinvestment of
distributions..................... -- -- 1,120 9,573
Repurchased........................ (21,323) (210,023) (23,649) (224,474)
------- --------- ------- ----------
Net (decrease)/increase............ (7,659) $ (75,013) 114,561 $1,166,547
======= ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------- --------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ------- --------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................... 9,169 $ 87,065 138,360 $1,386,132
Issued on reinvestment of
distributions..................... -- -- 479 4,077
Repurchased........................ (10,956) (105,533) (22,075) (211,575)
------- --------- ------- ----------
Net (decrease)/increase............ (1,787) $ (18,468) 116,764 $1,178,634
======= ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------- --------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------- ------- --------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................... 34,156 $ 342,546 227,583 $2,285,190
Issued on reinvestment of
distributions..................... -- -- 196 1,670
Repurchased........................ (66,611) (645,451) (45,852) (448,507)
------- --------- ------- ----------
Net (decrease)/increase............ (32,455) $(302,905) 181,927 $1,838,353
======= ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------- --------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- ------- ------- --------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................... -- -- 1 $ 10
Repurchased........................ -- -- (1) (10)
------- --------- ------- ----------
Net change......................... -- -- -- $ --
======= ========= ======= ==========
</TABLE>
03IISCF063098
<PAGE> 9
June 30, 1998 IVY FUNDS(R)
IVY
CHINA
REGION
FUND
SEMIANNUAL
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
[ART]
THROUGHOUT THE CENTURIES, THE CASTLE KEEP HAS BEEN A SOURCE OF LONG-RANGE VISION
AND STRATEGIC ADVANTAGE.
MARKET COMMENTARY
During the first quarter of 1998, stock markets in the China region, which
includes Hong Kong, China and Taiwan, rallied due to stabilization in regional
markets and renewed investor confidence. However, as economic prospects for the
region were downgraded in the second quarter, equity prices declined. The Hong
Kong and China markets have declined 20% to 30% during the past three months. As
a result, the Ivy China Region Fund has experienced an inordinately high level
of volatility over the past six months.
According to our research, virtually every sector of the China region has been
impacted by concerns over economic prospects. In Hong Kong, interest rates have
risen dramatically, causing property prices to fall nearly 50% in the past 12
months. This, in turn, has had a negative impact on consumer confidence, and
retail sales are off by as much as 25% during the first half of 1998. In
addition, concerns that China's economy may be slowing and fears that the
renminbi will devalue have added fuel to the fire. Red chips, Chinese-affiliated
companies listed in Hong Kong, which represent 9% of the Ivy China Region Fund,
have been particularly hard hit due to their high dependence on mainland China.
We believe that medium- and long-term prospects for the China region are better
than for the rest of Asia. And, since Hong Kong is one of the markets which is
least vulnerable to Southeast Asia's turmoil, its market performance will depend
more on China's economy remaining strong. To achieve its commitment to economic
reform and reach its target of an 8% GDP growth rate in 1998, the Chinese
government is expected to introduce more stimulus measures, such as increasing
fixed-asset investment in both infrastructure and residential property, as well
as increasing its monetary supply through further rate cuts.
We believe that structural reforms of banking systems in many Asian countries,
the introduction of a sound economic program in Japan and new bankruptcy and
foreclosure laws throughout Asia will establish a solid foundation for Asia's
next stage of growth. As these issues are addressed, interest rates should
stabilize and currency volatility in Asia should moderate, and the Ivy China
Region Fund should, in turn, perform well.
In our view, the countries and companies in which the Ivy China Region Fund has
invested are not hindered by many of the problems plaguing the rest of Asia.
Hong Kong's banking system is solid, its corporations have prudently used
leverage, it is not overly reliant upon Japan and it has China as an important
engine of growth. Investor sentiment, however, is very low causing many foreign
investors to flee, resulting in abnormally low levels of liquidity. As the rest
of Asia reforms, we believe that confidence will return to the China region.
Most important, investors should keep in mind that stock prices generally
anticipate an economic recovery at least 12 months in advance.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 10
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 99.36% SHARES VALUE
- -----------------------------------------
<S> <C> <C>
AMERICAS -- 0.54%
- -----------------------------------------
UNITED STATES -- 0.54%
Amway Asia Pacific Ltd. ................. 6,200 $ 80,988
------------
ASIA/PACIFIC -- 98.82%
- -----------------------------------------
CHINA -- 16.60%
Anhui Expressway Co. Ltd. ............... 1,646,000 165,692
China Southern Airlines Company
Limited(a)............................. 994,000 133,413
China Southern Glass Co. -- Class B...... 342,137 66,232
First Tractor Company Limited -- H
Shares................................. 220,000 58,204
Guangdong Kelon Elec Holding............. 266,000 209,406
Hainan Airlines Co., Ltd(a).............. 350,000 94,500
Inner Mongolia Erdos Cashmere Products
Co. -- Class B......................... 681,000 164,802
Qinling Motors Company Ltd. ............. 1,100,000 305,217
Shanghai China International Travel
Service Co., Ltd. -- Class B........... 236,500 56,287
Shanghai Dazhong Taxi Company -- Class
B(a)................................... 639,000 348,894
Shanghai Diesel Engine Co. Ltd. -- Class
B(a)................................... 648,000 108,864
Shanghai Narcissus Electric Appliances
Industrial Company Ltd. -- Class B(a).. 467,500 41,140
Shanghai Posts & Telecommunications
Equipment Co. Ltd. -- Class B.......... 510,900 146,117
Shanghai Shangling Electric Appliances
Co. Ltd. -- Class B(a)................. 312,000 53,040
Shanghai Worldbest Co., Ltd ............. 432,000 108,000
Shenzhen Konka Electronics Group
Limited -- Class B..................... 260,000 233,540
Zhejiang Southeast Electric Power Co.,
Ltd -- Class B......................... 289,393 81,030
Zhenhai Refining and Chemical Company
Limited................................ 900,000 116,150
------------
2,490,528
------------
HONG KONG -- 67.65%
Asia Satellite Telecommunications
Holdings Ltd. ......................... 100,000 165,192
Asia Satellite Telecommunications
Holdings Ltd. ADR...................... 4,000 65,500
CDL Hotels International Limited......... 840,000 249,336
Chen Hsong Holdings...................... 1,040,000 150,324
Cheung Kong Holdings Ltd. ............... 145,000 712,970
Cheung Kong Infrastructure Holdings...... 96,000 181,504
China Resources Enterprise Limited....... 128,000 132,153
China Travel International Investment
Hong Kong Ltd ......................... 864,400 111,556
Citic Pacific Ltd. ...................... 198,000 350,077
Cosco Pacific Limited.................... 220,000 78,789
Esprit Asia Holdings Ltd. ............... 696,000 211,084
Founder Hong Kong Ltd. .................. 417,600 177,850
Giordano Holdings Ltd. .................. 846,000 171,415
Gold Peak Industries..................... 823,000 281,465
Gold Peak Industries Warrants 2000(a).... 184,600 3,812
Guangdong Investments.................... 799,000 179,421
Guangdong Investments Warrants(a)........ 79,900 433
Guangdong Tannery Ltd. .................. 39,950 1,805
Guangzhou Investment Company Ltd. ....... 910,000 103,348
Guoco Group Ltd. ........................ 70,000 73,627
HSBC Holdings............................ 38,467 940,753
Hang Seng Bank........................... 20,900 118,140
Hong Kong & China Gas Company Ltd. ...... 245,520 278,835
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------
<S> <C> <C>
Hong Kong & China Gas Company Ltd
Warrants 09/30/99(a)................... 11,160 $ 763
Hong Kong Land Holdings Ltd. ............ 222,000 277,500
Hong Kong Telecommunications Limited..... 189,600 356,024
Jardine International Motor Holdings
Co. ................................... 524,000 192,732
Jardine Strategic Holdings Ltd. ......... 200,250 380,475
Johnson Electric Holdings Ltd. .......... 72,400 268,163
Kumagai Gumi (Hong Kong) Ltd (with 72,000
warrants).............................. 360,000 149,834
Lamex Holdings........................... 650,000 25,166
Li & Fung................................ 415,800 670,768
National Mutual Asia Ltd. ............... 440,000 281,084
New World Development Company Ltd. ...... 107,535 208,171
New World Infrastructure Ltd.(a)......... 133 153
Ng Fung Hong Limited..................... 324,000 223,706
Peregrine Investments Holdings
Limited(b)(c).......................... 262,000 --
Shanghai Industrial Holdings Limited..... 63,000 148,382
Shangri-La Asia Ltd. .................... 280,000 180,678
Sime Darby (Hong Kong)................... 182,000 68,703
Siu-Fung Ceramics Holdings, Ltd(a)(c).... 1,110,327 45,854
Sun Hung Kai Properties Ltd. ............ 79,800 338,826
Swire Pacific Ltd Class A................ 59,500 224,606
Techtronic Industries Co. ............... 1,748,000 360,944
Tingyi (Cayman Island) Holding Co. ...... 2,210,000 135,477
Tsingtao Brewery Co. Ltd Series H(a)..... 600,000 93,695
Union Bank of Hong Kong Ltd. ............ 366,833 233,159
Wharf Holdings Ltd (with 11,600
warrants).............................. 232,000 229,049
Yue Yuen Industrial Holdings............. 179,200 320,307
------------
10,153,608
------------
MALAYSIA -- 0.06%
Leader Universal Holdings -- Class A..... 61,666 9,218
------------
SINGAPORE -- 2.82%
Clipsal Industries Limited............... 203,000 181,685
Elec & Eltek International Co. Ltd. ..... 71,500 241,670
------------
423,355
------------
SOUTH KOREA -- 3.12%
Daewoo Corporation....................... 400 964
Hyundai Motor Co, Ltd. .................. 5,510 55,782
Keum Kang Development Ind. Company....... 8,800 45,122
Korea Electric Power Corporation......... 10,300 109,902
L.G. Electronics......................... 8,000 65,550
Pohang Iron & Steel Co. Ltd. ............ 2,000 66,692
Samsung Electronics Co. GDR.............. 640 5,360
Samsung Electronics Co. GDR 144A
Registered............................. 376 5,993
Samsung Electronics Co. New Common....... 2,650 82,028
Samsung Heavy Industries(a).............. 509 2,540
Shinhan Bank(a).......................... 8,400 27,898
------------
467,831
------------
TAIWAN -- 8.19%
Acer Incorporation(a).................... 163,750 196,345
Compeq Manufacturing Co(a)............... 8,400 44,737
Far Eastern Department Stores Ltd. ...... 554,495 403,439
President Enterprises(a)................. 244,800 220,858
Systex Corporation(a).................... 91,432 168,971
Systex Corporation Rights(a)............. 11,899 7,445
Yung Shin Pharmaceuticals
Industries Co. ........................ 79,400 187,174
------------
1,228,969
------------
</TABLE>
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
EQUITY SECURITIES SHARES VALUE
- -----------------------------------------
<S> <C> <C>
THAILAND -- 0.10%
Bank of Ayudhya -- Foreign Registered.... 68,750 $ 8,939
Krung Thai Bank Public Company
Limited -- Foreign Registered.......... 50,000 6,619
------------
15,558
------------
VIETNAM -- 0.28%
The Vietnam Fund Limited(a).............. 7,800 41,457
------------
TOTAL INVESTMENTS -- 99.36%
(Cost -- $25,714,019)(d)............... 14,911,512
OTHER ASSETS, LESS
LIABILITIES -- 0.64%................... 96,566
------------
NET ASSETS -- 100%....................... $ 15,008,078
============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Perigrine Investments Holdings Limited has filed for liquidation
under the laws of Hong Kong.
(c) Securities valued in good faith by the Valuation Committee of
the Board of Trustees. The cost of these securities aggregated
$857,396. See Note 1 to the Financial Statements.
(d) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 1,329,615
Gross unrealized depreciation.................... (12,132,122)
------------
Net unrealized depreciation.................. $(10,802,507)
============
Purchases and sales of securities other than short-term obligations
aggregated $3,913,232 and $3,831,639, respectively, for the period
ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $25,714,019)...... $ 14,911,512
Cash denominated in foreign currencies (cost -- $25,146).... 22,267
Receivables
Fund shares sold.......................................... 103,378
Dividends and interest.................................... 86,981
Manager for expense reimbursement......................... 8,173
Other assets................................................ 10,272
------------
Total assets.............................................. 15,142,583
------------
LIABILITIES
Payables
Fund shares repurchased................................... 44,391
Management fee............................................ 12,638
12b-1 service and distribution fees....................... 7,755
Other payables to related parties......................... 12,620
Due to custodian............................................ 44,817
Accrued expenses............................................ 12,284
------------
Total liabilities......................................... 134,505
------------
NET ASSETS.................................................. $ 15,008,078
============
CLASS A
Net asset value and redemption price per share
($8,583,789/1,518,156 shares outstanding)................. $ 5.65
============
Maximum offering price per share ($5.65 X 100/94.25)*....... $ 5.99
============
CLASS B
Net asset value, offering price and redemption price** per
share ($5,659,992/1,014,755 shares outstanding)........... $ 5.58
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($755,462/135,590 shares outstanding)............... $ 5.57
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($8,835/1,566 shares outstanding)................... $ 5.64
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 28,355,510
Accumulated net realized loss on investments and foreign
currency transactions................................... (2,703,735)
Undistributed net investment income....................... 161,697
Net unrealized depreciation on investments and foreign
currency transactions................................... (10,805,394)
------------
NET ASSETS.................................................. $ 15,008,078
============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 13
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $5,875 foreign taxes withheld........... $ 409,774
Interest.................................................. 22,889
-----------
432,663
-----------
EXPENSES
Management fee............................................ $107,161
Transfer agent............................................ 49,605
Administrative services fee............................... 10,716
Custodian fees............................................ 9,889
Blue Sky fees............................................. 19,331
Auditing and accounting fees.............................. 9,584
Shareholder reports....................................... 4,536
Fund accounting........................................... 18,266
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 58,762
Legal..................................................... 11,590
Other..................................................... 9,643
-----------
313,318
Expenses reimbursed by manager............................ (28,703)
Fees paid indirectly...................................... (16,889)
-----------
Net expenses............................................ 267,726
-----------
NET INVESTMENT INCOME....................................... 164,937
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (216,614)
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (6,036,171)
-----------
Net loss on investment transactions..................... (6,252,785)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $(6,087,848)
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 164,937 $ (1,188)
Net realized loss on investments and foreign currency
transactions............................................ (216,614) (897,380)
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (6,036,171) (6,275,142)
----------- -----------
Net decrease resulting from operations.................. (6,087,848) (7,173,710)
----------- -----------
Fund share transactions (Note 5)
Class A................................................... 178,192 1,133,531
Class B................................................... 127,601 1,383,129
Class C................................................... (264,111) 965,525
Advisor Class............................................. 12,228 --
----------- -----------
Net increase resulting from Fund share transactions..... 53,910 3,482,185
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (6,033,938) (3,691,525)
NET ASSETS
Beginning of period....................................... 21,042,016 24,733,541
----------- -----------
END OF PERIOD............................................. $15,008,078 $21,042,016
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 161,697 $ --
=========== ===========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 15
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ ---------------------------------------------- ----------------
CLASS A 1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 8.04 $ 10.30 $ 8.58 $ 8.61 $ 11.55 $10.00
------ ------- ------- ------- ------- ------
Income (loss) from investment
operations
Net investment income (loss)(a)........ .07(b) .02(b) .03 .14 .05 (.01)
Net realized and unrealized (loss) gain
on investment transactions........... (2.46)(b) (2.28)(b) 1.74 (.01) (2.91) 1.57
------ ------- ------- ------- ------- ------
Total from investment operations..... (2.39) (2.26) 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........... $ 5.65 $ 8.04 $ 10.30 $ 8.58 $ 8.61 $11.55
====== ======= ======= ======= ======= ======
Total return(%).......................... (29.73)(g) (21.94)(c) 20.50(c) 1.59(c) (24.88)(c) 15.65(g)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $8,584 $12,020 $15,290 $12,855 $13,180 $8,371
Ratio of expenses to average net
assets(d)
With expense reimbursement(%).......... 2.35(e) 2.44 2.20 2.20 2.20 1.98(e)
Without expense reimbursement(%)....... 2.62(e) 2.51 2.48 2.73 2.76 2.45(e)
Ratio of net investment income (loss) to
average net assets(%)(a)............... 1.84(e) .28 .32 1.61 .55 (.91)(e)
Portfolio turnover rate(%)............... 19 20 22 25 4 --
Average commission rate(f)............... $.0060 $ .0050 $ .0050 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 16
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ ---------------------------------------------- ----------------
CLASS B 1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 7.96 $ 10.28 $ 8.58 $ 8.61 $ 11.55 $10.00
------ ------- ------- ------- ------- ------
Income (loss) from investment
operations
Net investment income (loss)(a)........ .04(b) (.04)(b) (.04) .08 (.02) (.02)
Net realized and unrealized (loss) gain
on investment transactions........... (2.42)(b) (2.28)(b) 1.74 (.02) (2.92) 1.57
------ ------- ------- ------- ------- ------
Total from investment operations..... (2.38) (2.32) 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........... $ 5.58 $ 7.96 $ 10.28 $ 8.58 $ 8.61 $11.55
====== ======= ======= ======= ======= ======
Total return(%).......................... (29.90)(g) (22.57)(c) 19.67(c) .83(c) (25.45)(c) 15.50(g)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $5,660 $ 7,893 $ 8,995 $ 6,905 $ 7,336 $3,565
Ratio of expenses to average net
assets(d)
With expense reimbursement(%).......... 3.14(e) 3.17 2.95 2.95 2.95 2.74(e)
Without expense reimbursement(%)....... 3.41(e) 3.24 3.23 3.48 3.51 3.20(e)
Ratio of net investment income (loss) to
average net assets(%)(a)............... 1.06(e) (.45) (.43) .86 (.20) (1.66)(e)
Portfolio turnover rate(%)............... 19 20 22 25 4 --
Average commission rate(f)............... $.0060 $ .0050 $ .0050 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 17
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE APRIL 30, 1996
MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
CLASS C 1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 7.94 $10.24 $ 9.44
------ ------ ------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .05(b) (.03)(b) --
Net realized and unrealized gain (loss) on investment
transactions............................................ (2.42)(b) (2.27)(b) .89
------ ------ ------
Total from investment operations........................ (2.37) (2.30) .89
------ ------ ------
Less distributions
In excess of net investment income........................ -- -- .09
------ ------ ------
Total distributions..................................... -- -- .09
------ ------ ------
Net asset value, end of period.............................. $ 5.57 $ 7.94 $10.24
====== ====== ======
Total return(%)............................................. (29.85)(g) (22.46)(c) 9.39(g)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 755 $1,129 $ 449
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.98(e) 3.05 2.71(e)
Without expense reimbursement(%).......................... 3.25(e) 3.12 2.99(e)
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. 1.22(e) (.33) (.19)(e)
Portfolio turnover rate(%).................................. 19 20 22
Average commission rate(f).................................. $.0060 $.0050 $.0050
</TABLE>
(See Notes to Financial Statements)
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 10, 1998
(COMMENCEMENT)
TO JUNE 30,
-----------------
ADVISOR CLASS 1998*
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $ 7.89
------
Income (loss) from investment operations
Net investment income(a).................................. .10(b)
Net realized and unrealized loss on investment
transactions............................................ (2.35)(b)
------
Total from investment operations........................ (2.25)
------
Net asset value, end of period.............................. $ 5.64
======
Total return(%)............................................. (28.52)(g)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 9
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.73(e)
Without expense reimbursement(%).......................... 3.00(e)
Ratio of net investment income to average net
assets(%)(a).............................................. 1.46(e)
Portfolio turnover rate(%).................................. 19
Average commission rate(f).................................. $.0060
</TABLE>
<TABLE>
<S> <C>
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) Based on average shares outstanding
(c) Total return does not reflect a sales charge.
(d) Beginning in 1995, total expenses include fees paid
indirectly through an expense offset arrangement, if any.
(e) Annualized
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Total return represents aggregate total return and does not
reflect a sales charge.
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy China Region Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of June 30, 1998, such securities were
determined to have a value of $45,854 (.31% of net assets) by the Valuation
Committee and have been noted as such in the Portfolio of Investments.
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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund has a net tax-basis capital loss carryforward of approximately
$1,916,000 as of December 31, 1997, 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, $1,033,000 in 2004 and $416,000 in 2005.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 foreign denominated
securities, passive foreign investment companies, and certain securities sold at
a loss. As a result, Net investment income (loss) and Net realized gain (loss)
on investments and foreign currency transactions for a reporting period may
differ significantly in amount and character from distributions during such
period. Accordingly, the Fund may make reclassifications among certain of its
capital accounts without impacting the net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement with its custodian
whereby a percentage of quarterly cumulative credits resulting from cash
balances on deposit with the custodian are used to offset custody fees,
including transaction and out-of-pocket expenses. For the period, custody fees
were reduced by $16,889 under this arrangement.
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, 12b-1 fees, brokerage commissions,
interest, litigation and indemnification expenses, and other extraordinary
expenses) to an annual rate of 1.95% of its average net assets. The voluntary
expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the period ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $5,355.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
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
$16,122, $36,051 and $6,589, 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 $29,581, $17,801, $2,186 and $37, for Class A, Class B,
Class C and Advisor Class, 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, Class C and Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 970,665 $ 7,168,349 2,028,607 $ 21,422,934
Repurchased................ (947,929) (6,990,157) (2,017,783) (20,289,403)
-------- ----------- ---------- ------------
Net increase............... 22,736 $ 178,192 10,824 $ 1,133,531
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 456,225 $ 3,295,720 1,013,613 $ 10,381,225
Repurchased................ (432,732) (3,168,119) (897,479) (8,998,096)
-------- ----------- ---------- ------------
Net increase............... 23,493 $ 127,601 116,134 $ 1,383,129
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 254,085 $ 1,736,849 234,668 $ 2,360,065
Repurchased................ (260,635) (2,000,960) (136,401) (1,394,540)
-------- ----------- ---------- ------------
Net (decrease)/increase.... (6,550) $ (264,111) 98,267 $ 965,525
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 10, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
----------------------
ADVISOR CLASS SHARES AMOUNT
------------- -------- -----------
<S> <C> <C>
Sold....................... 82,033 $ 621,360
Repurchased................ (80,467) (609,132)
-------- -----------
Net increase............... 1,566 $ 12,228
======== ===========
</TABLE>
03ICRF063098
<PAGE> 21
June 30, 1998 IVY FUNDS(R)
IVY
MONEY
MARKET
FUND
SEMIANNUAL
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
In the first half of 1998, inflation in the US remained low. We believe that
fundamentals are positive for continued economic growth, but at a more moderate
pace. According to our research, the economy is slowing down on its own due to
high, real short-term rates and the strength of the US dollar, which is curbing
exports and foreign capital inflows. Low levels of unemployment, coupled with a
high rate of new job creation, have led many analysts to become concerned that
prices at the consumer level will rise, leading to renewed inflation. Higher
productivity, however, is relieving some of this inflationary pressure. In
addition, the strong US dollar and the Asian currency depreciation have made
imports cheaper, which directly impacts consumers and also manufacturers who
import components.
US monetary policy remains unchanged, as the Federal Reserve has opted to
neither raise nor cut interest rates at their last several Federal Open Market
Committee meetings. Short-term rates have remained fairly stable through the
first half of the year, while long-term rates have remained range bound (5.80%
to 6.10%) during the first quarter, and then have trended lower to the 5.65%
area throughout the second quarter.
According to our research, this drop in rates was driven primarily by two
factors. The first is a continued favorable outlook for moderate economic growth
with low inflation. The most recent economic data available show that consumer
price inflation remains contained, some deflation has occurred at the wholesale
level, and productivity continues to improve.
The second factor contributing to lower interest rates is the "safe haven"
buying of US Treasury securities due to the Asian currency crisis. Going
forward, reduced exports to Asia should also contribute to the slowing of the US
economy. In addition, consumer price inflation should remain low due to the lack
of pricing power that exists for US companies because of cheaper Asian exports
coming into the US market.
With this in mind, we believe the Federal Reserve will most likely keep its
current monetary policy in place for the near future. If this happens,
short-term treasuries and other money market instruments will experience
continued stability for the foreseeable future. The Ivy Money Market Fund should
continue to provide investors with competitive yield opportunities within the
money market universe.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 22
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMERCIAL PAPER -- 29.21% PRINCIPAL VALUE
- ------------------------------------------
<S> <C> <C>
Abbott Laboratories, 5.43%, 07/08/98...... $1,000,000 $ 998,944
Chevron, 5.49%, 07/29/98.................. 850,000 846,371
Exxon, 5.43%, 07/31/98.................... 1,000,000 995,475
General Electric Capital Corp., 5.51%,
08/03/98................................ 1,000,000 994,949
National Rural Utilities, 5.45%,
08/06/98................................ 1,000,000 994,550
Paccar Financial Corp., 5.45%, 07/24/98... 800,000 797,214
-----------
TOTAL COMMERCIAL PAPER
(Cost -- $5,627,503).................... 5,627,503
-----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 70.60%
- ------------------------------------------
Federal Home Loan Bank, 5.35%, 08/12/98... 850,000 844,695
Federal Home Loan Mortgage Corp., 5.37%,
07/14/98................................ 1,000,000 998,061
Federal Home Loan Mortgage Corp., 5.38%,
07/20/98................................ 2,700,000 2,692,333
Federal Home Loan Mortgage Corp., 5.40%,
07/22/98................................ 2,600,000 2,591,810
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT AGENCY OBLIGATIONS PRINCIPAL VALUE
- ----------------------------------------
<S> <C> <C>
Federal National Mortgage Association,
5.37%, 07/17/98......................... $3,000,000 $ 2,992,840
Federal National Mortgage Association,
5.37%, 09/11/98......................... 2,500,000 2,473,150
Student Loan Marketing Association, 5.34%,
08/02/99(a)............................. 1,000,000 1,008,457
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost -- $13,601,346)................... 13,601,346
-----------
TOTAL INVESTMENTS -- 99.81%
(Cost -- $19,228,849)(b)................ 19,228,849
OTHER ASSETS, LESS LIABILITIES -- 0.19%... 37,033
-----------
NET ASSETS -- 100%........................ $19,265,882
===========
</TABLE>
<TABLE>
<S> <C>
(a) Floating rate note; reflects variable rate as of the latest
reset date, June 24, 1998.
(b) Cost is the same for Federal income tax purposes.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $19,228,849)...... $19,228,849
Cash........................................................ 130,365
Receivable from manager for expense reimbursement........... 11,601
Other assets................................................ 23,112
-----------
Total assets.............................................. 19,393,927
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 4,743
Fund shares repurchased................................... 90,390
Management fees........................................... 8,199
Other payables to related parties......................... 11,546
Accrued expenses............................................ 13,167
-----------
Total liabilities......................................... 128,045
-----------
NET ASSETS.................................................. $19,265,882
===========
CLASS A
Net asset value, offering price and redemption price per
share ($14,977,150/14,977,150 shares outstanding)......... $ 1.00
===========
CLASS B
Net asset value, offering price and redemption price* per
share ($4,188,538/4,188,538 shares outstanding)........... $ 1.00
===========
CLASS C
Net asset value, offering price and redemption price* per
share ($100,194/100,194 shares outstanding)............... $ 1.00
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $19,265,882
-----------
NET ASSETS.................................................. $19,265,882
===========
</TABLE>
*Subject to any applicable contingent deferred sales charge.
(See Notes to Financial Statements)
<PAGE> 23
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $625,529
--------
EXPENSES
Management fee............................................ $45,433
Transfer agent............................................ 41,645
Administrative services fee............................... 11,358
Custodian fees............................................ 6,381
Blue Sky fees............................................. 14,254
Auditing and accounting fees.............................. 5,360
Shareholder reports....................................... 1,956
Fund accounting........................................... 14,402
Trustees' fees............................................ 4,235
Legal..................................................... 15,016
Other..................................................... 5,443
--------
165,483
Expenses reimbursed by manager............................ (69,351)
--------
Net expenses............................................ 96,132
--------
NET INVESTMENT INCOME AND INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................................... $529,397
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income....................................... $ 529,397 $ 968,293
----------- -----------
Net increase resulting from operations.................... 529,397 968,293
----------- -----------
Distributions to shareholders from net investment income
Class A................................................... (429,057) (805,708)
Class B................................................... (92,671) (148,800)
Class C................................................... (7,669) (13,785)
----------- -----------
Total distributions to shareholders..................... (529,397) (968,293)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (407,479) (5,974,438)
Class B................................................... 376,835 337,330
Class C................................................... (304,802) 331,385
----------- -----------
Net decrease resulting from Fund share transactions..... (335,446) (5,305,723)
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (335,446) (5,305,723)
NET ASSETS
Beginning of period....................................... 19,601,328 24,907,051
----------- -----------
END OF PERIOD............................................. $19,265,882 $19,601,328
=========== ===========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 24
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
CLASS A MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ -----------------------------------------------------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income(a)........................ .02 .05 .04 .05 .04 .02
Less distributions
From net investment income...................... (.02) (.05) (.04) (.05) (.04) (.02)
------- ------- ------- ------- ------- -------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return(%)................................... 2.30(b) 4.60 4.47 4.80 4.21 2.42
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......... $14,977 $15,385 $21,359 $24,609 $26,827 $25,782
Ratio of expenses to average net assets
With expense reimbursement(%)................... .87(c) .88 .86 .85 .85 .85
Without expense reimbursement(%)................ 1.48(c) 1.57 1.86 1.39 1.24 1.56
Ratio of net investment income to average net
assets(%)(a).................................... 4.64(c) 4.60 4.47 4.91 3.29 2.22
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
CLASS B MONTHS ENDED ENDED
JUNE 30, DECEMBER 31,
------------ ------------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00
------- ------ ------
Income from investment operations
Net investment income(a).................................. .02 .05 .05
Less distributions
From net investment income................................ (.02) (.05) (.05)
------- ------ ------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00
======= ====== ======
Total return(%)............................................. 2.36(b) 4.77 4.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 4,189 $3,812 $3,474
Ratio of expenses to average net assets
With expense reimbursement(%)............................. .75(c) .70 .77
Without expense reimbursement(%).......................... 1.36(c) 1.39 1.77
Ratio of net investment income to average net
assets(%)(a).............................................. 4.75(c) 4.77 4.57
</TABLE>
(See Notes to Financial Statements)
<PAGE> 25
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FROM
FOR THE SIX FOR THE APRIL 30, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $1.00 $1.00 $1.00
----- ----- -----
Income from investment operations
Net investment income(a).................................. .02 .05 .03
Less distributions
From net investment income................................ (.02) (.05) (.03)
----- ----- -----
Net asset value, end of period.............................. $1.00 $1.00 $1.00
===== ===== =====
Total return(%)............................................. 2.34(b) 4.78 4.78(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 100 $ 405 $ 74
Ratio of expenses to average net assets
With expense reimbursement(%)............................. .79(c) .70 .56(c)
Without expense reimbursement(%).......................... 1.40(c) 1.39 1.56(c)
Ratio of net investment income to average net
assets(%)(a).............................................. 4.71(c) 4.78 4.78(c)
</TABLE>
<TABLE>
<S> <C>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return.
(c) Annualized
</TABLE>
*Unaudited
Note: The seven day yield as of June 30, 1998 was 4.57%. The thirty day yield as
of June 30, 1998 was 4.64%.
(See Notes to Financial Statements)
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Money Market Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Short-term obligations and commercial paper are
valued at amortized cost, which approximates market.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986 (the "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
are declared daily and paid monthly.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .40% of
the Fund's average net assets. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, brokerage commissions, interest,
litigation and indemnification expenses, and other extraordinary expenses) to an
annual rate of .85% of its average net assets. The voluntary expense limitation
may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI,
is the transfer and shareholder servicing agent for the Fund. For those
services, the Fund pays a monthly fee plus certain out-of-pocket expenses. Such
fees and expenses of $35,870, $5,265 and $510, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions and equivalent dollar amounts for Class A, Class B
and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
CLASS A JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- --------------------
<S> <C> <C>
Sold........................... 33,201,413 110,167,300
Issued on reinvestment of
distributions................. 394,982 687,560
Repurchased.................... (34,003,874) (116,829,298)
------------ ------------
Net decrease................... (407,479) (5,974,438)
============ ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
CLASS B JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- --------------------
<S> <C> <C>
Sold........................... 6,155,199 17,941,947
Issued on reinvestment of
distributions................. 69,149 113,848
Repurchased.................... (5,847,513) (17,718,465)
------------ ------------
Net increase................... 376,835 337,330
============ ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
CLASS C JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- --------------------
<S> <C> <C>
Sold........................... 1,159,852 4,042,327
Issued on reinvestment of
distributions................. 5,366 10,606
Repurchased.................... (1,470,020) (3,721,548)
------------ ------------
Net (decrease)/increase........ (304,802) 331,385
============ ============
</TABLE>
03IMMF063098
<PAGE> 27
June 30, 1998
IVY FUNDS(TM)
Ivy
Canada
Fund
- ----------
Semiannual
Report
- ----------
This report and the
financial statements
contained herein are
submitted for the general
information of the
share-holders. This report
is not authorized for
distribution to prospective
investors unless preceded or
accompanied by an effective
prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Throughout the centuries, the castle keep has been a source of long-range
vision and strategic advantage.
IVY FUNDS
Market Commentary:
During the second quarter of 1998, there continued to be a growing
divergence between the fortunes of industrialized and developing nations,
commodity consumers and commodity producers, strong and weak currencies and
advancing and declining stocks. Most of these divergences can be explained by a
second wave of investor concerns about Asia. While much of the expected impact
has been reflected in the markets, continued divergences have the potential to
undermine broader profit and stock market growth. The Canadian economy and stock
markets have not been immune to these influences as stocks drifted lower during
the second quarter. The domestic economy is performing well, but export-oriented
resource companies continue to feel the full brunt of the Asian economic
slowdown. These trends have also pushed commodities and the Canadian dollar,
along with the currencies of other resource-producing nations, to new record
lows. However, we believe that the attractiveness of investing in Canada and the
competitive ness of Canadian companies have improved significantly compared to
US companies. According to our research, American energy companies have already
recognized this opportunity, and are actively making significant
investments/takeovers of Canadian companies. We believe that investors are now
entering the capitulation phase, and it may take a few more months before the
market absorbs the selling pressure. The process of forming a low in resources
always tests the patience of investors, and the concentrated pullback this past
quarter has been very disappointing. According to our research, share prices are
way down, with good valuations; in our view, this has provided a good buying
opportunity for Canadian and other resource stocks. Despite the poor share price
p erformance, most companies continue to have reasonable balance sheets and
positive cash flow. Therefore, the Ivy Canada Fund will remain fully invested
primarily in Canadian companies with high-quality assets, but will also hold
selected non-Canadian world leaders in resources. As world markets form a
launching pad for the next sustainable advance in resources, and in response to
the significant share-price reductions, we are becoming more positive about the
potential returns. While there are no guarantees, a positive catalyst, whether
in the form of production cuts, inventory reductions, or a more positive demand
outlook, should likely lead to a significant improvement in the resource sector,
which would benefit the Ivy Canada Fund.
Ivy Management, Inc.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
<PAGE> 28
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 95.15% SHARES VALUE
- -----------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS -- 0.77%
Semi-Tech Corporation(a)................. 300,000 $ 55,082
-----------
DIAMONDS -- 3.77%
Aber Resources, Ltd.(a).................. 20,000 176,806
De Beers Consolidated Mines Ltd.......... 2,500 43,750
SouthernEra Resources Ltd.(a)............ 11,500 49,658
-----------
270,214
-----------
ENERGY SERVICE -- 9.15%
Bonus Resource Services
Corporation(a)......................... 10,000 26,181
EVI Weatherford, Inc.(a)................. 5,000 185,625
Ensign Resource Service Group, Inc....... 15,000 255,008
NQL Drilling Tools Inc. -- Class A(a).... 25,000 153,005
Noble Drilling Corporation(a)............ 1,500 36,094
-----------
655,913
-----------
FOOD/AGRICULTURE -- 3.89%
Potash Corporation of
Saskatchewan Inc....................... 2,200 165,762
Saskatchewan Wheat Pool.................. 10,000 113,224
-----------
278,986
-----------
GAS PRODUCERS -- 10.41%
Elk Point Resources, Inc.(a)............. 20,000 68,002
Fletcher Challenge Energy................ 55,000 127,720
Merit Energy Ltd.(a)..................... 50,000 170,005
Penn West Petroleum Ltd.(a).............. 20,000 231,207
Remington Energy Ltd.(a)................. 15,000 148,925
-----------
745,859
-----------
INDUSTRIAL PRODUCTS -- 8.55%
Cameco Corporation....................... 7,500 209,107
Offshore Systems International Ltd.(a)... 258,824 96,803
Simmonds Capital Ltd.(a)................. 100,000 26,521
Slater Steel, Inc........................ 37,500 280,509
-----------
612,940
-----------
JUNIOR PRECIOUS METALS -- 8.90%
Geomaque Explorations Ltd.(a)............ 50,000 68,002
Golden Knight Resources, Inc.(a)......... 100,000 56,442
Meridian Gold, Inc.(a)................... 100,000 207,406
Orvana Minerals Corporation(a)........... 375,000 306,010
-----------
637,860
-----------
METALS & MINERALS -- 8.52%
Billiton Plc............................. 35,000 70,953
Breakwater Resources, Ltd.(a)............ 115,000 156,405
International Uranium Corp.(a)........... 380,000 136,956
LionOre Mining International Ltd.(a)..... 108,100 51,457
Tenke Mining Corp.(a).................... 75,000 99,453
Western Garnet Company Ltd.(a)........... 40,000 95,203
-----------
610,427
-----------
OIL PRODUCERS -- 13.34%
Baytex Energy Ltd. -- Class A(a)......... 22,000 128,660
Canadian Natural Resources Ltd.(a)....... 10,000 171,365
Carmanah Resources Ltd.(a)............... 12,500 25,076
Hurricane Hydrocarbons Ltd. -- Class
A(a)................................... 20,000 96,563
Pacalta Resources Ltd.(a)................ 30,000 173,405
Richland Petroleum Corporation -- Class
A(a)................................... 100,000 224,407
Vermilion Resources Ltd.(a).............. 30,000 136,684
-----------
956,160
-----------
PAPER & FOREST PRODUCTS -- 12.80%
Alliance Forest Products, Inc.(a)........ 12,500 189,131
Asia Pulp & Paper Company Ltd. --
Sponsored ADR.......................... 10,000 112,500
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Donohue, Inc. Class A.................... 7,500 $ 169,580
Sino-Forest Corp. Class A(a)............. 300,000 357,011
Timberwest Timber Trust.................. 15,000 88,743
-----------
916,965
-----------
PLATINUM GROUP METALS -- 4.89%
Anglo American Platinum Corporation
Limited................................ 17,500 191,638
Industrias Penoles S.A................... 50,000 158,579
-----------
350,217
-----------
SENIOR PRECIOUS METALS -- 10.16%
Acacia Resources Ltd..................... 125,000 133,138
Freeport-McMoRan Copper & Gold, Inc...... 13,500 192,375
Gold Fields of South Africa Limited...... 6,000 69,375
Normandy Mining Ltd...................... 100,000 81,741
Sons of Gwalia Limited................... 30,000 74,310
Vengold Inc.(a).......................... 175,000 177,316
-----------
728,255
-----------
TOTAL EQUITY SECURITIES
(Cost -- $12,092,348).................. 6,818,878
-----------
BONDS -- 1.17% PRINCIPAL
- ----------------------------------------- --------
William Resources, Inc.
8.00%, 01/23/02(c) (Cost -- $89,401)... $495,000 84,153
-----------
U.S. GOVERNMENT OBLIGATIONS -- 3.26%
- -----------------------------------------
U.S. Treasury Bill, 4.94%, 07/09/98...... 70,000 69,923
U.S. Treasury Bill, 4.87%, 07/16/98...... 15,000 14,970
U.S. Treasury Bill, 4.945%, 07/23/98..... 10,000 9,970
U.S. Treasury Bill, 4.84%, 07/30/98...... 5,000 4,981
U.S. Treasury Bill, 4.88%, 07/30/98...... 5,000 4,980
U.S. Treasury Bill, 4.95%, 09/03/98...... 10,000 9,912
U.S. Treasury Bill, 4.98%, 09/03/98...... 10,000 9,911
U.S. Treasury Bill, 4.93%, 09/10/98...... 35,000 34,660
U.S. Treasury Bill, 4.95%, 09/10/98...... 5,000 4,951
U.S. Treasury Bill, 4.96%, 09/17/98...... 70,000 69,246
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost -- $233,504)..................... 233,504
-----------
TOTAL INVESTMENTS -- 99.58%
(Cost -- $12,415,253)(b)............... 7,136,535
OTHER ASSETS, LESS
LIABILITIES -- 0.42%................... 30,114
-----------
NET ASSETS -- 100%....................... $ 7,166,649
===========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
(c) Issuer is in default on interest payments.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation.................. $ 364,068
Gross unrealized depreciation.................. (5,642,786)
-----------
Net unrealized depreciation................ $(5,278,718)
===========
Purchases and sales of investments (excluding short-term
obligations) aggregated $3,526,037 and $5,645,986, respectively,
for the period ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 29
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $12,415,253)...... $ 7,136,535
Cash........................................................ 994
Receivables
Investments sold.......................................... 29,225
Fund shares sold.......................................... 12,171
Dividends and interest.................................... 3,967
Other assets................................................ 24,000
-----------
Total assets.............................................. 7,206,892
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 9,606
Management and advisory fees.............................. 5,323
12b-1 service and distribution fees....................... 3,382
Other payables to related parties......................... 6,620
Accrued expenses............................................ 15,312
-----------
Total liabilities......................................... 40,243
-----------
Net assets.................................................. $ 7,166,649
===========
CLASS A
Net asset value and redemption price per share
($5,763,083/1,283,475 shares outstanding)............... $ 4.49
===========
Maximum offering price per share ($4.49 X 100/94.25)*..... $ 4.76
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($1,108,067/248,824 shares outstanding)........... $ 4.45
===========
CLASS C
Net asset value, offering price and redemption price***
per share ($280,206/62,561 shares outstanding).......... $ 4.48
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($15,293/3,402 shares outstanding)................ $ 4.50
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $15,202,416
Accumulated net realized loss on investments and foreign
currency transactions................................... (2,595,926)
Accumulated net investment loss........................... (156,945)
Net unrealized depreciation on investments and foreign
currency transactions................................... (5,282,896)
-----------
NET ASSETS.................................................. $ 7,166,649
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 30
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $2,845 foreign taxes withheld........... $ 37,050
Interest.................................................. 6,537
-----------
43,587
-----------
EXPENSES
Management fee............................................ $23,783
Advisory fee.............................................. 16,648
Transfer agent............................................ 29,125
Administrative services fee............................... 4,757
Custodian fees............................................ 22,149
Blue Sky fees............................................. 19,160
Auditing and accounting fees.............................. 12,865
Shareholder reports....................................... 2,915
Fund accounting........................................... 16,240
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 24,169
Legal..................................................... 11,542
Other..................................................... 8,468
-----------
Total expenses.......................................... 196,056
-----------
NET INVESTMENT LOSS......................................... (152,469)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (720,665)
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (778,872)
-----------
Net loss on investment transactions..................... (1,499,537)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $(1,652,006)
===========
(See Notes to Financial Statements)
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- ------------
1998* 1997
---------------- ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (152,469) $ (329,750)
Net realized (loss) gain on investments and foreign
currency transactions................................... (720,665) 599,116
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (778,872) (4,015,909)
----------- -----------
Net decrease resulting from operations.............. (1,652,006) (3,746,543)
----------- -----------
Class A distributions
In excess of net investment income........................ -- (156,088)
From net realized gain.................................... -- (529,266)
In excess of net realized gain............................ -- (1,387,244)
----------- -----------
Total distributions to Class A shareholders......... -- (2,072,598)
----------- -----------
Class B distributions
In excess of net investment income........................ -- (27,307)
From net realized gain.................................... -- (92,594)
In excess of net realized gain............................ -- (242,694)
----------- -----------
Total distributions to Class B shareholders......... -- (362,595)
----------- -----------
Class C distributions
In excess of net investment income........................ -- (5,985)
From net realized gain.................................... -- (20,295)
In excess of net realized gain............................ -- (53,194)
----------- -----------
Total distributions to Class C shareholders......... -- (79,474)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (1,444,582) (1,566,391)
Class B................................................... (140,155) 363,532
Class C................................................... (4,924) 390,361
Advisor Class............................................. 20,143 --
----------- -----------
Net decrease resulting from Fund share
transactions........................................ (1,569,518) (812,498)
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (3,221,524) (7,073,708)
NET ASSETS
Beginning of period....................................... 10,388,173 17,461,881
----------- -----------
END OF PERIOD............................................. $ 7,166,649 $10,388,173
=========== ===========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 31
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
CLASS A MONTHS ENDED MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
------------ --------------------------------- ------------ --------------------
1998* 1997 1996 1995 1994 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 5.50 $ 9.64 $ 9.21 $ 8.90 $ 9.85 $ 10.04 $ 7.43
------- ------- ------- ------- ------- ------- -------
Income (loss) from
investment operations
Net investment loss......... (.09)(g) (.22) (.21) (.19)(a) (.11) (.11) (.01)
Net realized and unrealized
gain (loss) on investment
transactions.............. (.92)(g) (2.19) 2.29 .75 (.81) .24 3.35
------- ------- ------- ------- ------- ------- -------
Total from investment
operations............ (1.01) (2.41) 2.08 .56 (.92) .13 3.34
------- ------- ------- ------- ------- ------- -------
Less distributions
In excess of net investment
income.................... -- .15 -- -- -- -- --
From net realized gain...... -- .44 1.65 .25 -- .31 .73
In excess of net realized
gain...................... -- 1.14 -- -- -- -- --
From capital paid-in........ -- -- -- -- .03 .01 --
------- ------- ------- ------- ------- ------- -------
Total distributions..... -- 1.73 1.65 .25 .03 .32 .73
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period...................... $ 4.49 $ 5.50 $ 9.64 $ 9.21 $ 8.90 $ 9.85 $ 10.04
======= ======= ======= ======= ======= ======= =======
Total return(%)............... (18.36)(c) (23.75)(b) 23.86(b) 6.37(b) (9.38)(c) 1.05(b) 47.10(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands).............. $ 5,763 $ 8,538 $15,249 $19,353 $23,296 $34,549 $30,971
Ratio of expenses to average
net assets(%)............... 4.07(d) 2.89 2.79 2.90(f) 2.44(d) 2.05 2.63
Ratio of net investment loss
to average net assets(%).... (3.15)(d) (2.11) (1.78) (2.13)(a) (1.85)(d) (1.09) (1.41)
Portfolio turnover rate(%).... 37 93 56 21 36 62 32
Average commission rate(e).... $ .0140 $ .0170 $ .0134 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE SIX APRIL 1, 1994
CLASS B MONTHS ENDED MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, TO JUNE 30,
------------ ----------------------------------- ------------ --------------
1998* 1997 1996 1995 1994 1994
SELECTED PER SHARE DATA ------------ ------- ------ ------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 5.46 $ 9.59 $ 9.21 $ 8.90 $ 9.85 $10.16
------- ------- ------ ------ ------ ------
Income (loss) from investment
operations
Net investment loss............ (.10)(g) (.24) (.17) (.20)(a) (.09) (.02)
Net realized and unrealized
gain (loss) on investment
transactions................. (.91)(g) (2.18) 2.19 .71 (.86) (.29)
------- ------- ------ ------ ------ ------
Total from investment
operations............... (1.01) (2.42) 2.02 .51 (.95) (.31)
------- ------- ------ ------ ------ ------
Less distributions
In excess of net investment
income....................... -- .13 -- -- -- --
From net realized gain......... -- .44 1.64 .20 -- --
In excess of net realized
gain......................... -- 1.14 -- -- -- --
------- ------- ------ ------ ------ ------
Total distributions........ -- 1.71 1.64 .20 -- --
------- ------- ------ ------ ------ ------
Net asset value, end of period... $ 4.45 $ 5.46 $ 9.59 $ 9.21 $ 8.90 $ 9.85
======= ======= ====== ====== ====== ======
Total return(%).................. (18.50)(c) (24.03)(b) 23.26(b) 5.74(b) (9.64)(c) (3.05)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)................. $ 1,108 $ 1,501 $2,040 $1,142 $ 741 $ 227
Ratio of expenses to average net
assets(%)...................... 4.38(d) 3.23 3.30 3.50(f) 3.03(d) 2.66(d)
Ratio of net investment loss to
average net assets(%).......... (3.46)(d) (2.45) (2.30) (2.73)(a) (2.44)(d) (1.72)(d)
Portfolio turnover rate(%)....... 37 93 56 21 36 62
Average commission rate(e)....... $ .0140 $ .0170 $.0134 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 32
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR APRIL 30, 1996
CLASS C MONTHS ENDED ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.49 $ 9.62 $ 10.67
------- ------- -------
Income (loss) from investment operations
Net investment loss....................................... (.10)(g) (.24) (.14)
Net realized and unrealized gain (loss) on investment
transactions............................................ (.91)(g) (2.18) .72
------- ------- -------
Total from investment operations........................ (1.01) (2.42) .58
------- ------- -------
Less distributions
In excess of net investment income........................ -- .13 --
From net realized gain.................................... -- .44 1.63
In excess of net realized gain............................ -- 1.14 --
------- ------- -------
Total distributions..................................... -- 1.71 1.63
------- ------- -------
Net asset value, end of period.............................. $ 4.48 $ 5.49 $ 9.62
======= ======= =======
Total return(%)............................................. (18.40)(c) (23.95)(b) 6.51(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 280 $ 349 $ 173
Ratio of expenses to average net assets(%).................. 4.29(d) 3.14 3.15(d)
Ratio of net investment loss to average net assets(%)....... (3.37)(d) (2.37) (2.15)(d)
Portfolio turnover rate(%).................................. 37 93 56
Average commission rate(e).................................. $ .0140 $ .0170 $ .0134
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
--------------
1998*
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $ 5.96
-------
Loss from investment operations
Net investment loss....................................... (.10)(g)
Net realized and unrealized loss on investments........... (1.36)(g)
-------
Total from investment operations........................ (1.46)
-------
Net asset value, end of period.............................. $ 4.50
=======
Total return(%)............................................. (24.50)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 15
Ratio of expenses to average net assets(%).................. 3.31(d)
Ratio of net investment loss to average net assets(%)....... (2.39)(d)
Portfolio turnover rate(%).................................. 37
Average commission rate(e).................................. $ .0140
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Net investment loss is net of expenses reimbursed by
manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized
(e) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(f) The ratio of expenses to average net assets is net of
expenses reimbursed by manager. Without the expense
reimbursement, the ratio of expenses to average net assets
would have been 3.23% and 3.83% for Class A and Class B,
respectively, for the year ended December 31, 1995.
(g) Based on average shares outstanding
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Canada Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998 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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 foreign denominated
securities, passive foreign investment companies, and certain securities sold at
a loss. As a result, Net investment income (loss) and Net realized gain (loss)
on investments and foreign currency transactions for a reporting period may
differ significantly in amount and character from distributions during such
period. Accordingly, the Fund may make reclassifications among certain of its
capital accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI"), a wholly owned subsidiary of Mackenzie
Investment Management, Inc. ("MIMI"), is the Manager of the Fund. For its
services, IMI receives a fee monthly at the annual rate of .50% of the Fund's
average net assets.
Mackenzie Financial Corporation ("MFC") in Toronto, Ontario, Canada is the
Investment 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 MIMI, a subsidiary of MFC.
MIMI also provides certain administrative, accounting and pricing services
for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 June 30, 1998, the net amount of
underwriting discount retained by IMDI was $882.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class A shares are also subject to an ongoing
distribution fee at an annual rate of .15% of the average net assets 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 assets attributable to Class B
and Class C. IMDI may use such distribution fee for purposes of advertising and
marketing shares of the Fund. Such fees of $15,579, $6,915 and $1,675 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 $26,036, $2,605, $475 and $9, for Class A, Class B, Class C
and Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold......................... 212,461 $ 1,171,862 298,986 $ 2,635,521
Issued on reinvestment of
distributions............... -- -- 361,059 1,859,358
Repurchased.................. (480,607) (2,616,444) (690,062) (6,061,270)
-------- ----------- ---------- -----------
Net decrease................. (268,146) $(1,444,582) (30,017) $(1,566,391)
======== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold......................... 18,067 $ 101,762 70,576 $ 643,792
Issued on reinvestment of
distributions............... -- -- 60,223 307,742
Repurchased.................. (44,003) (241,917) (68,785) (588,002)
-------- ----------- ---------- -----------
Net (decrease)/increase...... (25,936) $ (140,155) 62,014 $ 363,532
======== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 TO DECEMBER 31, 1997
---------------------- ------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold......................... 2,436 $ 11,589 51,492 $ 488,373
Issued on reinvestment of
distributions............... -- -- 11,742 60,359
Repurchased.................. (3,429) (16,513) (17,649) (158,371)
-------- ----------- ---------- -----------
Net(decrease)/increase....... (993) $ (4,924) 45,585 $ 390,361
======== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
----------------------
ADVISOR CLASS SHARES AMOUNT
------------- -------- -----------
<S> <C> <C>
Sold......................... 3,616 $ 21,184
Repurchased.................. (214) (1,041)
-------- -----------
Net increase................. 3,402 $ 20,143
======== ===========
</TABLE>
03ICFX063098
<PAGE> 35
June 30, 1998 IVY FUNDS(R)
IVY
PAN-EUROPE
FUND
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
During the first half of 1998, European markets increased by more than 25%.
Efforts to meet the economic convergence criteria to qualify for Economic and
Monetary Union (EMU) stimulated the growth in some markets by more than 40%:
Finland (+53%), Belgium (+42%), France (+40%) and Portugal (+40%). However,
countries that opted out of EMU-notably the United Kingdom-did not perform as
well. Given our view that the UK represents one of the most undervalued markets
in Europe, we have used periods of market weakness to build long-term positions
in UK companies in the Ivy Pan-Europe Fund.
As a result of the market convergence phenomenon, the themes of restructuring
and cyclical recovery were overshadowed during the first half of 1998. However,
according to our research, they are now gaining momentum. New restructuring
plans are announced regularly. For example, in 1998, cost-cutting measures in
France should lead to 20% growth in earnings; and in 1999, growth is expected to
reach 25%. SKF, the Swedish bearing producer and a core holding in the Ivy
Pan-Europe Fund, disclosed a major program to reduce costs and improve control
over inventories. To improve productivity and reach a critical size, two paper
and pulp companies held in the Fund-Stora of Sweden and Enso of Finland-are
merging to create the largest producer of newsprint and cartonboard. And,
Daimler-Benz and Chrysler have agreed to merge, creating the fifth-largest
automaker with an annual production of four million units.
Our research confirms that a cyclical recovery is also on the rise in Europe as
companies are confident of meeting and even exceeding their goals. Earnings
targets are regularly revised upward, and are expected to grow by 11.3% in 1998
(versus expectations of 10.7% growth at the end of March), and by 14.3% in 1999
(versus 13.6% at the end of March). In comparison, earnings growth for the US
market is expected to be 8.5% in 1998, and 6.0% in 1999.
Relative to other developed countries, our research confirms that to date, the
Asian crisis has had a limited impact on European companies. Exports to this
region are declining (down 16% year on year in the first quarter of 1998), and
we anticipate that this downward trend will continue in 1998. Direct trade
shifts with Asia will likely lower nominal European Union (EU) GDP growth this
year by approximately 0.50%, and will probably be lowered by the same percentage
or less in 1999. However, given the strength of domestic European economies and
strong export trends to other parts of the world, analysts forecast real GDP for
1998 to grow by 2.7% (versus 2.6% in 1997), and by 3.0% in 1999.
Despite the recent surge in European equities, we are comfortable with the
valuation levels for several reasons. Our research confirms that by all
measures, European markets are more attractively valued than US markets, growth
prospects are higher, and Europe is more insulated from the Asian crisis than
the US. With a benign interest rate environment, a strong domestic economic
recovery and an on-going focus on corporate restructuring, we believe that the
favorable environment for the Ivy Pan-Europe Fund should continue.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 36
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 90.69% SHARES VALUE
- ----------------------------------------------
<S> <C> <C>
AUSTRIA -- 0.66%
Creditanstalt-Bankverein...................... 200 $ 21,576
Julius Meinl International AG................. 362 12,058
WEBS-Austria, WEBS-World Equity Benchmark
Shares(a)................................... 275 3,472
----------
37,106
----------
BELGIUM -- 0.71%
Solvay S.A.................................... 500 39,640
----------
CZECH REPUBLIC -- 0.12%
SPT Telekom A/S(a)............................ 500 6,918
----------
DENMARK -- 4.39%
Jyske Bank A/S................................ 587 69,242
Sydbank A/S................................... 986 54,913
Unidanmark A/S................................ 1,350 121,317
----------
245,472
----------
FINLAND -- 3.93%
Enso OY -- R Shares........................... 7,127 77,031
Pohjola Insurance Group B..................... 1,203 59,860
UPM -- Kymmene Corp. ......................... 3,008 82,787
----------
219,678
----------
FRANCE -- 14.71%
Assurances Banque Populaire................... 375 39,013
Banque Nationale de Paris..................... 1,429 116,759
Bongrain S.A. ................................ 143 71,807
Bouygues...................................... 562 102,063
Eurotunnel S.A.(a)............................ 22,200 24,418
Eurotunnel S.A. Warrants(a)................... 9,200 1,400
Groupe Danone................................. 347 95,674
Scor.......................................... 2,448 155,277
Societe Generale.............................. 712 148,028
Usinor Sacilor................................ 4,328 66,860
----------
821,299
----------
GERMANY -- 3.63%
BMW AG........................................ 14 14,124
BMW AG -- New Shares(a)....................... 3 2,983
Daimler -- Benz AG............................ 162 15,886
Dyckerhoff AG................................. 154 53,750
Dyckerhoff AG Preferred....................... 75 29,833
Leica Camera AG............................... 1,221 14,543
Merck KGaA.................................... 1,599 71,489
----------
202,608
----------
HUNGARY -- 0.02%
BorsodChem GDR 144A(a)........................ 41 1,159
----------
ITALY -- 6.25%
Fiat S.p.A. .................................. 28,210 123,470
Gucci Group................................... 2,085 106,699
Safilo S.p.A. ................................ 16,300 118,971
----------
349,140
----------
NETHERLANDS -- 6.83%
Akzo Nobel NV................................. 363 80,694
Fortis Amev NV................................ 570 33,372
Hagemeyer NV.................................. 998 43,173
ING Groep NV.................................. 494 32,347
Nedlloyd Groep NV............................. 2,415 49,031
Philips Electronics NV........................ 1,698 142,737
----------
381,354
----------
NORWAY -- 3.37%
Bergesen...................................... 2,120 39,645
Saga Petroleum ASA-B Shares................... 2,910 41,146
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------------
<S> <C> <C>
Saga Petroleum Series A Free.................. 3,306 $ 50,838
Smedvig ASA-A Shares.......................... 4,650 56,356
----------
187,985
----------
PORTUGAL -- 1.26%
Portugal Telecom S.A. ........................ 530 28,090
Portugal Telecom S.A. ADR..................... 800 42,350
----------
70,440
----------
RUSSIA -- 0.02%
LUKoil Holding Co. -- Sponsored ADR........... 30 983
----------
SPAIN -- 3.21%
Corp. Financiera Reunida, S.A. (COFIR)(a)..... 4,270 64,570
Grupo Anaya S.A. ............................. 1,008 36,214
Telefonica de Espana.......................... 385 17,830
Telefonica de Espana S.A. ADR................. 437 60,770
----------
179,384
----------
SWEDEN -- 7.81%
ABB AB -- B Shares............................ 5,237 72,892
AssiDoman AB.................................. 620 18,036
Astra AB "B" Shares........................... 964 19,220
Electrolux AB................................. 6,445 110,717
S.K.F. AB Series "B".......................... 4,616 83,928
Sandvik AB -- "B" Shares...................... 1,006 27,626
Stora Kopparbergs Bergslags Aktiebolag
(STORA) -- A Shares......................... 100 1,574
Stora Kopparbergs Bergslags Aktiebolag
(STORA) -- B Shares......................... 1,650 26,069
Volvo AB B Shares............................. 2,554 76,060
----------
436,122
----------
SWITZERLAND -- 9.06%
Edipresse S.A. ............................... 191 52,510
Fotolabo S.A. ................................ 83 27,250
Georg Fischer AG Bearer....................... 160 62,236
Holderbank Financiere Glaris AG............... 36 45,807
Jelmoli Holding AG Bearer..................... 24 30,458
Nestle AG Registered.......................... 52 111,281
Pargesa Holding AG -- B Shares................ 12 21,321
SGS Societe Generale de Surveillance Holding
S.A. ....................................... 38 64,410
Sulzer AG Registered.......................... 66 52,084
The Swatch Group AG........................... 50 38,634
----------
505,991
----------
UNITED KINGDOM -- 24.71%
Albert Fisher Group PLC....................... 120,349 46,184
Barclays PLC.................................. 2,914 84,161
British Steel plc............................. 33,175 73,342
Cadbury Schweppes PLC......................... 3,590 55,586
Corporate Services Group PLC.................. 30,360 120,814
Corporate Services Group PLC Rights(a)........ 7,590 1,456
Diageo PLC.................................... 3,200 38,095
Gallaher Group PLC............................ 27,890 154,611
HSBC Holdings plc............................. 2,980 75,626
Hanson plc.................................... 14,900 90,430
Hanson plc Sponsored ADR...................... 400 12,125
Hazelwood Foods PLC........................... 7,460 29,873
Imperial Chemical Industries PLC.............. 4,532 73,045
Jarvis Hotels PLC............................. 17,968 51,115
National Westminster Bank PLC................. 1,921 34,392
Next PLC...................................... 8,940 76,969
PizzaExpress PLC.............................. 1,577 22,550
Shell Transport & Trading Co. ................ 7,572 53,189
</TABLE>
<PAGE> 37
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------------
<S> <C> <C>
Standard Chartered PLC........................ 4,270 $ 48,482
Tate and Lyle PLC............................. 10,750 85,332
Waterford Wedgwood PLC........................ 52,744 69,083
Willis Corroon Group PLC...................... 32,880 83,661
----------
1,380,121
----------
TOTAL INVESTMENTS -- 90.69%
(Cost -- $4,830,430)(b)..................... 5,065,400
OTHER ASSETS, LESS LIABILITIES -- 9.31%....... 519,841
----------
NET ASSETS -- 100%............................ $5,585,241
==========
ADR - American Depository Receipt
GDR - Global Depository Receipt
NV - Non-voting
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation...................... $ 430,065
Gross unrealized depreciation...................... (195,095)
----------
Net unrealized appreciation.................... $ 234,970
==========
Purchases and sales of securities other than short-term obligations
aggregated $4,668,409 and $401,452, respectively, for the period
ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 38
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost - $4,830,430)........ $5,065,400
Cash........................................................ 412,291
Receivables
Fund shares sold.......................................... 92,717
Dividends and interest.................................... 20,225
Manager for expense reimbursement......................... 18,008
Deferred organization expenses.............................. 53,429
Other assets................................................ 13,832
----------
Total assets.............................................. 5,675,902
----------
LIABILITIES
Payables
Investments purchased..................................... 37,654
Fund shares repurchased................................... 1,314
Management fee............................................ 4,419
12b-1 service and distribution fees....................... 3,115
Other payables to related parties......................... 37,400
Accrued expenses............................................ 6,759
----------
Total liabilities......................................... 90,661
----------
NET ASSETS.................................................. $5,585,241
==========
CLASS A
Net asset value and redemption price per share
($2,524,809/199,415 shares outstanding)................... $ 12.66
==========
Maximum offering price per share ($12.66 x 100/94.25)*...... $ 13.43
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($1,936,491/153,786 shares outstanding)............. $ 12.59
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,081,156/85,816 shares outstanding).............. $ 12.60
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($42,785/3,376 shares outstanding).................. $ 12.67
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $5,286,891
Undistributed net realized gain on investments and foreign
currency transactions................................... 45,971
Undistributed net investment income....................... 17,480
Net unrealized appreciation on investments and foreign
currency transactions................................... 234,899
----------
NET ASSETS.................................................. $5,585,241
==========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum contingent deferred sales charge of 5%.
*** Subject to a maximum contingent deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 39
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $6,940 foreign taxes withheld........... $ 56,048
--------
EXPENSES
Management fee............................................ $15,043
Transfer agent............................................ 1,616
Administrative services fee............................... 1,504
Custodian fees............................................ 28,724
Blue Sky fees............................................. 16,023
Auditing and accounting fees.............................. 7,769
Shareholder reports....................................... 473
Amortization of organization expenses..................... 4,554
Fund accounting........................................... 9,751
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 9,234
Legal..................................................... 12,083
Other..................................................... 1,102
--------
112,111
Expenses reimbursed by manager............................ (68,680)
Fees paid indirectly...................................... (4,863)
--------
Net expenses............................................ 38,568
--------
NET INVESTMENT INCOME....................................... 17,480
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 45,940
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 251,489
--------
Net gain on investment transactions..................... 297,429
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $314,909
========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 40
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 13, 1997
MONTHS ENDED (COMMENCEMENT) TO
JUNE 30, DECEMBER 31,
------------ -----------------
1998* 1997
------------ -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss)................................ $ 17,480 $ (1,041)
Net realized gain on investments and foreign currency
transactions............................................ 45,940 1,919
Net unrealized appreciation (depreciation) during the
period on investments................................... 251,489 (16,590)
---------- --------
Net increase (decrease) resulting from operations....... 314,909 (15,712)
---------- --------
Distributions to shareholders from net realized gain
Class A................................................... -- (805)
Class B................................................... -- (42)
---------- --------
Total distributions to shareholders..................... -- (847)
---------- --------
Fund share transactions (Note 4)
Class A................................................... 1,741,772 589,270
Class B................................................... 1,831,597 72,520
Class C................................................... 1,009,400 --
Advisor Class............................................. 42,332 --
---------- --------
Net increase resulting from Fund share transactions..... 4,625,101 661,790
---------- --------
TOTAL INCREASE IN NET ASSETS................................ 4,940,010 645,231
NET ASSETS
Beginning of period....................................... 645,231 --
---------- --------
END OF PERIOD............................................. $5,585,241 $645,231
========== ========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 17,480 $ --
========== ========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 41
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 13, 1997
CLASS A MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1998* 1997
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $10.56 $10.02
------ ------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .15(e) (.02)
Net realized and unrealized gain on investment
transactions............................................ 1.95(e) .58
------ ------
Total from investment operations........................ 2.10 .56
------ ------
Less distributions
From net realized gain.................................... -- .02
------ ------
Total distributions..................................... -- .02
------ ------
Net asset value, end of period.............................. $12.66 $10.56
====== ======
Total return(%)(b).......................................... 19.89 5.54
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,525 $ 575
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 2.52 2.20
Without expense reimbursement(%)(c)....................... 7.09 28.41
Ratio of net investment income (loss) to average net
assets(%)(a)(c)........................................... 1.53 (.48)
Portfolio turnover rate(%).................................. 15 5
Average commission rate(d).................................. $.0240 $.0300
</TABLE>
(See Notes to Financial Statements)
<PAGE> 42
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 13, 1997
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1998* 1997
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $10.54 $10.02
------ ------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .07(e) (.03)
Net realized and unrealized gain on investment
transactions............................................ 1.98(e) .56
------ ------
Total from investment operations........................ 2.05 .53
------ ------
Less distributions
From net realized gain.................................... -- .01
------ ------
Total distributions..................................... -- .01
------ ------
Net asset value, end of period.............................. $12.59 $10.54
====== ======
Total return(%)(b).......................................... 19.45 5.26
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,936 $ 70
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 3.30 3.29
Without expense reimbursement(%)(c)....................... 7.87 29.50
Ratio of net investment income (loss) to average net
assets(%)(a)(c)........................................... .75 (1.58)
Portfolio turnover rate(%).................................. 15 5
Average commission rate(d).................................. $.0240 $.0300
</TABLE>
(See Notes to Financial Statements)
<PAGE> 43
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 29, 1998
CLASS C (COMMENCEMENT)
TO JUNE 30,
-----------------
1998*
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $10.91
------
Income from investment operations
Net investment income (a)................................. .07(e)
Net realized and unrealized gain on investment
transactions............................................ 1.62(e)
------
Total from investment operations........................ 1.69
------
Net asset value, end of period.............................. 12.60
======
Total return(%)(b).......................................... 15.49
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,081
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 3.24
Without expense reimbursement(%)(c)....................... 7.81
Ratio of net investment income to average net
assets(%)(a)(c)........................................... .81
Portfolio turnover rate(%).................................. 15
Average commission rate(d).................................. $.0240
</TABLE>
(See Notes to Financial Statements)
<PAGE> 44
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 23, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
--------------
1998*
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $12.31
------
Income from investment operations
Net investment income(a).................................. .03(e)
Net realized and unrealized gain on investment
transactions............................................ .33(e)
------
Total from investment operations........................ .36
------
Net asset value, end of period.............................. $12.67
======
Total return(%)(b).......................................... 2.92
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 43
Ratio of expenses to average net assets
With expense reimbursement(%)(c).......................... 3.33
Without expense reimbursement(%)(c)....................... 6.80
Ratio of net investment income to average net
assets(%)(a)(c)........................................... 1.72
Portfolio turnover rate(%).................................. 15
Average commission rate(d).................................. $.0240
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Annualized
(d)This amount may vary from period to period and fund to fund depending on the
mix of trades executed in various markets where trading practices and
commission rate structures may differ.
(e) Based on average shares outstanding
*Unaudited
(See Notes to Financial Statements)
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Pan-Europe Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998, 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.
CASH AND CASH EQUIVALENTS -- The Fund classifies as cash amounts on deposit
with the Fund's custodian. These amounts earn interest at variable interest
rates. At June 30, 1998 the interest rate was 5.25%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 foreign denominated securities
and non-deductible organization expenses. As a result, Net investment income
(loss) and Net realized gain (loss) on investments and foreign currency
transactions for a reporting period may differ significantly in amount and
character from distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement with its custodian
whereby a 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.
<PAGE> 46
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
For the period, custody fees were reduced by $4,863 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 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 the Fund's average net assets. The
voluntary expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $4,376.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $1,913,
$4,310 and $3,011, 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 $803, $577, $225 and $11, for Class A, Class B, Class C and
Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1998 1997
-------------------- ------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- ------- ---------- ------- --------
<S> <C> <C> <C> <C>
Sold................................ 223,056 $2,728,989 81,901 $893,474
Issued on reinvestment of
distributions...................... - - 77 804
Repurchased......................... (78,127) (987,217) (27,492) (305,008)
------- ---------- ------- --------
Net increase........................ 144,929 $1,741,772 54,486 $589,270
======= ========== ======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1998 1997
-------------------- ----------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold................................. 220,360 $2,786,966 6,634 $72,488
Issued on reinvestment of
distributions....................... - - 4 42
Repurchased.......................... (73,211) (955,369) (1) (10)
------- ---------- ----- -------
Net increase......................... 147,149 $1,831,597 6,637 $72,520
======= ========== ===== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 29, 1998 YEAR ENDED
(COMMENCEMENT) DECEMBER 31,
TO JUNE 30, 1998 1997
-------------------- ---------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................. 116,266 $1,394,310 1 $ 10
Repurchased.......................... (30,450) (384,910) (1) (10)
------- ---------- --- ----
Net increase......................... 85,816 $1,009,400 - $ -
======= ========== === ====
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 23, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
--------------------
ADVISOR CLASS SHARES AMOUNT
- ------------- ------- ----------
<S> <C> <C>
Sold................................. 3,376 $ 42,332
------- ----------
Net increase......................... 3,376 $ 42,332
======= ==========
</TABLE>
03IPEF063098
<PAGE> 47
June 30, 1998 IVY FUNDS(R)
IVY
ASIA
PACIFIC
FUND
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
Market Commentary
So far in 1998, it has been a rough ride in the Asian equity markets. At the
beginning of the year, investors in the Ivy Asia Pacific Fund were rewarded as
regional stock markets and currencies experienced a strong rally after last
year's free fall. During the first quarter, we believe that bargain hunters,
attracted by many stocks trading at large discounts to net asset values, drove
the rebound. Over the course of the second quarter, however, the markets sold
off again--reflecting expectations that it will take some time to solve the
fundamental problems in many Asian economies. Many markets in the region have
actually retested last year's lows, and sentiment toward the region appears to
be nearing the point of maximum pessimism.
We agree with the views of many analysts that in the short to medium term,
economic prospects for the region are somewhat mixed. According to our research,
Asia is currently experiencing a period of structural change, which will
undoubtedly cause some consternation in the near term. However, we expect that
economic reforms and restructuring--such as consolidation of the banking
systems, lowering of private-sector debt levels, deregulation and
privatization--will improve prospects for healthy long-term growth.
Of interest is the divergence of opinion between direct investors and portfolio
investors. Despite overwhelmingly negative sentiment in financial markets, many
Asian economies are currently experiencing an unprecedented level of merger and
acquisition activity. In our view, this surge in interest by companies based in
mature economies implies that many multinational companies view the current
crisis of confidence as an opportunity. A recent study by the United Nations
Conference on Trade and Development (UNCTAD) surveyed 200 multinationals on
their investment intentions for the region. Most indicated that the crisis has
not altered their long-term view of the region. Eighty-eight percent of those
surveyed intend to go ahead or accelerate investment plans. Twenty-five percent
said they are planning to increase investment due to lower costs as a result of
the devaluations and opportunities to buy local companies at fire-sale prices.
And, nearly all survey participants expressed confidence in the region as a
destination for profitable foreign investment.
We believe that the most pressing question facing investors at this point is in
regard to the extent to which equity prices have already reflected the impact of
last year's events. In our view, equity investors appear to have already
discounted the worst-case scenario in many instances; and, at current levels,
these markets offer compelling long-term value. The Ivy Asia Pacific Fund
remains highly correlated to developments in Southeast Asia, with 41% of total
assets invested in the area. While there are no guarantees, we believe that as
dramatically undervalued currencies return to more normal levels and investor
sentiment improves, this portion of the Fund should make a significant
contribution to performance.
Going forward, we continue to believe that currency markets will lead sentiment
in the Asian stock markets. As regional currencies stabilize and interest rates
come down to more normal levels, prospects for the region should improve
dramatically. As value-oriented, long-term investors, we view this as a good
opportunity to prepare for the next phase of Asia's economic development.
Therefore, we believe that the Ivy Asia Pacific Fund is well positioned to
capture this upside opportunity.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 48
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 87.84% SHARES VALUE
- --------------------------------------------
<S> <C> <C>
AUSTRALIA -- 5.06%
Australia & New Zealand Banking Group
Ltd....................................... 4,600 $ 31,733
BRL Hardy Limited........................... 14,000 45,081
Broken Hill Proprietary Company Limited..... 4,200 35,501
National Australia Bank Ltd................. 3,100 40,889
Pacific Dunlop Limited...................... 22,000 35,557
Tyndall Australia Limited................... 41,140 53,499
Westpac Banking Corp. Ltd................... 5,000 30,498
-----------
272,758
-----------
CHINA -- 2.02%
Anhui Expressway Co. Ltd.................... 270,000 27,179
China Southern Airlines Company
Limited(a)................................ 166,000 22,280
Guangdong Kelon Elec Holding................ 39,000 30,702
Zhenhai Refining and Chemical Company
Limited................................... 224,000 28,909
-----------
109,070
-----------
HONG KONG -- 38.22%
Asia Satellite Telecommunications Holdings
Ltd....................................... 30,000 49,557
CDL Hotels International Ltd................ 180,000 53,429
Chen Hsong Holdings......................... 140,000 20,236
Cheung Kong Holdings Ltd.................... 45,000 221,266
Cheung Kong Infrastructure Holdings......... 12,000 22,688
China Resources Enterprise Limited.......... 82,000 84,661
Citic Pacific Ltd........................... 43,000 76,027
Giordano Holdings Ltd....................... 180,000 36,471
Guangdong Investments....................... 122,000 27,396
Guangdong Investments Warrants(a)........... 1,000 5
Guangzhou Investment Company Ltd............ 126,000 14,310
Guoco Group Ltd............................. 31,000 32,606
HSBC Holdings............................... 8,400 205,431
Henderson Land Development Company
Ltd....................................... 12,000 39,569
Hong Kong Land Holdings Ltd................. 32,000 40,000
Jardine International Motor Holdings Co..... 108,000 39,723
Jardine Matheson Holdings Ltd............... 17,800 48,060
Jardine Strategic Holdings Ltd.............. 30,500 57,950
Li & Fung................................... 34,000 54,849
Moulin International Holding Ltd............ 230,000 22,856
National Mutual Asia Ltd.................... 60,000 38,330
New World Development Company Ltd........... 34,000 65,819
Ng Fung Hong Limited........................ 60,000 41,427
Peregrine Investments Holdings
Limited(b)(c)............................. 38,000 --
Shanghai Industrial Holdings Limited........ 28,000 65,948
Sun Hung Kai Properties Ltd................. 34,000 144,362
Swire Pacific Ltd Class A................... 21,000 79,273
Techtronic Industries Company............... 134,000 27,670
Tingyi (Cayman Island) Holding Co........... 366,000 22,436
Union Bank of Hong Kong Ltd................. 88,266 56,102
VTech Holdings Limited...................... 25,000 93,082
WEBS -- Hong Kong, WEBS..................... 14,600 117,712
Wharf Holdings Ltd (with 3,800
warrants(a)).............................. 76,000 75,033
Wheelock & Company, Ltd..................... 57,000 33,655
Yue Yuen Industrial Holdings................ 29,000 51,835
-----------
2,059,774
-----------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------
<S> <C> <C>
INDONESIA -- 1.66%
Asia Pulp & Paper Company Ltd -- Sponsored
ADR....................................... 4,400 $ 49,500
PT Bank Dagang Nasional -- Foreign
Registered (with 500 warrants(a))......... 30,500 155
PT Darya Varia Laboratoria (with 559,500
rights(a))................................ 186,500 2,835
PT Hanjaya Mandala Sampoerna................ 96,000 13,135
PT Mulia Industrindo........................ 310,000 5,236
Semen Gresik................................ 32,500 18,446
-----------
89,307
-----------
MALAYSIA -- 11.47%
AMMB Holdings Berhad........................ 37,800 19,868
Berjaya Sports Toto Bhd..................... 19,000 28,174
Genting Berhad.............................. 7,000 12,658
Hicom Holdings Berhad....................... 158,000 40,000
Johor Port Berhad........................... 204,000 37,873
KFC Holdings (Malaysia) Berhad(a)........... 62,700 33,259
Land & General Berhad....................... 350,000 39,662
Malayan Banking Berhad...................... 24,400 24,591
Malayan Cement Berhad....................... 55,750 18,146
Perusahaan Otomobil Nasional Bhd............ 78,000 49,837
RHB Capital Berhad.......................... 46,000 18,744
Sime Darby Berhad........................... 94,000 64,820
Sime UEP Properties Berhad.................. 68,000 39,021
Sungei Way Holdings Bhd..................... 171,000 26,387
Tenaga Nasional Berhad...................... 43,000 51,838
WEBS -- Malaysia............................ 32,900 113,094
-----------
617,972
-----------
NEW ZEALAND -- 5.23%
Fisher & Paykel Industries Ltd.............. 13,900 35,355
Fletcher Challenge Building................. 33,900 42,233
Fletcher Challenge Energy................... 6,350 15,162
Fletcher Challenge Forestry................. 48,336 27,098
Fletcher Challenge Paper.................... 40,000 44,434
Telecom Corporation of New Zealand
Limited................................... 14,000 57,702
Tourism Holdings Limited(a)................. 104,428 59,628
-----------
281,612
-----------
PHILIPPINES -- 4.59%
Alaska Milk Corporation(a).................. 820,000 36,575
Asian Terminals, Inc........................ 961,000 32,264
Benpres Holdings Corporation Sponsored
GDR(a).................................... 23,600 57,820
Benpres Holdings Corporation 144A........... 1,000 2,450
Metro Pacific Corporation(a)................ 1,633,124 37,205
Music Corporation(a)........................ 112,000 9,938
Philippine Long Distance Telephone Co....... 1,472 33,535
Universal Robina Corporation................ 369,500 37,659
-----------
247,446
-----------
SINGAPORE -- 13.76%
Clipsal Industries Limited.................. 48,000 42,960
Comfort Group Limited....................... 157,000 35,313
DBS Land Limited............................ 66,000 54,691
Development Bank of Singapore Limited....... 20,550 113,729
Elec & Eltek International Co. Ltd.......... 14,050 47,489
Fraser & Neave Ltd. Ordinary................ 22,000 59,119
Oversea -- Chinese Banking Corporation...... 15,000 51,051
Overseas Union Bank Ltd..................... 22,240 48,706
Singapore Airlines Ltd...................... 21,000 98,196
United Overseas Bank Ltd.................... 19,000 59,042
WEBS -- Singapore........................... 29,600 131,350
-----------
741,646
-----------
</TABLE>
<PAGE> 49
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------
<S> <C> <C>
SOUTH KOREA -- 2,31%
Hyundai Motor Company Ltd................... 3,000 $ 30,371
Pohang Iron & Steel Company Ltd............. 600 20,008
Samsung Electronics Co. GDR 144A
Registered................................ 3,954 63,017
Samsung Fire & Marine Insurance............. 67 11,175
-----------
124,571
-----------
THAILAND -- 3.16%
Bangkok Bank Public Company Ltd.
--Foreign Registered...................... 23,800 29,258
Bank of Ayudhya Public Company Ltd.
--Foreign Registered...................... 76,000 9,882
Circuit Electronics Industries Public
Company Inc. -- Foreign Registered(a)..... 4,500 1,410
Delta Electronics (Thailand) Public Company
Inc. -- Foreign Registered................ 6,450 36,596
K. R. Precision Public Company Limited --
Foreign Registered(a)..................... 6,400 4,236
Krung Thai Bank Public Company
Limited -- Foreign Registered............. 152,000 20,123
Robinson Department Store Public Company
Limited -- Foreign Registered(a).......... 27,200 784
SG Asia Credit Company PLC -- Foreign
Registered(a)............................. 32,900 6,533
Thai Airways Int'l. Public Company, Ltd. --
Foreign Registered........................ 41,400 34,500
Thai Farmers Bank Public Company, Ltd. --
Foreign Registered........................ 30,500 26,859
-----------
170,181
-----------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES VALUE
- --------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS -- 87.48%
(Cost -- $7,492,638)(d)................... $ 4,714,337
OTHER ASSETS, LESS LIABILITIES -- 12.52%.... 674,458
-----------
NET ASSETS -- 100%.......................... $ 5,388,795
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
WEBS -- World Equity Benchmark Shares
(a) Non-income producing security
(b) Peregrine Investments Holdings Limited filed for
liquidation under the laws of Hong Kong.
(c) Securities valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of
these securities aggregated $49,827. See Note 1 to
the Financial Statements.
(d) Cost is approximately the same for Federal income
tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 40,885
Gross unrealized depreciation..................... (2,819,186)
-----------
Net unrealized depreciation................... $(2,778,301)
===========
Purchases and sales of securities other than short-term obligations
aggregated $5,172,289 and $316,072, respectively, for the period
ended June 30, 1998.
(See Notes to Financial Statements)
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $7,492,638)....... $ 4,714,337
Cash........................................................ 662,301
Receivables
Fund shares sold.......................................... 41,375
Dividends and interest.................................... 14,397
Manager for expense reimbursement......................... 21,887
Deferred organization expenses.............................. 33,784
Other assets................................................ 13,897
-----------
Total assets.............................................. 5,501,978
-----------
LIABILITIES
Payables
Investments purchased..................................... 95,306
Management fee............................................ 4,316
12b-1 service and distribution fees....................... 3,296
Other payables to related parties......................... 3,543
Accrued expenses............................................ 6,722
-----------
Total liabilities......................................... 113,183
-----------
NET ASSETS.................................................. $ 5,388,795
===========
CLASS A
Net asset value and redemption price per share
($2,267,320/531,306 shares outstanding)................... $ 4.27
===========
Maximum offering price per share ($4.27 x 100/94.25)*....... $ 4.53
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($1,546,708/365,044 shares outstanding)............. $ 4.24
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,574,767/371,390 shares outstanding)............. $ 4.24
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 8,330,116
Accumulated net realized loss on investments and foreign
currency transactions................................... (171,776)
Undistributed net investment income....................... 8,686
Net unrealized depreciation on investments and foreign
currency transactions................................... (2,778,231)
-----------
NET ASSETS.................................................. $ 5,388,795
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 50
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $5,779 foreign taxes withheld........... $ 72,026
-----------
EXPENSES
Management fee............................................ $ 24,921
Transfer agent............................................ 6,347
Administrative services fee............................... 2,492
Custody fees.............................................. 48,217
Blue Sky fees............................................. 17,010
Auditing and accounting fees.............................. 7,774
Shareholder reports....................................... 687
Amortization of organization expenses..................... 4,873
Fund accounting........................................... 9,726
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 17,587
Legal..................................................... 11,898
Other..................................................... 1,574
-----------
157,341
Expenses reimbursed by manager............................ (78,801)
Fees paid indirectly...................................... (12,358)
-----------
Net expenses............................................ 66,182
-----------
NET INVESTMENT INCOME....................................... 5,844
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (172,782)
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (1,930,305)
-----------
Net loss on investment transactions..................... (2,103,087)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $(2,097,243)
===========
(See Notes to Financial Statements)
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 5,844 $ 2,221
Net realized (loss) gain on investments and foreign
currency transactions................................... (172,782) 2,302
Net unrealized depreciation during the period on
investments............................................. (1,930,305) (847,926)
----------- ----------
Net decrease resulting from operations.................. (2,097,243) (843,403)
----------- ----------
Class A distributions
From net investment income................................ -- (1,243)
In excess of net investment income........................ -- (3,430)
----------- ----------
Total distributions to Class A shareholders............. -- (4,673)
----------- ----------
Class B distributions
From net investment income................................ -- (521)
In excess of net investment income........................ -- (1,436)
----------- ----------
Total distributions to Class B shareholders............. -- (1,957)
----------- ----------
Class C distributions
From net investment income................................ -- (457)
In excess of net investment income........................ -- (1,260)
----------- ----------
Total distributions to Class C shareholders............. -- (1,717)
----------- ----------
Fund share transactions (Note 5)
Class A................................................... 2,390,943 1,052,849
Class B................................................... 1,268,848 1,226,021
Class C................................................... 1,441,988 957,139
----------- ----------
Net increase resulting from Fund share transactions..... 5,101,779 3,236,009
----------- ----------
TOTAL INCREASE IN NET ASSETS................................ 3,004,536 2,384,259
NET ASSETS
Beginning of period....................................... 2,384,259 --
----------- ----------
END OF PERIOD............................................. $ 5,388,795 $2,384,259
=========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 8,686 $ 2,842
=========== ==========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 51
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
CLASS A JUNE 30, DECEMBER 31,
------------ ------------
SELECTED PER SHARE DATA 1998* 1997
------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 6.01 $ 10.00
------- -------
Income (loss) from investment operations
Net investment income(a).................................. .02(b) .02
Net realized and unrealized loss on investment
transactions............................................ (1.76)(b) (3.98)
------- -------
Total from investment operations........................ (1.74) (3.96)
------- -------
Less distributions
From net investment income................................ -- .01
In excess of net investment income........................ -- .02
------- -------
Total distributions..................................... -- .03
======= =======
NET ASSET VALUE, END OF PERIOD.............................. $ 4.27 $ 6.01
======= =======
Total return(%)............................................. (28.95)(e) (39.58)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 2,267 $ 692
Ratio of expenses to average net assets(f)
With expense reimbursement(%)............................. 2.65(c) 2.11
Without expense reimbursement(%).......................... 5.81(c) 10.17
Ratio of net investment income to average net
assets(%)(a).............................................. .74(c) .63
Portfolio turnover rate(%).................................. 8 1
Average commission rate(g).................................. $ .0040 $ .0070
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
CLASS B JUNE 30, DECEMBER 31,
------------ ------------
SELECTED PER SHARE DATA 1998* 1997
------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 5.99 $ 10.00
------- -------
Loss from investment operations
Net investment loss(a).................................... --(b) --
Net realized and unrealized loss on investment
transactions............................................ (1.75)(b) (4.00)
------- -------
Total from investment operations........................ (1.75) (4.00)
------- -------
Less distributions
In excess of net investment income........................ -- .01
------- -------
Total distributions..................................... -- .01
------- -------
Net assets, end of period................................... $ 4.24 $ 5.99
======= =======
Total return(%)............................................. (29.22)(e) (39.96)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,547 $ 929
Ratio of expenses to average net assets(f)
With expense reimbursement(%)............................. 3.52(c) 2.86
Without expense reimbursement(%).......................... 6.68(c) 10.92
Ratio of net investment loss to average net assets(%)(a).... (.14)(c) (.12)
Portfolio turnover rate(%).................................. 8 1
Average commission rate(g).................................. $ .0040 $ .0070
</TABLE>
(See Notes to Financial Statements)
<PAGE> 52
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
CLASS C JUNE 30, DECEMBER 31,
------------ ------------
SELECTED PER SHARE DATA 1998* 1997
------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 5.99 $ 10.00
------- -------
Loss from investment operations
Net investment loss(a).................................... --(b) --
Net realized and unrealized loss on investment
transactions............................................ (1.75)(b) (3.99)
------- -------
Total from investment operations........................ (1.75) (3.99)
------- -------
Less distributions
In excess of net investment income........................ -- .02
------- -------
Total distributions..................................... -- .02
------- -------
Net assets, end of period................................... $ 4.24 $ 5.99
======= =======
Total return(%)............................................. (29.22)(e) (39.94)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,575 $ 764
Ratio of expenses to average net assets(f)
With expense reimbursement(%)............................. 3.43(c) 2.74
Without expense reimbursement(%).......................... 6.59(c) 10.80
Ratio of net investment loss to average net assets(%)(a).... (.05)(c) --
Portfolio turnover rate(%).................................. 8 1
Average commission rate(g).................................. $ .0040 $ .0070
</TABLE>
(a) Net investment income (loss)is net of expenses reimbursed by manager.
(b) Based on average shares outstanding
(c) Annualized
(d) Total return does not reflect a sales charge.
(e) Total return represents aggregate total return and does not reflect a sales
charge.
(f) Total expenses include fees paid indirectly through an expense offset
arrangement, if any.
(g) This amount may vary from period to period and fund to fund depending on the
mix of trades executed in various markets where trading practices and
commission rate structures may differ.
*Unaudited
(See Notes to Financial Statements)
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Asia Pacific Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of June 30, 1998, such securities were
determined to have no value by the Valuation Committee and have been noted as
such in the Portfolio of Investments.
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.
CASH AND CASH EQUIVALENTS -- The Fund classifies as cash amounts on deposit
with the Fund's custodian. These amounts earn interest at variable interest
rates. At June 30, 1998 the interest rate was 5.25%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 foreign denominated
securities, certain securities sold at a loss, and non-deductible organization
expenses. As a result, Net investment income (loss) and Net realized gain (loss)
on investments and foreign currency transactions for a reporting period may
differ significantly in amount and character from distributions during such
period. Accordingly, the Fund may make reclassifications among certain of its
capital accounts without impacting the net asset value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement with its custodian
whereby a percentage of quarterly cumulative credits resulting from cash
balances on deposit with the custodian are used to offset custody fees,
including transaction and out-of-pocket expenses. For the period, custody fees
were reduced by $12,358 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
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Fund's average net assets. Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding taxes, 12b-1 fees, brokerage commissions,
interest, litigation and indemnification expenses, and other extraordinary
expenses) to an annual rate of 1.95% of its average net assets. The voluntary
expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $4,085.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $2,445,
$7,380, and $7,762 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 $2,008, $2,447 and $1,892, for Class A, Class B and
Class C, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in the
Asia-Pacific region. Therefore, the Fund is more susceptible to factors
adversely affecting securities within the Asia-Pacific region than is an equity
fund that is not concentrated in such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------- --------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Sold.............................. 462,619 $2,633,920 186,266 $1,497,206
Issued on reinvestment of
distributions.................... -- -- 747 4,378
Repurchased....................... (46,429) (242,977) (71,897) (448,735)
------- ---------- ------- ----------
Net increase...................... 416,190 $2,390,943 115,116 $1,052,849
======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------- --------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Sold.............................. 230,185 $1,376,780 177,326 $1,403,362
Issued on reinvestment of
distributions.................... -- -- 171 1,002
Repurchased....................... (20,222) (107,932) (22,416) (178,343)
------- ---------- ------- ----------
Net increase...................... 209,963 $1,268,848 155,081 $1,226,021
======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------- --------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Sold.............................. 285,646 $1,655,330 133,442 $ 992,947
Issued on reinvestment of
distributions.................... -- -- 283 1,654
Repurchased....................... (41,689) (213,342) (6,292) (37,462)
------- ---------- ------- ----------
Net increase...................... 243,957 $1,441,988 127,433 $ 957,139
======= ========== ======= ==========
</TABLE>
03IAPF063098
<PAGE> 55
June 30, 1998 IVY FUNDS(R)
IVY
GLOBAL
NATURAL
RESOURCES
FUND
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
During the second quarter of 1998, there continued to be a growing divergence
between the fortunes of industrialized and developing nations, commodity
consumers and commodity producers, strong and weak currencies and advancing and
declining stocks. Most of these divergences can be explained by a second wave of
investor concerns about Asia. While much of the expected impact has been
reflected in markets, continued divergences have the potential to undermine
broader profit and stock market growth.
According to our research, commodity prices have fallen to 12-year lows; and
adjusted for inflation, they are now at multidecade lows. Resource commodities,
in particular, are suffering the full brunt of weaker Asian economies, as Japan,
the world's second-largest economy, slips into recession. In our view, the
downtrend has been temporarily exacerbated by short sellers who continue to push
prices below fair long-term sustainable prices. These trends have also pushed
commodities and commodity-based currencies to new record lows. However,
according to our research, going forward, the attractiveness of investing in
resources should improve significantly.
Many investors are asking whether resources are just dinosaur industries
awaiting extinction. In our view, they are not-not if we want to heat homes with
natural gas, grow food with fertilizers, drive cars made of metal with air
pollution reduced by platinum, read books and newspapers on paper, take pictures
with silver-based film or buy gold wedding bands and jewelry. In fact, demand
for resources has continued to grow with the world economy, although at rates
slightly below total growth.
If demand has continued to grow, why are prices so low? Resources are highly
correlated with Asian stock markets. Only a few years ago, demand for resources
was projected to grow strongly in Asia, and potential shortages were forecast
without new production. However, because of the slowdown in Asian economies, the
demand has not been as robust as expected, leading to a short-term oversupply.
This, in turn, has driven prices down to record lows.
We believe that investors are now entering the capitulation phase, and it may
take a few more months before the market absorbs the selling pressure. The
process of forming a low in resources always tests the patience of investors,
and the concentrated pullback this past quarter has been very disappointing.
According to our research, share prices are way down, with good valuations; and,
in our view, this has provided a very good buying opportunity for resource
stocks. Despite the poor share price performance, most companies continue to
have reasonable balance sheets and positive cash flow. Therefore, the Ivy Global
Natural Resources Fund will remain fully invested primarily in companies with
high-quality assets that are leaders in their industries.
As world markets form a launching pad for the next sustainable advance in
resources, and in response to the significant share price reductions, we are
very positive about the potential returns. Significant production cutbacks by
OPEC show that the repair process has already begun. While there are no
guarantees, a positive catalyst, whether in the form of production cuts,
inventory reductions or a more positive demand outlook, could lead to a
significant improvement in the commodities markets, which would, in turn,
benefit the Ivy Global Natural Resources Fund.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 56
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 96.28% SHARES VALUE
- --------------------------------------------
<S> <C> <C>
DIAMONDS -- 3.63%
Aber Resources, Ltd.(a)..................... 10,000 $ 88,403
De Beers Consolidated Mines Ltd............. 1,500 26,250
SouthernEra Resources Ltd.(a)............... 5,500 23,750
-----------
138,403
-----------
ENERGY SERVICES -- 13.94%
Diamond Offshore Drilling, Inc.............. 1,000 40,000
ENSCO International Incorporated............ 3,000 52,125
EVI Weatherford, Inc.(a).................... 2,700 100,237
Ensign Resource Service Group, Inc.......... 10,000 170,005
Marine Drilling Companies, Inc.(a).......... 3,000 48,000
NQL Drilling Tools Inc. -- Class A(a)....... 7,500 45,901
Nabors Industries, Inc.(a).................. 2,000 39,625
Noble Drilling Corporation(a)............... 1,500 36,094
-----------
531,987
-----------
FOOD/AGRICULTURE -- 4.45%
Potash Corporation of Saskatchewan
Inc....................................... 1,500 113,020
Saskatchewan Wheat Pool..................... 5,000 56,612
-----------
169,632
-----------
GAS PRODUCERS -- 7.42%
Elk Point Resources, Inc.(a)................ 8,000 27,201
Fletcher Challenge Energy................... 35,000 81,276
Penn West Petroleum Ltd.(a)................. 10,800 124,852
Remington Energy Ltd.(a).................... 5,000 49,642
-----------
282,971
-----------
INDUSTRIAL -- 5.53%
AK Steel Holding Corporation................ 1,000 17,875
Cameco Corporation.......................... 4,000 111,524
International Uranium Corp.(a).............. 150,000 54,062
Steel Dynamics, Inc.(a)..................... 2,000 27,750
-----------
211,211
-----------
JUNIOR PRECIOUS METALS -- 6.45%
Meridian Gold Inc.(a)....................... 40,000 82,963
Orvana Minerals Corporation(a).............. 200,000 163,205
-----------
246,168
-----------
METALS & MINERALS -- 7.75%
Aluminum Company of America................. 200 13,187
Billiton plc................................ 15,000 30,408
Breakwater Resources, Ltd.(a)............... 56,000 76,162
LionOre Mining International Ltd.(a)........ 45,000 21,421
QNI Limited................................. 223,000 90,450
Tenke Mining Corp.(a)....................... 25,000 33,151
WMC Limited................................. 10,256 30,866
-----------
295,645
-----------
OIL PRODUCERS -- 12.22%
Baytex Energy Ltd. -- Class A(a)............ 10,000 58,482
Canadian Natural Resources Ltd.(a).......... 4,000 68,546
Carmanah Resources Ltd.(a).................. 5,500 11,033
Hurricane Hydrocarbons Ltd. -- Class A(a)... 10,000 48,282
Pacalta Resources Ltd.(a)................... 17,500 101,153
Richland Petroleum Corporation -- Class
A(a)...................................... 24,000 53,858
Vermilion Resources Ltd.(a)................. 17,500 79,732
YPF S.A. ADR Class D........................ 1,500 45,094
-----------
466,180
-----------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------
<S> <C> <C>
PAPER & FOREST PRODUCTS -- 14.57%
Alliance Forest Products, Inc.(a)........... 6,500 $ 98,348
Aracruz Celulose S.A. -- Sponsored ADR...... 8,000 91,500
Asia Pulp & Paper Company Ltd.
Sponsored ADR............................. 10,000 112,500
Donohue, Inc. Class A....................... 2,000 45,221
Sino-Forest Corp. Class A(a)................ 175,000 208,257
-----------
555,826
-----------
PLATINUM GROUP METALS -- 6.93%
Anglo American Platinum Corporation
Limited................................... 14,000 153,310
Industrias Penoles S.A. .................... 35,000 111,006
-----------
264,316
-----------
SENIOR PRECIOUS METALS -- 13.39%
Acacia Resources Ltd........................ 65,000 69,232
Anglogold Limited -- ADR.................... 4,000 79,000
Ashanti Goldfields Company Ltd.............. 5,089 41,348
Freeport-McMoRan Copper & Gold, Inc......... 8,500 121,125
Gold Fields of South Africa Limited......... 4,000 46,250
Normandy Mining Ltd......................... 50,000 40,870
Sons of Gwalia Limited...................... 15,000 37,155
Vengold Inc.(a)............................. 75,000 75,992
-----------
510,972
-----------
TOTAL EQUITY SECURITIES
(Cost -- $4,794,220)...................... 3,673,311
-----------
BONDS -- 1.78% PRINCIPAL
William Resources, Inc.
8.00%, 01/23/02(b)
(Cost -- $70,355)......................... $400,000 68,002
-----------
U.S. GOVERNMENT OBLIGATIONS -- 0.13%
- --------------------------------------------
U.S. Treasury Bill, 4.925%, 07/23/98
(Cost -- $4,985).......................... 5,000 4,985
-----------
TOTAL INVESTMENTS -- 98.19%
(Cost -- $4,869,560)(c)................... 3,746,298
OTHER ASSETS, LESS LIABILITIES -- 1.81%..... 68,942
-----------
NET ASSETS -- 100%.......................... $ 3,815,240
===========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Issuer is in default on interest payments.
(c) Cost is approximately the same for
Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation..................... $ 33,749
Gross unrealized depreciation..................... (1,157,011)
-----------
Net unrealized depreciation................... $(1,123,262)
===========
Purchases and sales of investments (excluding short-term
obligations) aggregated $2,586,602 and $5,217,445, respectively, for
the period ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 57
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $4,869,560)....... $ 3,746,298
Receivables
Investments sold.......................................... 129,728
Dividends and interest.................................... 2,416
Manager for expense reimbursement......................... 14,153
Deferred organization expenses.............................. 33,785
Other assets................................................ 13,843
-----------
Total assets............................................ 3,940,223
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 968
Management and advisory fees.............................. 3,456
12b-1 service and distribution fees....................... 2,221
Other payables to related parties......................... 3,243
Due to custodian............................................ 106,819
Accrued expenses............................................ 8,276
-----------
Total liabilities....................................... 124,983
-----------
NET ASSETS.................................................. $ 3,815,240
===========
CLASS A
Net asset value and redemption price per share
($1,900,317/247,749 shares outstanding)................... $ 7.67
===========
Maximum offering price per share ($7.67 X 100/94.25)*....... $ 8.14
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($1,811,127/237,372 shares outstanding)............. $ 7.63
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($103,796/13,623 shares outstanding)................ $ 7.62
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 6,159,220
Accumulated net realized loss on investments and foreign
currency transactions................................... (1,200,520)
Accumulated net investment loss........................... (16,032)
Net unrealized depreciation on investments and foreign
currency transactions................................... (1,127,428)
-----------
NET ASSETS.................................................. $ 3,815,240
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 58
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $1,923 foreign taxes withheld........... $ 33,152
---------
EXPENSES
Management fee............................................ $13,116
Advisory fee.............................................. 13,116
Transfer agent............................................ 7,195
Administrative services fee............................... 2,623
Custodian fees............................................ 21,251
Blue Sky fees............................................. 16,683
Auditing and accounting fees.............................. 7,798
Shareholder reports....................................... 666
Amortization of organization expenses..................... 4,873
Fund accounting........................................... 9,821
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 16,000
Legal..................................................... 11,524
Other..................................................... 3,205
---------
132,106
Expenses reimbursed by manager............................ (64,959)
---------
Net expenses............................................ 67,147
---------
NET INVESTMENT LOSS......................................... (33,995)
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (806,628)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 72,528
---------
Net loss on investment transactions..................... (734,100)
---------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $(768,095)
=========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 59
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- ------------
1998* 1997
----------- ------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (33,995) $ (87,912)
Net realized (loss) gain on investments and foreign
currency transactions................................... (806,628) 740,820
Net unrealized appreciation (depreciation) during the
period on investments and foreign currency
transactions............................................ 72,528 (1,199,956)
----------- -----------
Net decrease resulting from operations................ (768,095) (547,048)
----------- -----------
Class A distributions
In excess of net investment income........................ -- (91,654)
From net realized gain.................................... -- (441,915)
In excess of net realized gain............................ -- (125,911)
----------- -----------
Total distributions to Class A shareholders........... -- (659,480)
----------- -----------
Class B distributions
In excess of net investment income........................ -- (44,832)
From net realized gain.................................... -- (287,696)
In excess of net realized gain............................ -- (78,348)
----------- -----------
Total distributions to Class B shareholders........... -- (410,876)
----------- -----------
Class C distributions
In excess of net investment income........................ -- (1,675)
From net realized gain.................................... -- (11,209)
In excess of net realized gain............................ -- (4,050)
----------- -----------
Total distributions to Class C shareholders........... -- (16,934)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (1,582,420) 4,800,177
Class B................................................... (570,677) 3,416,671
Class C................................................... (1,546) 155,468
----------- -----------
Net (decrease) increase resulting from Fund share
transactions......................................... (2,154,643) 8,372,316
----------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (2,922,738) 6,737,978
NET ASSETS
Beginning of period....................................... 6,737,978 --
----------- -----------
END OF PERIOD............................................. $ 3,815,240 $ 6,737,978
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 17,963
=========== ===========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 60
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 1998* DECEMBER 31, 1997
--------------------------------- -------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SELECTED PER SHARE DATA ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 9.01 $ 9.00 $ 9.00 $10.00 $ 10.00 $ 10.00
------- ------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment loss (a)................................ (.04)(b) (.08)(b) (.09)(b) (.11) (.15) (.17)
Net realized and unrealized (loss) gain on investment
transactions......................................... (1.30)(b) (1.29)(b) (1.29)(b) .70 .68 .68
------- ------- ------- ------- ------- -------
Total from investment operations..................... (1.34) (1.37) (1.38) .59 .53 .51
------- ------- ------- ------- ------- -------
Less distributions
In excess of net investment income..................... -- -- -- .22 .17 .15
From net realized gain................................. -- -- -- 1.08 1.08 1.08
In excess of net realized gain......................... -- -- -- .28 .28 .28
------- ------- ------- ------- ------- -------
Total distributions.................................. -- -- -- 1.58 1.53 1.51
------- ------- ------- ------- ------- -------
Net asset value, end of period........................... $ 7.67 $ 7.63 $ 7.62 $ 9.01 $ 9.00 $ 9.00
======= ======= ======= ======= ======= =======
Total return (%)......................................... (14.87)(d) (15.22)(d) (15.33)(d) 6.95(c) 6.28(c) 6.08(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................. $1,900 $ 1,811 $ 104 $3,907 $ 2,706 $ 124
Ratio of expenses to average net assets
With expense reimbursement (%)......................... 2.21(f) 2.91(f) 3.32(f) 2.10 2.86 3.08
Without expense reimbursement (%)...................... 4.69(f) 5.39(f) 5.80(f) 2.88 3.64 3.86
Ratio of net investment loss to average net assets
(%)(a)................................................. (.95)(f) (1.65)(f) (2.06)(f) (1.10) (1.86) (2.08)
Portfolio turnover rate (%).............................. 47 47 47 199 199 199
Average commission rate (e).............................. $.0140 $ .0140 $ .0140 $.0190 $ .0190 $ .0190
</TABLE>
(a) Net investment loss is net of expenses reimbursed by manager.
(b) Based on average shares outstanding
(c) Total return does not reflect a sales charge.
(d) Total return represents aggregate total return and does not reflect a sales
charge.
(e) 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) Annualized
*Unaudited
(See Notes to Financial Statements)
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Global Natural Resources Fund (the "Fund"), is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C and Advisor Class
are authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998 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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 foreign denominated
securities, passive foreign investment companies, certain securities sold at a
loss and non-deductible organization expenses. As a result, Net investment
income (loss) and Net realized gain (loss) on investments and foreign currency
transactions for a reporting period may differ significantly in amount and
character from distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI"), a wholly owned subsidiary of Mackenzie
Investment Management Inc. (MIMI), is the Manager of the Fund. For its services,
IMI receives a management fee monthly at the annual rate of .50% of the Fund's
average net assets. Currently, IMI voluntarily limits the Fund's total operating
expenses (excluding taxes, 12b-1 fees, brokerage commissions, interest,
litigation and indemnification expenses, and other extraordinary expenses) to an
annual rate of 1.95% of the Fund's average net assets. The voluntary expense
limitation may be terminated or revised at any time.
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 .50% of the Fund's average net assets. The fee is collected
from the Fund and remitted to MFC by MIMI, a subsidiary of MFC.
MIMI also provides certain administrative, accounting and pricing services
for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $460.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $3,410,
$11,944 and $646, 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 $3,911, $2,867 and $417, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 116,135 $ 1,064,894 514,551 $ 5,779,987
Issued on reinvestment of
distributions................ -- -- 35,261 297,604
Repurchased................... (301,992) (2,647,314) (116,206) (1,277,414)
-------- ----------- -------- -----------
Net (decrease)/increase....... (185,857) $(1,582,420) 433,606 $ 4,800,177
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 9,927 $ 88,904 322,291 $ 3,679,427
Issued on reinvestment of
distributions................ -- -- 15,150 127,716
Repurchased................... (73,336) (659,581) (36,660) (390,472)
-------- ----------- -------- -----------
Net (decrease)/increase....... (63,409) $ (570,677) 300,781 $ 3,416,671
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 2,378 $ 21,451 16,819 $ 190,701
Issued on reinvestment of
distributions................ -- -- 1,026 8,660
Repurchased................... (2,574) (22,997) (4,026) (43,893)
-------- ----------- -------- -----------
Net (decrease)/increase....... (196) $ (1,546) 13,819 $ 155,468
======== =========== ======== ===========
</TABLE>
03IGNR063098
<PAGE> 63
June 30, 1998 IVY FUNDS(R)
IVY
GLOBAL
FUND
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
Market Commentary
During the first half of 1998, markets around the world have been highly
volatile, as sentiment has swung almost daily in response to news from Asia,
Europe and the US corporate sector. International equity markets have been most
affected by developments in Asia and uncertainty surrounding the Japanese
economy.
The Ivy Global Fund's European allocation, which is the Fund's largest regional
allocation (57% of assets), reflects both our optimism for economic growth in
Europe and our expectation for share prices to continue to rise for some time.
The formal announcement of Economic and Monetary Union's (EMU) 11 founding
members at a special summit held in the United Kingdom in early May marked the
beginning of a new era in the Continental economies. According to our research,
valuation levels in Europe are by no means inexpensive anymore; however, we
believe that the European bull market still has a way to go. It is our belief
that the current wave of restructuring and consolidation, which is still in its
early stages, will accelerate. This should contribute to strong earnings growth
over the next three to five years, as many European companies focus on improving
economies of scale, disposing of noncore assets, and eliminating excess from
cost structures.
In contrast to our views on improving profitability for European companies, we
expect to see a fairly significant deceleration in US earnings growth going
forward. At 7% of assets, the Ivy Global Fund continues to be underweight the US
market. Although the US market continued to perform well during the first half
of 1998, we expect to see increasing evidence of a slowdown in the economy in
the second half of the year. While the US has escaped serious harm from the
year-old Asian crisis thus far, most economists now expect the brunt of the
crisis to be felt over the next six to nine months. While we still do not expect
a dramatic sell-off in the US market, in our view, its recent period of
outperformance is likely to lose steam.
Twenty-three percent of the Fund's assets are invested in Asia. At the beginning
of the year, Asian stock markets and currencies experienced a strong rally after
last year's free fall. However, during the second quarter, the markets sold off
again, reflecting a renewed bout of pessimism on prospects for the region. While
short-term prospects for non-Japan Asia are somewhat mixed, we expect reforms
and economic restructuring will improve prospects for long-term growth. And,
with many stocks trading at large discounts to net asset values and with stock
prices at four to five times earnings, we believe that these markets currently
represent compelling long-term value, and that going forward, the medium-term
direction of Asian stock markets will largely depend on the stabilization of
regional currencies.
While the Ivy Global Fund has no Japanese exposure, we believe that a stable yen
and efforts to stimulate consumption in Japan will have positive effects on the
rest of Asia.
The Fund currently has about 5% invested in Latin America. Although Latin
American markets have performed poorly since the beginning of the year, we
believe that prospects remain sound and valuations are extremely compelling.
Continued selling pressure in non-Japan Asia and Latin America -- while the US
and European markets continued to perform relatively well -- has contributed to
a widening discount between emerging market stocks and their developed market
counterparts. Markets throughout both Asia and Latin America seem to have priced
in the worst-case scenario, and are reaching the point of maximum pessimism. As
volatility subsides and investor interest returns, we believe that there is
potential for this price disparity to narrow.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 64
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 99.87% SHARES VALUE
- ------------------------------------------
<S> <C> <C>
AFRICA -- 3.02%
- ------------------------------------------
SOUTH AFRICA -- 3.02%
Anglo American Corporation of South Africa
Ltd. ADR................................ 8,000 $ 271,646
Rembrandt Group Ltd. ..................... 54,000 339,218
South African Breweries Ltd. ............. 12,072 250,047
-----------
860,911
-----------
ASIA/PACIFIC -- 23.31%
- ------------------------------------------
AUSTRALIA -- 0.57%
Pacific Dunlop Limited.................... 100,100 161,785
-----------
CHINA -- 0.82%
Shenzhen Konka Electronics Group Ltd.
Class B................................. 260,000 233,540
-----------
HONG KONG -- 7.74%
Cheung Kong Holdings Ltd.................. 34,000 167,179
Citic Pacific Ltd......................... 90,000 159,126
Esprit Asia Holdings Ltd.................. 534,000 161,952
HSBC Holdings............................. 13,539 331,111
Hong Kong Telecommunications Ltd. --
Sponsored ADR........................... 7,400 139,675
Jardine Matheson Holdings Ltd............. 15,600 42,120
Jardine Strategic Holdings Ltd............ 91,187 173,255
Li & Fung................................. 386,000 622,695
National Mutual Asia Ltd.................. 360,000 229,978
New World Development Company Ltd......... 45,401 87,889
Peregrine Investments Holdings
Limited(d).............................. 120,000 --
Union Bank of Hong Kong Ltd............... 85,333 54,238
Wharf Holdings Ltd. (with 1,800
warrants)(a)............................ 36,000 35,542
-----------
2,204,760
-----------
MALAYSIA -- 1.49%
Edaran Otomobil Nasional Berhad........... 38,000 36,649
KFC Holdings (Malaysia) Berhad............ 58,000 30,766
Land & General Berhad..................... 281,500 31,900
London & Pacific Insurance Company
Berhad.................................. 90,600 93,931
Perusahaan Otomobil Nasional Berhad....... 75,000 47,920
Public Bank Berhad........................ 166,800 50,271
RHB Capital Berhad........................ 151,000 61,529
RHB Sakura Merchant Bankers............... 3,000 781
Technology Resources Industries Berhad.... 103,000 70,778
-----------
424,525
-----------
NEW ZEALAND -- 2.43%
Brierley Investments Ltd.................. 241,800 120,494
Fletcher Challenge Building............... 21,500 26,785
Fletcher Challenge Forestry............... 2,580 1,446
Fletcher Challenge Paper.................. 43,000 47,766
Lion Nathan Ltd........................... 500 1,111
Telecom Corp. of New Zealand Ltd.......... 42,000 173,105
Tourism Holdings Limited(a)............... 562,242 321,037
-----------
691,744
-----------
PHILIPPINES -- 1.45%
Alaska Milk Corporation(a)................ 2,000,000 89,208
Asian Terminals, Inc...................... 150,000 5,036
Bacnotan Cement Corporation............... 150,000 20,144
Belle Corporation(a)...................... 631,000 16,040
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------
<S> <C> <C>
Belle Corporation Warrants(a)............. 46,200 $ 64
Benpres Holdings Corporation GDR(a)....... 24,100 59,045
C & P Homes, Inc.......................... 759,000 38,223
Mondragon International Philippines,
Inc.(a)................................. 1,394,400 23,407
Philippine Long Distance Telephone Co. ... 3,800 86,571
SM Prime Holdings, Inc.................... 251,000 39,727
Universal Robina Corporation.............. 360,000 36,691
-----------
414,156
-----------
SINGAPORE -- 3.49%
Clipsal Industries Ltd.................... 118,000 105,610
DBS Land Limited.......................... 115,000 95,296
Development Bank of Singapore Limited..... 15,600 86,334
Elec & Eltek International Co. Ltd........ 34,100 115,258
Fraser & Neave Ltd........................ 114,200 306,880
Singapore Airlines Ltd.................... 48,000 224,448
United Overseas Bank Ltd.................. 20,000 62,149
-----------
995,975
-----------
SOUTH KOREA -- 1.94%
Hyundai Motor GDR......................... 5,000 9,188
Hyundai Motor Company Ltd................. 1,500 15,186
Keum Kang Development Ind. Company........ 11,600 59,478
Korea Electric Power Corporation.......... 8,400 89,629
Pohang Iron & Steel Company Ltd........... 2,400 80,030
Samsung Electronics....................... 5,959 184,455
Samsung Electronics Sponsored GDR......... 623 9,929
Samsung Electronics Sponsored GDR NV...... 4,338 36,331
Samsung Fire & Marine Insurance........... 407 67,883
Samsung Heavy Industries(a)............... 337 1,681
-----------
553,790
-----------
TAIWAN -- 2.06%
Acer Incorporation(a)..................... 61,500 73,742
Compeq Manufacturing Co.(a)............... 11,760 62,632
Far Eastern Department Stores Ltd......... 168,303 122,454
President Enterprises(a).................. 120,000 108,264
Systex Corporation(a)..................... 34,962 64,612
Systex Corporation Rights(a).............. 4,550 2,847
Yung Shin Pharmaceuticals Industries
Co...................................... 64,900 152,993
-----------
587,544
-----------
THAILAND -- 1.32%
Bangkok Bank Public Company Limited....... 7,900 8,124
Bank of Ayudhya Public Company Limited
Foreign Registered...................... 183,750 23,892
Robinson Department Store Public Company
Limited -- Foreign Registered(a)........ 377,000 10,873
SG Asia Credit Company Limited -- Foreign
Registered(a)........................... 336,000 66,723
Siam Cement Public Co. Ltd. (The) Foreign
Registered(a)........................... 7,600 36,652
Siam Makro Public Company Limited --
Foreign Registered...................... 77,800 106,676
Thai Airways International Public Co.,
Ltd. -- Foreign Registered.............. 115,000 95,833
Thai Telephone & Communication Public Co.
Ltd. -- Foreign Registered(a)........... 207,000 25,936
-----------
374,709
-----------
</TABLE>
<PAGE> 65
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------
<S> <C> <C>
EUROPE -- 56.53%
- ------------------------------------------
AUSTRIA -- 1.83%
Creditanstalt-Bankverein.................. 3,600 $ 388,377
Julius Meinl International AG(a).......... 4,000 133,239
-----------
521,616
-----------
FINLAND -- 3.84%
Enso OY -- R Shares....................... 30,000 324,251
Metsa-Serla Oyj -- B Shares............... 28,200 272,415
Rauma OY.................................. 10,290 210,996
UPM -- Kymmene Corp....................... 10,420 286,781
-----------
1,094,443
-----------
FRANCE -- 12.03%
Banque Nationale De Paris................. 8,275 676,121
Compagnie Financiere de Paribas........... 3,689 394,769
Galeries Lafayette........................ 160 159,576
Groupe Danone............................. 1,400 386,005
Scor...................................... 6,800 431,324
Societe Generale.......................... 4,219 877,151
Suez Lyonnaise des Eaux................... 3,054 502,599
-----------
3,427,545
-----------
GERMANY -- 1.45%
Volkswagen AG............................. 430 413,316
-----------
IRELAND -- 0.87%
Bank of Ireland........................... 12,000 246,871
-----------
ITALY -- 5.93%
Banca Commerciale Italiana................ 77,800 465,255
Banca Popolare di Brescia................. 25,250 477,286
Banca Popolare di Milano.................. 32,000 254,733
Fiat S.P.A................................ 113,100 495,017
-----------
1,692,291
-----------
LUXEMBOURG -- 0.74%
Scandinavian Broadcast System S.A.(a)..... 7,000 211,313
-----------
NETHERLANDS -- 5.97%
Akzo Nobel NV............................. 1,100 244,526
Fortis Amev NV............................ 5,300 310,305
Hunter Douglas NV......................... 3,800 206,418
ING Groep NV.............................. 4,022 263,359
Nedlloyd Groep NV......................... 14,300 290,327
Philips Electronics NV.................... 4,600 386,683
-----------
1,701,618
-----------
NORWAY -- 0.99%
Storebrand ASA(a)......................... 31,700 280,913
-----------
PORTUGAL -- 1.91%
Colep -- Cia Portuguesa de Embalagens(a).. 8,700 115,344
Lusomundo -- SGPS S.A. Preferred Shares... 5,900 77,806
Portugal Telecom S.A. ADR................. 2,977 157,595
Sonae Industria E Investimentos........... 3,550 193,893
-----------
544,638
-----------
SWEDEN -- 5.83%
AssiDoman AB.............................. 6,600 192,001
Astra AB "B" Shares....................... 17,066 340,252
Electrolux AB............................. 14,000 240,503
S.K.F. AB Series "B"...................... 12,400 225,456
Sandvik AB -- "B" Shares.................. 9,500 260,879
Stora Kopparbergs Bergslags Aktiebolag
(STORA) "A" Shares...................... 11,600 182,547
Trelleborg AB "B" Free Shares............. 16,700 219,876
-----------
1,661,514
-----------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------
<S> <C> <C>
SWITZERLAND -- 3.75%
Georg Fischer AG Bearer................... 250 $ 97,244
Holderbank Financiere Glaris AG........... 290 368,998
Nestle AG Registered...................... 138 295,322
SMH AG.................................... 400 309,070
-----------
1,070,634
-----------
UNITED KINGDOM -- 11.39%
Billiton Plc.............................. 90,600 183,667
Boots Company plc......................... 18,000 299,429
Cadbury Schweppes PLC..................... 25,000 387,092
Corporate Services Group Plc.............. 100,000 397,937
Corporate Services Group Plc Rights(a).... 25,000 4,797
Gallaher Group Plc........................ 45,000 249,462
Imperial Chemical Industries PLC --
Sponsored ADR........................... 25,000 402,943
National Westminster Bank PLC ADR......... 2,400 258,000
Rio Tinto plc............................. 3,000 33,812
Rio Tinto plc Sponsored ADR............... 3,089 145,955
Safeway plc............................... 43,000 282,677
Standard Chartered plc.................... 18,700 212,322
Tate & Lyle PLC........................... 49,000 388,957
-----------
3,247,050
-----------
NORTH AMERICA -- 11.53%
- ------------------------------------------
CANADA -- 4.16%
Alcan Aluminium Ltd....................... 5,472 151,164
Dofasco Inc............................... 12,000 195,438
Edperbrascan Corporation -- Class A....... 14,400 241,870
Inco Limited.............................. 10,350 141,019
Methanex Corporation(a)................... 25,000 218,457
Power Financial Corp...................... 5,000 233,757
Semi-Tech Corporation(a).................. 34,000 6,243
-----------
1,187,948
-----------
UNITED STATES -- 7.37%
Air Express International Corp............ 9,200 246,100
Aluminum Company of America............... 2,600 171,438
American Standard Companies, Inc.(a)...... 6,500 290,469
Ameron International Corp................. 3,200 185,000
Apria Healthcare Group, Inc.(a)........... 13,000 86,938
Crown Cork & Seal Company, Inc............ 4,000 190,000
Ford Motor Company........................ 3,000 177,000
Phelps Dodge Corp......................... 2,700 154,406
Sunglass Hut International, Inc.(a)....... 20,000 221,250
Union Carbide Corporation................. 4,000 213,500
Wendy's International, Inc................ 7,000 164,500
-----------
2,100,601
-----------
SOUTH AMERICA -- 5.48%
- ------------------------------------------
ARGENTINA -- 0.54%
YPF S.A. Sponsored ADR.................... 5,100 153,319
-----------
BRAZIL -- 3.84%
Petroleo Brasileiro S.A. Preferred
(Petrobras)............................. 1,700,000 314,541
Telecomunicacoes Brasileiras S.A. ADR
(Telebras).............................. 6,000 655,125
Uniao de Bancos Brasileiros Preferred
S.A.(a)................................. 4,400,000 125,540
-----------
1,095,206
-----------
</TABLE>
<PAGE> 66
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------
CHILE -- 1.10%
A.F.P. Provida S.A. ADR................... 9,100 $ 151,856
Cristalerias de Chile -- Sponsored ADR.... 12,400 161,200
-----------
313,056
-----------
TOTAL EQUITY SECURITIES
(Cost -- $28,002,379)................... 28,467,331
-----------
BONDS -- 1.13% PRINCIPAL
- ------------------------------------------ ----------
International Knife & Saw 144A, 11.375%,
11/15/06(b) (Cost -- $300,000).......... $ 300,000 321,000
-----------
TOTAL INVESTMENTS -- 101.00%
(Cost -- $28,302,379)(c)................ 28,788,331
OTHER ASSETS, LESS
LIABILITIES -- (1.00%).................. (284,685)
-----------
NET ASSETS -- 100%........................ $28,503,646
===========
ADR - American Depository Receipt
GDR - Global Depository Receipt
NV - Non-voting
(a) Non-income producing security
(b) Below investment grade security
(c) Cost is approximately the same for Federal income
tax purposes.
(d) Peregrine Investments Holdings Limited has filed
for liquidation under the laws of Hong Kong. This
security was valued by the Valuation Committee of
the Board of Trustees. The cost of this security
aggregated $158,474. See Note 1 to the Financial
Statements.
<TABLE>
<CAPTION>
- ----------------------------------------
<S> <C> <C>
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 8,453,644
Gross unrealized depreciation.................... (7,967,692)
------------
Net unrealized appreciation.................. $ 485,952
============
Purchases and sales of securities other than short-term obligations
aggregated $3,285,158 and $7,820,730, respectively, for the period
ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 67
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $28,302,379)...... $28,788,331
Cash denominated in foreign currencies (cost -- $5,791)..... 5,428
Receivables
Fund shares sold.......................................... 7,090
Dividends and interest.................................... 113,669
Manager for expense reimbursement......................... 14,918
Other assets................................................ 26,194
-----------
Total assets........................................ 28,955,630
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 43,707
Management fee............................................ 24,038
12b-1 service and distribution fees....................... 13,062
Other payables to related parties......................... 11,508
Due to custodian............................................ 335,413
Accrued expenses............................................ 24,256
-----------
Total liabilities................................... 451,984
-----------
NET ASSETS.................................................. $28,503,646
===========
CLASS A
Net asset value and redemption price per share
($18,389,133/1,530,205 shares outstanding)................ $ 12.02
===========
Maximum offering price per share ($12.02X100/94.25)*........ $ 12.75
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($9,229,985/773,447 shares outstanding)............. $ 11.93
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($546,384/46,799 shares outstanding)................ $ 11.68
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($338,144/28,108 shares outstanding)................ $ 12.03
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $26,625,237
Undistributed net realized gain on investments and foreign
currency transactions................................... 1,341,000
Undistributed net investment income....................... 54,007
Net unrealized appreciation on investments and foreign
currency transactions................................... 483,402
-----------
NET ASSETS.................................................. $28,503,646
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 68
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $44,700 foreign taxes withheld.......... $ 450,767
Interest.................................................. 19,300
----------
470,067
----------
EXPENSES
Management fee............................................ $156,483
Transfer agent............................................ 36,651
Administrative services fee............................... 15,648
Custodian fees............................................ 52,276
Blue Sky fees............................................. 19,619
Auditing and accounting fees.............................. 11,542
Shareholder reports....................................... 4,405
Fund accounting........................................... 18,953
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 80,210
Legal..................................................... 11,630
Other..................................................... 8,192
----------
419,844
Expenses reimbursed by manager.......................... (34,414)
----------
Net expenses............................................ 385,430
----------
NET INVESTMENT INCOME....................................... 84,637
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on
investments and foreign currency transactions........... 279,353
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 2,666,893
----------
Net gain on investment transactions..................... 2,946,246
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $3,030,883
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 69
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ ------------
1998* 1997
------------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income..................................... $ 84,637 $ 128,231
Net realized gain on investments and foreign currency
transactions............................................ 279,353 3,695,413
Net unrealized appreciation (depreciation) during the
period on
Investments and foreign currency transactions........... 2,666,893 (6,927,266)
Forward foreign currency contracts...................... -- 24,267
----------- -----------
Net increase (decrease) resulting from operations..... 3,030,883 (3,079,355)
----------- -----------
Class A distributions
From net investment income................................ -- (82,131)
In excess of net investment income........................ -- (449,677)
From net realized gain.................................... -- (1,315,142)
----------- -----------
Total distributions to Class A shareholders........... -- (1,846,950)
----------- -----------
Class B distributions
From net investment income................................ -- (42,863)
In excess of net investment income........................ -- (234,682)
From net realized gain.................................... -- (598,343)
----------- -----------
Total distributions to Class B shareholders........... -- (875,888)
----------- -----------
Class C distributions
From net investment income................................ -- (3,237)
In excess of net investment income........................ -- (17,720)
From net realized gain.................................... -- (46,276)
----------- -----------
Total distributions to Class C shareholders........... -- (67,233)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (3,284,018) (858,287)
Class B................................................... (1,821,551) 3,188,082
Class C................................................... (269,269) 823,223
Advisor Class............................................. 372,452 --
----------- -----------
Net (decrease) increase resulting from Fund share
transactions......................................... (5,002,386) 3,153,018
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (1,971,503) (2,716,408)
NET ASSETS
Beginning of period....................................... 30,475,149 33,191,557
----------- -----------
END OF PERIOD............................................. $28,503,646 $30,475,149
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 54,007 $ --
=========== ===========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 70
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE SIX
CLASS A MONTHS ENDED FOR THE YEAR ENDED MONTHS ENDED FOR THE YEAR
JUNE 30, DECEMBER 31, DECEMBER 31, ENDED JUNE 30,
------------ ----------------------------- ------------ ------------------
1998* 1997 1996 1995 1994 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.93 $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62 $ 10.55
------- ------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment income (loss)........... .05(a)(f) .08 .08 .09(a) --(a) --(a) .03(a)
Net realized and unrealized gain (loss)
on investment transactions........... 1.04(f) (1.23) 1.86 1.25 (.10) 1.79 .44
------- ------- ------- ------- ------- ------- -------
Total from investment operations... 1.09 (1.15) 1.94 1.34 (.10) 1.79 .47
------- ------- ------- ------- ------- ------- -------
Less distributions
From net investment income............. -- .05 .08 .04 -- .01 .03
In excess of net investment income..... -- .26 .18 -- -- -- --
From net realized gain................. -- .78 .48 .49 .09 .88 .37
In excess of net realized gain......... -- -- -- .07 -- -- --
From capital paid-in................... -- -- -- -- .10 -- --
------- ------- ------- ------- ------- ------- -------
Total distributions................ -- 1.09 .74 .60 .19 .89 .40
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $ 12.02 $ 10.93 $ 13.17 $ 11.97 $ 11.23 $ 11.52 $ 10.62
======= ======= ======= ======= ======= ======= =======
Total return(%)......................... 9.97(c) (8.72)(b) 16.21(b) 12.08(b) (1.00)(c) 16.71(b) 4.54(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) ............................ $18,389 $19,692 $24,152 $21,264 $19,327 $17,393 $12,391
Ratio of expenses to average net assets
With expense reimbursement(%).......... 2.18(d) -- -- 2.20 2.20(d) 2.20 1.95
Without expense reimbursement(%)....... 2.40(d) 2.07 2.18 2.46 2.34(d) 2.42 2.76
Ratio of net investment income (loss) to
average net assets(%).................. .82(a)(d) .58 .58 .71(a) (.06)(a)(d) .01(a) .38(a)
Portfolio turnover rate(%).............. 10 45 43 53 23 85 67
Average commission rate(e).............. $ .0040 $ .0100 $ .0181 N/A N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 71
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE SIX APRIL 1, 1994
CLASS B MONTHS ENDED FOR THE YEAR ENDED MONTHS ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, DECEMBER 31, TO JUNE 30,
---------------- ------------------------------------ ------------ --------------
1998* 1997 1996 1995 1994 1994
SELECTED PER SHARE DATA ---------------- ------- ------- ------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $10.90 $ 13.12 $ 11.97 $11.23 $11.52 $12.12
------ ------- ------- ------ ------ ------
Income (loss) from
investment operations
Net investment income
(loss).................... --(a)(f) (.02) (.02) --(a) (.03)(a) (.01)(a)
Net realized and unrealized
gain (loss) on investment
transactions.............. 1.03(f) (1.20) 1.85 1.25 (.12) (.04)
------ ------- ------- ------ ------ ------
Total from investment
operations........... 1.03 (1.22) 1.83 1.25 (.15) (.05)
------ ------- ------- ------ ------ ------
Less distributions
From net investment
income.................... -- 0.05 -- -- -- --
In excess of net investment
income.................... -- 0.26 .20 -- -- --
From net realized gain...... -- 0.69 .48 .45 .08 .55
In excess of net realized
gain...................... -- -- -- .06 -- --
From capital paid-in........ -- -- -- -- .06 --
------ ------- ------- ------ ------ ------
Total distributions... -- 1.00 .68 .51 .14 .55
------ ------- ------- ------ ------ ------
Net asset value, end of
period...................... $11.93 $ 10.90 $ 13.12 $11.97 $11.23 $11.52
====== ======= ======= ====== ====== ======
Total return (%)............. 9.45(c) (9.33)(b) 15.30(b) 11.25(b) (1.37)(c) .38(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).................. $9,230 $10,056 $ 8,968 $4,811 $2,956 $ 376
Ratio of expenses to average
net assets
With expense
reimbursement(%).......... 2.96(d) -- -- 2.95 2.95(d) 2.95(d)
Without expense
reimbursement(%).......... 3.18(d) 2.82 2.94 3.21 3.09(d) 3.17(d)
Ratio of net investment
income (loss) to average net
assets(%)................... .04(a)(d) (.18) (.17) (.04)(a) (.81)(a)(d) (.74)(a)(d)
Portfolio turnover rate
(%)......................... 10 45 43 53 23 85
Average commission rate(e)... $.0040 $ .0100 $ .0181 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 72
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR APRIL 30, 1996
CLASS C FOR THE SIX MONTHS ENDED (COMMENCEMENT)
ENDED JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.67 $12.94 $13.31
------ ------ ------
Income (loss) from investment operations
Net investment loss....................................... (.01)(a)(f) (.02) (.01)
Net realized and unrealized gain (loss) on investment
transactions............................................ 1.02(f) (1.24) .42
------ ------ ------
Total from investment operations...................... 1.01 (1.26) .41
------ ------ ------
Less distributions
From net investment income................................ -- .05 --
In excess of net investment income........................ -- .26 .30
From net realized gain.................................... -- .70 .48
------ ------ ------
Total distributions................................... -- 1.01 .78
------ ------ ------
Net asset value, end of period.............................. $11.68 $10.67 $12.94
====== ====== ======
Total return(%)............................................. 9.47(c) (9.72)(b) 3.07(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 546 $ 727 $ 71
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 3.24(d) -- --
Without expense reimbursement(%).......................... 3.46(d) 2.82 3.77(d)
Ratio of net investment loss to average net assets(%)....... (.24)(a)(d) (.18) (1.01)(d)
Portfolio turnover rate(%).................................. 10 45 43
Average commission rate(e).................................. $.0040 $.0100 $.0181
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
--------------
1998*
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $13.26
------
Income (loss) from investment operations
Net investment income..................................... .05(a)(f)
Net realized and unrealized loss on investment
transactions............................................ (1.28)(f)
------
Total from investment operations...................... (1.23)
------
Net asset value, end of period.............................. $12.03
======
Total return(%)............................................. (9.28)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 338
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 1.77(d)
Without expense reimbursement(%).......................... 1.99(d)
Ratio of net investment income to average net assets(%)..... 1.23(a)(d)
Portfolio turnover rate(%).................................. 10
Average commission rate(e).................................. $.0040
</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) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
(f) Based on average shares outstanding
*Unaudited
(See Notes to Financial Statements)
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Global Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of June 30, 1998 such securities were
determined to have no value by the Valuation Committee and have been noted as
such in the Portfolio of Investments.
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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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
counterparties 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 foreign denominated
securities, forward foreign currency contracts, passive foreign investment
companies, and certain securities sold at a loss. As a result, Net investment
income (loss) and Net realized gain (loss) on investments and foreign currency
transactions for a reporting period may differ significantly in amount and
character from distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
<PAGE> 74
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
on the Fund's first $500 million of average net assets, and .75% of the Fund's
average net assets in excess of $500 million. Currently, IMI voluntarily limits
the Fund's total operating expenses (excluding taxes, 12b-1 fees, brokerage
commissions, interest, litigation and indemnification expenses, and other
extraordinary expenses) to an annual rate of 1.95% of its average net assets.
The voluntary expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $1,937.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $25,229,
$51,082 and $3,899, 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 $21,987, $12,584, $2,050 and $30, for Class A, Class B,
Class C and Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 95,471 $ 1,173,352 716,642 $ 9,986,512
Issued on reinvestment of
distributions................ -- -- 157,077 1,735,809
Repurchased................... (366,630) (4,457,370) (906,904) (12,580,608)
-------- ----------- -------- -----------
Net decrease.................. (271,159) $(3,284,018) (33,185) $ (858,287)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 45,065 $ 557,324 366,100 $ 3,039,662
Issued on reinvestment of
distributions................ -- -- 65,780 724,938
Repurchased................... (194,312) (2,378,875) (192,584) (576,518)
-------- ----------- -------- -----------
Net (decrease)/increase....... (149,247) $(1,821,551) 239,296 $ 3,188,082
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold.......................... 12,905 $ 154,280 71,556 $ 948,831
Issued on reinvestment of
distributions................ -- -- 5,049 54,480
Repurchased................... (34,258) (423,549) (13,938) (180,088)
-------- ----------- -------- -----------
Net (decrease)/increase....... (21,353) $ (269,269) 62,667 $ 823,223
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
----------------------
ADVISOR CLASS SHARES AMOUNT
- ------------- -------- -----------
<S> <C> <C>
Sold.......................... 28,672 $ 379,659
Repurchased................... (564) (7,207)
-------- -----------
Net increase.................. 28,108 $ 372,452
======== ===========
</TABLE>
03IGLF063098
<PAGE> 75
June 30, 1998 IVY FUNDS(R)
IVY
INTERNATIONAL
FUND
SEMIANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the share-holders. This report is not authorized for
distrib-ution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
(ART)
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
The second quarter of 1998 was a period when the positive themes in
Europe--fiscal discipline due to euro convergence leading to low interest rates,
low inflation and reduced government deficits--were offset by the downswing in
the resource cycle, which hit oil and gas and metals, as well as the economies
and companies that are resource dependent. Consequently, stocks in France and
elsewhere on the Continent were strong, and those in South Africa were weak.
In our view, there are many positive trends taking place in Europe that
should continue to drive stock prices higher. The first is Economic and Monetary
Union (EMU). Interest rates have trended down as countries imposed strict
controls on government spending to meet the inflation and deficit goals of the
Maastricht rule for joining EMU. The euro, the single European currency, will
allow countries to transact business across the Continent without regard for
currency risk. We are seeing a wave of corporate restructuring and consolidation
across Europe, which we believe should lead to improved profits for European
companies. With 76% of the Fund's assets invested in Europe, we believe the Ivy
International Fund is well positioned to benefit from the opportunities that
should continue to arise from EMU.
Selling of Russian stocks began in August 1997; and by June 30, 1998,
Russia represented a scant 0.95% of the portfolio, down from a peak of 6.4%.
Substantial capital gains were booked from the sale of these positions, along
with the gains from an operation in Brazil whereby Telebras is being swapped for
Telesp (the fixed line company in Sao Paulo). In our opinion, Russia has become
worrisome. We believe that Russia has a structural problem with their payments
system whereby unproductive enterprises are continued even though they are
unable to meet their financial obligations, triggering a raft of unpaid bills up
and down the economy.
In Japan, we believe that the situation is still uncertain as the political
turmoil breeds consumer wariness at a time when there is pressure to encourage
consumers to spend, not save. The depth of the banking crisis is being measured,
but a sustained period of very low rates makes one speculate as to the quality
of recently booked loans in Japan.
Our research supports our belief that the downswing in the resource sector
is a result of the slowdown in Southeast Asia. South African companies and
currency were hit especially hard. Oil prices remained low as the slowdown in
Southeast Asia was compounded by a warm winter in the Organization for Economic
Cooperation and Development (OECD) countries, leaving the world awash in oil. A
further factor in oil prices remaining low is the increased ability to find and
recover oil. These factors are very positive for world inflation. In our view,
investors are anticipating a continuance of these trends as stock markets are
strong in the developed countries.
We believe prospects are good for world markets as reduced government debt
world wide should keep the focus on equity markets.
We would like to take this opportunity to remind shareholders that they can
continue to invest in Ivy International Fund without limitation, although the
Fund did close to new investors in April 1997.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
<PAGE> 76
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 92.37% SHARES VALUE
- --------------------------------------
<S> <C> <C>
AFRICA -- 1.88%
- --------------------------------------
SOUTH AFRICA -- 1.88%
Anglo American Corporation of South
Africa Ltd. ........................ 26,900 $ 913,409
Anglo American Corporation of South
Africa Ltd. ADR..................... 450,000 14,850,000
Billiton Plc.......................... 476,400 946,326
Billiton Plc ADR...................... 6,000,000 11,916,000
Gencor Limited........................ 95,280 148,015
Gencor Limited ADR.................... 1,200,000 1,863,600
South African Breweries Limited....... 266,012 5,509,907
South African Breweries Limited ADR... 789,089 16,344,400
--------------
52,491,657
--------------
ASIA -- 11.64%
- --------------------------------------
HONG KONG -- 2.43%
Cheung Kong Holdings.................. 5,000,000 24,585,163
Hong Kong Telecommunications Ltd...... 15,921,610 29,897,032
Swire Pacific Class A................. 3,500,000 13,212,105
--------------
67,694,300
--------------
JAPAN -- 5.98%
Bridgestone Corp...................... 1,200,000 28,360,410
Canon Inc............................. 1,200,000 27,236,370
Fuji Photo Film ORD................... 850,000 29,581,724
Matsushita Electric Industrial Co..... 1,700,000 27,315,629
Sharp Corp............................ 3,500,000 28,346,000
Sony Corp............................. 302,000 26,003,528
--------------
166,843,661
--------------
MALAYSIA -- 1.05%
Malayan Banking Berhad................ 4,600,000 4,636,049
Sime Darby Berhad..................... 21,500,000 14,825,809
Telekom Malaysia Berhad............... 5,875,000 9,915,619
--------------
29,377,477
--------------
RUSSIA -- 0.95%
LUKoil Oil Co. Sponsored ADR 144A..... 170,586 5,748,748
Mosenergo Sponsored ADR 144A.......... 1,840,000 8,970,000
Unified Energy Systems(a)............. 90,000,000 11,812,500
--------------
26,531,248
--------------
SINGAPORE -- 1.23%
Fraser & Neave Ltd. ORD............... 5,000,000 13,436,079
Keppel Corporation Ltd................ 7,050,000 10,599,113
United Overseas Bank Foreign
Registered.......................... 3,312,407 10,293,183
--------------
34,328,375
--------------
AUSTRALIA -- 1.37%
- --------------------------------------
AUSTRALIA -- 1.37%
News Corp. Ltd. ADR................... 1,000,000 32,125,000
Rio Tinto Limited..................... 322,500 3,834,377
Western Mining Corporation Holdings... 418,235 1,258,695
Western Mining Corporation Holdings
ADR................................. 82,812 993,744
--------------
38,211,816
--------------
EUROPE -- 72.28%
- --------------------------------------
DENMARK -- 2.55%
ISS International Service Systems B... 700,000 40,715,339
Novo Nordisk AS -- Class B............ 220,000 30,327,111
--------------
71,042,450
--------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------
<S> <C> <C>
FRANCE -- 16.30%
AXA-UAP............................... 500,000 $ 56,235,258
BIC................................... 87,860 6,248,696
Banque Nationale de Paris............. 513,349 41,943,961
Compagnie de Saint Gobain............. 130,000 24,103,424
Compagnie Financiere de Paribas....... 367,257 39,301,049
Elf Aquitaine S.A. ................... 300,000 42,176,443
Eurotunnel S.A.(a).................... 10,000,000 10,998,955
Eurotunnel SA Warrants(a)............. 10,000,000 1,521,660
Michelin Class B REGD................. 353,305 20,394,121
Rhone Poulenc S.A..................... 567,790 32,023,728
Schneider S.A......................... 500,000 39,869,144
Seita/Societe National D'Exploitation
Industrielle Des Tabacs Et
Allumettes.......................... 691,570 31,341,262
Societe Generale...................... 90,000 18,711,455
Suez Lyonnaise des Eaux............... 222,611 36,635,277
Total S.A. ........................... 407,995 53,040,445
--------------
454,544,878
--------------
ITALY -- 3.24%
Assicurazioni Genarali................ 1,392,000 45,263,196
Banca Commericale Italiana............ 7,540,000 45,090,261
--------------
90,353,457
--------------
NETHERLANDS -- 4.28%
ABN Amro Holdings NV.................. 1,460,906 34,184,630
Hunter Douglas NV..................... 149,261 8,107,935
ING Groep NV.......................... 638,603 41,815,456
Royal Dutch Petroleum ADR............. 640,000 35,080,000
--------------
119,188,021
--------------
NORWAY -- 2.43%
Bergesen D.Y. A/S A................... 1,150,000 21,880,387
Frontline Ltd (with 804,393
warrants)(a)........................ 13,801,994 8,993,239
Norsk Hydro Sponsored ADR............. 450,000 19,856,250
Saga Petroleum Series A Free.......... 1,100,000 16,915,272
--------------
67,645,148
--------------
PORTUGAL -- 1.52%
Banco Commercial Portugues Preferred.. 400,000 42,400,000
--------------
SPAIN -- 3.15%
Banco Bilboa Vizcaya REGD............. 300,000 15,422,299
Banco Intercontinental................ 350,000 22,748,054
Repsol S.A. .......................... 900,000 49,676,654
--------------
87,847,007
--------------
SWEDEN -- 8.20%
AGA AB Series B Free.................. 2,500,000 38,244,768
Autoliv, Inc. SDR..................... 1,600,000 51,160,215
Ericsson L.M. Telephone Series B
Free................................ 1,200,000 35,059,794
Scania AB-B 6/4/99(a)................. 2,008,500 1,725,181
Svenska Cellulosa AB (SCA) -- Series
B................................... 1,200,000 31,072,307
Swedish Match AB...................... 9,000,000 29,906,155
Trelleborg AB B Free.................. 300,000 3,949,870
Volvo AB B Free....................... 1,260,000 37,523,760
--------------
228,642,050
--------------
</TABLE>
<PAGE> 77
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- --------------------------------------
<S> <C> <C>
SWITZERLAND -- 15.08%
Ciba Specialty Chemicals AG........... 300,000 $ 38,518,312
Compagnie Financiere Michelin......... 45,000 27,590,781
Compagnie Financiere Richemont AG..... 37,000 48,420,667
Credit Suisse Group REGD.............. 177,035 39,391,402
Nestle AG REGD........................ 20,000 42,800,323
Novartis AG REGD...................... 18,096 30,112,060
Sairgroup............................. 150,000 49,346,952
Swiss Re REGD......................... 20,655 52,236,291
UBS AG................................ 109,976 40,892,850
Zurich Versicherungsgesellschaft
REGD................................ 80,000 51,054,482
--------------
420,364,120
--------------
UNITED KINGDOM -- 15.53%
B.A.T. Industries plc................. 4,114,488 41,087,164
BG plc................................ 6,176,470 35,759,878
Barclay's Bank ORD.................... 483,912 13,976,218
British Petroleum ORD................. 2,389,992 34,792,697
Cadbury Schweppes plc ADR............. 430,081 26,503,742
Diageo plc............................ 3,460,000 41,190,426
Eurotunnel Equity Units When
Issued(a)........................... 4,846,000 5,336,464
Imperial Tobacco Group Plc............ 5,500,000 40,423,584
National Westminster Bank............. 2,025,841 36,268,642
Reed International plc................ 3,600,000 32,525,739
Rio Tinto Plc......................... 1,670,228 18,824,668
Royal Bank Scotland Group ORD......... 804,764 13,951,159
Smithkline Beecham plc ADR............ 800,000 48,400,000
Waste Management International plc
ADR(a).............................. 1,809,000 19,672,875
Whitbread PLC......................... 1,500,000 24,301,703
--------------
433,014,959
--------------
SOUTH AMERICA -- 5.20%
- --------------------------------------
ARGENTINA -- 2.47%
Telecom de Argentina S.A. Class B..... 3,300,000 19,472,337
Telefonica de Argentina S.A. Class
B................................... 6,000,000 19,442,333
YPF ADR Class D....................... 1,000,000 30,062,500
--------------
68,977,170
--------------
BRAZIL -- 2.73%
Centrais Electricas Brasileiras
S.A.(Electrobras)................... 600,000,000 18,156,556
Centrais Geradoras do Sul do Brazil
S.A.(Gersul)(a)..................... 600,000,000 866,327
Petrobras Registered NV............... 150,000,000 27,753,593
Telebras Registered NV................ 107,400,000 11,690,799
Telecomunicacoes de Sao Paulo S.A.
(Telesp) Preferred.................. 74,000,000 17,562,577
Telecomunicacoes de Sao Paulo S.A.
(Telesp) Preferred Rights(a)........ 1,043,351 16,688
--------------
76,046,540
--------------
TOTAL EQUITY SECURITIES
(Cost -- $2,017,623,957)............ 2,575,544,334
--------------
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS -- 0.60% PRINCIPAL VALUE
- --------------------------------------
<S> <C> <C>
Liberty Life International 144A
Registered, 6.50%, 09/30/04
(Cost -- $18,280,326)............... $16,500,000 $ 16,747,500
--------------
COMMERCIAL PAPER -- 6.64%
- --------------------------------------
Chevron Oil Finance, 5.56%, 07/07/98.. 20,334,000 20,362,330
G.E. Financial Assuracnce, 5.56%,
07/06/98............................ 18,417,000 18,451,223
G.E. Financial Assuracnce, 5.58%,
07/09/98............................ 19,183,000 19,203,862
General Electric Company, 5.57%,
07/14/98............................ 13,319,000 13,323,131
General Electric Company, 5.57%,
07/15/98............................ 19,457,000 19,460,017
Prudential Funding, 5.47%, 07/01/98... 18,156,000 18,194,704
Prudential Funding, 5.40%, 07/02/98... 23,026,000 23,070,995
Prudential Funding, 5.56%, 07/08/98... 18,802,000 18,825,285
Prudential Funding, 5.57%, 07/10/98... 16,836,000 16,851,666
Prudential Funding, 5.56%, 07/13/98... 17,291,000 17,304,387
--------------
TOTAL COMMERCIAL PAPER
(Cost -- $185,047,600).............. 185,047,600
--------------
TOTAL INVESTMENTS -- 99.61%
(Cost -- $2,220,951,883)(b)......... 2,777,339,434
OTHER ASSETS, LESS
LIABILITIES -- 0.39%................ 10,764,451
--------------
NET ASSETS -- 100%.................... $2,788,103,885
==============
</TABLE>
<TABLE>
<S> <C>
ADR -- American Depository Receipt
NV -- Non-voting
ORD -- Ordinary
REGD -- Registered
SDR -- Swedish Depository Receipt
</TABLE>
<TABLE>
<S> <C> <C>
(a) Non-income producing security
(b) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................. $ 787,466,610
Gross unrealized depreciation.................. (231,079,059)
--------------
Net unrealized appreciation.............. $ 556,387,551
==============
Purchases and sales of securities other than short-term obligations
aggregated $193,751,214 and $314,069,665, respectively, for the
period ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 78
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $2,220,951,883)... $2,777,339,434
Cash........................................................ 99,422
Receivables
Investments sold.......................................... 4,516,209
Fund shares sold.......................................... 4,020,415
Dividends and interest.................................... 13,962,226
Other assets................................................ 94,376
--------------
Total assets.............................................. 2,800,032,082
--------------
LIABILITIES
Payables
Investments purchased..................................... 2,699,764
Fund shares repurchased................................... 4,838,921
Management fee............................................ 2,289,812
12b-1 service and distribution fees....................... 976,567
Other payables to related parties......................... 502,077
Accrued expenses............................................ 621,056
--------------
Total liabilities......................................... 11,928,197
--------------
NET ASSETS.................................................. $2,788,103,885
==============
CLASS A
Net asset value and redemption price per share
($1,883,204,382/44,123,717 shares outstanding)............ $ 42.68
==============
Maximum offering price per share ($42.68 X 100/94.25)*...... $ 45.28
==============
CLASS B
Net asset value, offering price and redemption price** per
share ($600,053,637/14,196,211 shares outstanding)........ $ 42.27
==============
CLASS C
Net asset value, offering price and redemption price*** per
share ($181,431,029/4,312,077 shares outstanding)......... $ 42.08
==============
CLASS I
Net asset value, offering price and redemption price per
share ($123,414,837/2,884,446 shares outstanding)......... $ 42.79
==============
NET ASSETS CONSIST OF
Capital paid-in........................................... $2,169,609,571
Undistributed net realized gain on investments and foreign
currency transactions................................... 45,580,717
Undistributed net investment income....................... 16,632,257
Net unrealized appreciation on investments and foreign
currency transactions................................... 556,281,340
--------------
NET ASSETS.................................................. $2,788,103,885
==============
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 79
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $3,729,806 foreign taxes withheld....... $ 38,234,606
Interest.................................................. 2,982,083
------------
41,216,689
------------
EXPENSES
Management fee............................................ $13,708,540
Transfer agent............................................ 1,614,737
Administrative services fee............................... 1,316,064
Custodian fees............................................ 1,133,480
Blue Sky fees............................................. 40,321
Auditing and accounting fees.............................. 44,691
Shareholder reports....................................... 132,209
Fund accounting........................................... 106,436
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 6,010,052
Legal..................................................... 22,665
Other..................................................... 418,100
------------
Total expenses.......................................... 24,551,530
------------
NET INVESTMENT INCOME....................................... 16,665,159
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 51,661,036
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 166,466,580
------------
Net gain on investment transactions..................... 218,127,616
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $234,792,775
============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 80
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------- --------------
1998* 1997
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 16,665,159 $ 10,282,860
Net realized gain on investments.......................... 51,661,036 15,941,694
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 166,466,580 155,677,616
--------------- --------------
Net increase resulting from operations.................. 234,792,775 181,902,170
--------------- --------------
Class A distributions
From net investment income................................ -- (9,161,845)
From net realized gain.................................... -- (11,110,560)
In excess of net realized gain............................ -- (4,390,449)
--------------- --------------
Total distributions to Class A shareholders............. -- (24,662,854)
--------------- --------------
Class B distributions
From net investment income................................ -- (1,396)
From net realized gain.................................... -- (3,054,436)
In excess of net realized gain............................ -- (1,203,967)
--------------- --------------
Total distributions to Class B shareholders............. -- (4,259,799)
--------------- --------------
Class C distributions
From net investment income................................ -- (71,355)
From net realized gain.................................... -- (957,153)
In excess of net realized gain............................ -- (377,366)
--------------- --------------
Total distributions to Class C shareholders............. -- (1,405,874)
--------------- --------------
Class I distributions
From net investment income................................ -- (927,558)
From net realized gain.................................... -- (819,545)
In excess of net realized gain............................ -- (324,157)
--------------- --------------
Total distributions to Class I shareholders............. -- (2,071,260)
--------------- --------------
Fund share transactions (Note 4)
Class A................................................... 18,357,764 616,356,715
Class B................................................... (18,059,482) 218,972,703
Class C................................................... (8,667,597) 121,136,209
Class I................................................... (2,538,281) 59,040,747
--------------- --------------
Net (decrease) increase resulting from Fund share
transactions........................................... (10,907,596) 1,015,506,374
--------------- --------------
TOTAL INCREASE IN NET ASSETS................................ 223,885,179 1,165,008,757
NET ASSETS
Beginning of period....................................... 2,564,218,706 1,399,209,949
--------------- --------------
END OF PERIOD............................................. $2,788,103,885 $2,564,218,706
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 16,632,257 $ --
============== ==============
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 81
FINANCIAL HIGHLIGHTS(a)
<TABLE>
<CAPTION>
CLASS A FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------ ----------------------------------------------------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------------ ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 39.03 $ 35.89 $ 30.67 $ 27.60 $ 27.71 $ 18.88
---------- ---------- -------- -------- -------- --------
Income from investment operations
Net investment income...................... .30(f) .24 .20 .25 .07 .12
Net realized and unrealized gain on
investment transactions.................. 3.35(f) 3.47 5.85 3.22 1.01 9.01
---------- ---------- -------- -------- -------- --------
Total from investment operations......... 3.65 3.71 6.05 3.47 1.08 9.13
---------- ---------- -------- -------- -------- --------
Less distributions
From net investment income................. -- .21 .19 .25 .07 .08
From net realized gain..................... -- .26 .64 .12 1.11 .22
In excess of net realized gain............. -- .10 -- .03 -- --
From capital paid-in....................... -- -- -- -- .01 --
---------- ---------- -------- -------- -------- --------
Total distributions...................... -- .57 .83 .40 1.19 .30
---------- ---------- -------- -------- -------- --------
Net asset value, end of period............... $ 42.68 $ 39.03 $ 35.89 $ 30.67 $ 27.60 $ 27.71
========== ========== ======== ======== ======== ========
Total return(%).............................. 9.35(c) 10.38(b) 19.72(b) 12.65(b) 3.92(b) 48.37(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $1,883,204 $1,705,772 $989,254 $475,989 $229,586 $172,539
Ratio of expenses to average net assets(%)... 1.57(d) 1.59 1.65 1.52 1.58 1.61
Ratio of net investment income to average net
assets(%).................................. 1.44(d) .68 .76 .97 .30 .56
Portfolio turnover rate(%)................... 7 8 14 6 7 19
Average commission rate(e)................... $ .0030 $ .0090 $ .0092 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 82
FINANCIAL HIGHLIGHTS(a) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ --------------------------------------- ----------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ -------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 38.82 $ 35.73 $ 30.67 $ 27.60 $ 27.71 $25.86
-------- -------- -------- ------- ------- ------
Income from investment operations
Net investment income (loss)........................ .12(f) (.06) (.01) .01 (.10) (.01)
Net realized and unrealized gain on investment
transactions...................................... 3.33(f) 3.44 5.76 3.20 .91 2.12
-------- -------- -------- ------- ------- ------
Total from investment operations.................. 3.45 3.38 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.............................. -- .21 .64 .10 .90 .22
In excess of net realized gain...................... -- .08 -- .03 -- --
From capital paid-in................................ -- -- -- -- .02 --
-------- -------- -------- ------- ------- ------
Total distributions............................... -- .29 .69 .14 .92 .26
-------- -------- -------- ------- ------- ------
Net asset value, end of period........................ $ 42.27 $ 38.82 $ 35.73 $ 30.67 $ 27.60 $27.71
======== ======== ======== ======= ======= ======
Total return(%)....................................... 8.89(c) 9.46(b) 18.76(b) 11.62(b) 2.96(b) 7.65(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $600,054 $568,521 $312,161 $74,650 $30,143 $2,846
Ratio of expenses to average net assets(%)............ 2.42(d) 2.42 2.45 2.44 2.50 2.59(d)
Ratio of net investment income (loss) to average net
assets(%)........................................... .59(d) (.15) (.04) .05 (.62) (.42)(d)
Portfolio turnover rate(%)............................ 7 8 14 6 7 19
Average commission rate(e)............................ $ .0030 $ .0090 $ .0092 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 83
FINANCIAL HIGHLIGHTS(a) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE APRIL 30, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 38.64 $ 35.58 $ 32.68
-------- -------- --------
Income from investment operations
Net investment income (loss).............................. .13(f) (.05) --
Net realized and unrealized gain on investment
transactions............................................ 3.31(f) 3.42 3.74
-------- -------- --------
Total from investment operations........................ 3.44 3.37 3.74
-------- -------- --------
Less distributions
From net investment income................................ -- .01 --
In excess of net investment income........................ -- -- .20
From net realized gain.................................... -- .21 .64
In excess of net realized gain............................ -- .09 --
-------- -------- --------
Total distributions..................................... -- .31 .84
-------- -------- --------
Net asset value, end of period.............................. $ 42.08 $ 38.64 $ 35.58
======== ======== ========
Total return(%)............................................. 8.90(c) 9.50(b) 11.45(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $181,431 $174,880 $ 44,450
Ratio of expenses to average net assets(%)................ 2.41(d) 2.41 2.44(d)
Ratio of net investment income (loss) to average net
assets(%)............................................... .60(d) (.14) (.03)(d)
Portfolio turnover rate(%).................................. 7 8 14
Average commission rate(e).................................. $ .0030 $ .0090 $ .0092
</TABLE>
(See Notes to Financial Statements)
<PAGE> 84
FINANCIAL HIGHLIGHTS(a) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 6, 1994
CLASS I MONTHS ENDED FOR THE YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ -------------------------------- ---------------
1998* 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------ -------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 39.06 $ 35.89 $ 30.67 $ 27.60 $29.06
-------- -------- ------- ------- ------
Income (loss) from investment operations
Net investment income................................... .38(f) .32 .27 .30 .03
Net realized and unrealized gain (loss) on investment
transactions.......................................... 3.35(f) 3.56 5.88 3.22 (.49)
-------- -------- ------- ------- ------
Total from investment operations...................... 3.73 3.88 6.15 3.52 (.46)
-------- -------- ------- ------- ------
Less distributions
From net investment income.............................. -- .32 .27 .30 .03
In excess of net investment income...................... -- -- .02 -- --
From net realized gain.................................. -- .28 .64 .12 .92
In excess of net realized gain.......................... -- .11 -- .03 --
From capital paid-in.................................... -- -- -- -- .05
-------- -------- ------- ------- ------
Total distributions................................... -- .71 .93 .45 1.00
-------- -------- ------- ------- ------
Net asset value, end of period............................ $ 42.79 $ 39.06 $ 35.89 $ 30.67 $27.60
======== ======== ======= ======= ======
Total return(%)........................................... 9.55(c) 10.87(b) 20.06(b) 12.85(b) (1.64)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $123,415 $115,046 $53,344 $13,020 $4,921
Ratio of expenses to average net assets(%)................ 1.19(d) 1.18 1.25 1.35 1.41(d)
Ratio of net investment income to average net assets(%)... 1.82(d) 1.08 1.16 1.14 0.47(d)
Portfolio turnover rate(%)................................ 7 8 14 6 7
Average commission rate(e)................................ $ .0030 $ .0090 $ .0092 N/A N/A
</TABLE>
(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) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not reflect a sales
charge.
(d) Annualized
(e) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
(f) Based on average shares outstanding
*Unaudited
(See Notes to Financial Statements)
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Class I are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998, 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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets. Northern Cross Investments, Limited is the
subadviser of the Fund. IMI, not the Fund, is obligated to compensate the
subadviser.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
from investment dealers. For the six months ended June 30,1998 the net amount of
underwriting discounts retained by IMDI was $35,226.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net assets of shares issued after December 31, 1991, excluding Class I. Class B
and Class C shares are also subject to an ongoing distribution fee at an annual
rate of .75% of the average net assets attributable to Class B and Class C. IMDI
may use such distribution fee for purposes of advertising and marketing shares
of the Fund. Such fees of $2,116,379, $2,983,216 and $910,457, 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 $905,360, $535,521, $150,910 and $22,946, for Class A,
Class B, Class C and Class I, respectively, are reflected as Transfer agent in
the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class I were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Sold................... 5,844,796 $ 245,208,735 24,535,217 $ 947,843,934
Issued on reinvestment
of distributions...... -- -- 553,328 21,066,996
Repurchased............ (5,419,754) (226,850,971) (8,953,220) (352,554,215)
---------- ------------- ---------- -------------
Net increase........... 425,042 $ 18,357,764 16,135,325 $ 616,356,715
========== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 458,863 $ 19,199,648 7,205,870 $269,571,973
Issued on reinvestment of
distributions............ -- -- 55,534 2,101,941
Repurchased............... (907,123) (37,259,130) (1,353,764) (52,701,211)
-------- ------------ ---------- ------------
Net (decrease)/increase... (448,260) $(18,059,482) 5,907,640 $218,972,703
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- ------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold....................... 243,810 $ 10,169,161 3,605,650 $133,986,481
Issued on reinvestment of
distributions............. -- -- 12,771 481,083
Repurchased................ (457,370) (18,836,758) (342,252) (13,331,355)
-------- ------------ --------- ------------
Net (decrease)/increase.... (213,560) $ (8,667,597) 3,276,169 $121,136,209
======== ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- ------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold....................... 126,427 $ 5,324,433 1,663,567 $ 67,173,182
Issued on reinvestment of
distributions............. -- -- 41,606 1,584,389
Repurchased................ (187,532) (7,862,714) (245,848) (9,716,824)
-------- ------------ --------- ------------
Net (decrease)/increase.... (61,105) $ (2,538,281) 1,459,325 $ 59,040,747
======== ============ ========= ============
</TABLE>
Effective April 18, 1997, Ivy International Fund suspended the offer of its
shares to new investors. Shares of Ivy International Fund are available for
purchase only by existing shareholders of Ivy International Fund. Once a
shareholders account is liquidated, the shareholder may not invest in Ivy
International Fund at a later date.
03IVINX063098
<PAGE> 87
JUNE 30, 1998 IVY FUNDS(R)
IVY
GROWTH
WITH INCOME
FUND
SEMIANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the share-holders. This report is not authorized for
distrib-ution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
(ART)
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
In the first half of 1998 in the US, a potent combination of subdued inflation
and solid economic growth drove the continuing remarkable climb of the stock
market. Economic turmoil in Asia, when combined with a strong US dollar, has
helped boost US stocks, particularly large-capitalization stocks, because the US
market is viewed as a safe haven for foreign money. However, many analysts now
believe that the impact of the Asian turmoil on our economy will be felt over
the next six to nine months as the earnings of many larger companies will be
directly impacted by the economic slowdown in Asia. Also, larger companies have
been the prime beneficiaries of all the corporate restructuring that has taken
place during the past decade. We believe that the Asia slowdown, combined with a
winding down of restructuring activity, could lead to slower revenue growth for
large caps going forward.
With this concern in mind, the Ivy Growth with Income Fund has maintained a
blend of investments that includes mid-capitalization stocks and real estate
investment trusts (REITs), in addition to the Fund's larger-capitalization
holdings. Unfortunately, REIT prices have retreated this year, in our view, due
primarily to concerns about oversupply and because investors have pulled money
out of the sector to invest in the strong, broader stock market. However, we
believe that REITs continue to look attractive as a diversifier, given that
their performance is less correlated with the general market than are many other
sectors and that they offer good dividend yields with decent earnings growth and
reasonable price to earnings (P/E) ratios.
According to our research, mid-cap stocks are more attractively priced
investments than their large-cap counterparts. Most of the money flowing into
the US market from abroad, in a flight to quality over Asia concerns, has gone
into large, liquid, well-known names, driving the P/E ratios of the large-cap
indices to historic highs. Mid caps, however, have lagged behind during this
time. As a result, we believe that the companies purchased for the Ivy Growth
with Income Fund offer better value, given their growth prospects combined with
lower P/E ratios. We continue to focus on finding well-managed companies, with
solid franchises and good long-term prospects, which are selling at attractive
prices.
The principal goal of the Ivy Growth with Income Fund is to provide
long-term capital growth, while controlling risk. We also strive to minimize the
taxable capital gains that our shareholders will have to report by keeping
turnover at moderate levels and by keeping in mind tax implications when
selecting securities for sale. We believe that the relatively conservative
nature of the Fund and its aversion to paying taxes should be attractive to
investors wishing to participate in the US equity market, while avoiding the
added volatility and tax implications of more aggressive funds.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
<PAGE> 88
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 82.82% SHARES VALUE
- ---------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 7.39%
Crown Cork & Seal Company, Inc............... 69,000 $ 3,277,500
Du Pont (E.I.) De Numours & Company.......... 5,500 410,438
Ferro Corporation............................ 14,000 354,375
Harsco Corporation........................... 44,000 2,015,750
Lubrizol Corporation, The.................... 25,500 771,375
Minnesota Mining and Manufacturing Company... 6,500 534,219
-----------
7,363,657
-----------
CAPITAL GOODS -- 6.42%
AGCO Corporation............................. 52,000 1,069,250
American Standard Companies, Inc(b).......... 9,700 433,469
Fluor Corporation............................ 5,000 255,000
Foster Wheeler Corporation................... 8,500 182,219
General Electric Company..................... 12,500 1,137,500
Harley-Davidson, Inc......................... 17,000 658,750
Kaydon Corporation........................... 7,500 264,844
Tenneco Inc.................................. 14,000 532,875
Tyco International Ltd....................... 14,892 938,196
US Filter Corporation(b)..................... 33,000 926,062
-----------
6,398,165
-----------
COMMERCIAL SERVICES -- 11.52%
Banta Corp................................... 54,500 1,682,687
Electronic Data Systems New.................. 109,500 4,380,000
First Data Corporation....................... 116,000 3,864,250
Harte-Hanks Communications................... 60,000 1,548,750
-----------
11,475,687
-----------
CONSUMER NON-DURABLES -- 10.36%
Hasbro, Inc.................................. 10,500 412,781
Mattel, Inc.................................. 37,500 1,586,719
Nine West Group, Inc.(b)..................... 128,500 3,445,406
PepsiCo, Inc................................. 30,000 1,235,625
Scholastic Corporation(b).................... 24,500 976,938
Tupperware Corporation....................... 17,200 483,750
UST Inc...................................... 35,000 945,000
Warnaco Group, Inc........................... 29,100 1,234,931
-----------
10,321,150
-----------
CONSUMER SERVICES -- 8.88%
Carnival Corporation Class A................. 35,000 1,386,875
Harcourt General, Inc........................ 15,500 922,250
J.C.Penney Co., Inc.......................... 15,481 1,119,470
Lowe's Companies, Inc........................ 10,000 405,625
McDonald's Corporation....................... 36,000 2,484,000
Royal Caribbean Cruises Ltd.................. 10,500 834,750
Tricon Global Restaurants, Inc.(b)........... 14,800 468,975
Walt Disney Company, The..................... 3,000 315,188
Westwood One, Inc.(b)........................ 36,000 907,875
-----------
8,845,008
-----------
ENERGY -- 4.22%
Dresser Industries, Inc...................... 14,000 616,875
Enron Corporation............................ 23,000 1,243,438
Helmerich & Payne, Inc. ..................... 21,000 467,250
Noble Drilling Corporation(b)................ 27,000 649,688
Nuevo Energy Company(b)...................... 16,800 539,700
Schlumberger, Ltd. .......................... 10,000 683,125
-----------
4,200,076
-----------
FINANCIAL SERVICES -- 16.36%
AMBAC, Inc................................... 21,200 1,240,200
Aegon NV(a).................................. 11,146 964,129
Bankers Trust Corporation.................... 4,200 487,463
Exel Limited................................. 19,500 1,517,344
Federal National Mortgage Association........ 31,000 1,883,250
First Union Corporation...................... 18,000 1,048,500
Freddie Mac.................................. 42,000 1,976,625
J.P. Morgan & Company Inc. .................. 5,000 585,625
NationsBank Corporation...................... 10,400 795,600
Norwest Corporation.......................... 17,800 665,275
Penncorp Financial Group, Inc................ 17,000 348,500
Providian Corporation........................ 20,000 1,571,250
Resource Bancshares Mortgage Group, Inc. .... 49,500 921,938
Terra Nova (Bermuda) Holdings Ltd............ 21,000 658,875
Travelers, Inc............................... 26,840 1,627,175
-----------
16,291,749
-----------
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ---------------------------------------------
<S> <C> <C>
HEALTHCARE -- 6.64%
Allegiance Corporation....................... 16,000 $ 820,000
Boston Scientific Corporation(b)............. 4,000 286,500
Columbia/HCA Healthcare Corp................. 22,000 640,750
Elan Corp. PLC -- Sponsored ADR(a)(b)........ 28,500 1,832,906
Johnson & Johnson............................ 10,000 737,500
Medpartners, Inc.(b)......................... 43,500 348,000
Pharmacia & Upjohn, Inc. .................... 14,000 645,750
US Surgical Corp............................. 28,500 1,300,312
-----------
6,611,718
-----------
TECHNOLOGY -- 8.69%
Bell & Howell Company(b)..................... 49,000 1,264,813
Cisco Systems, Inc.(b)....................... 13,500 1,242,844
Diebold Incorporated......................... 34,500 996,187
Hewlett-Packard Company...................... 6,500 389,187
Intel Corp................................... 13,000 963,625
International Business Machines
Corporation................................ 6,000 688,875
KLA Instruments Corporation(b)............... 9,000 249,187
Loral Space & Communications Ltd.(b)......... 27,000 762,750
Microsoft Corporation(b)..................... 11,500 1,246,312
Motorola, Inc................................ 10,000 525,625
Oracle Corporation(b)........................ 12,950 318,084
-----------
8,647,489
-----------
UTILITIES -- 2.34%
Citizens Utilities Company Class B(b)........ 186,850 1,798,431
Duke Energy Corporation...................... 9,000 533,250
-----------
2,331,681
-----------
TOTAL COMMON STOCKS
(Cost -- $61,384,808)...................... 82,486,380
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) --
7.75%
- ---------------------------------------------
Amli Residential Properties Trust............ 17,000 364,437
Apartment Investment & Management Co. ....... 28,500 1,125,750
Arden Realty Group, Inc...................... 18,000 465,750
Boykin Lodging Company....................... 12,000 260,250
Developers Diversified Realty Corporation.... 14,000 548,625
Duke Realty Investments, Inc................. 49,000 1,160,687
Equity Residential Properties Trust.......... 12,000 569,250
First Industrial Realty Trust, Inc........... 22,000 698,500
Manufactured Home Communities, Inc........... 18,000 434,250
Spieker Properties, Inc...................... 24,000 930,000
Storage Trust Realty......................... 21,000 490,875
Storage USA, Inc............................. 13,000 455,000
Sunstone Hotel Investors, Inc................ 16,000 213,000
-----------
TOTAL REITS
(Cost -- $6,015,091)....................... 7,716,374
-----------
TOTAL INVESTMENTS -- 90.57%
(Cost -- $67,399,899)(c)................... 90,202,754
OTHER ASSETS, LESS LIABILITIES -- 9.43%...... 9,391,055
-----------
NET ASSETS -- 100%........................... $99,593,809
===========
ADR - American Depository Receipt
NV - Non-voting
(a) Foreign security
(b) Non-income producing security
(c) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation............ $25,781,881
Gross unrealized depreciation............ (2,979,026)
-----------
Net unrealized appreciation.............. $22,802,855
===========
Purchases and sales of securities (other than short-term
obligations) aggregated $17,169,950 and $18,070,970 respectively,
for the period ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 89
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost - $67,399,899)....... $90,202,754
Cash........................................................ 8,938,305
Receivables
Investments sold.......................................... 586,685
Fund shares sold.......................................... 20,157
Dividends and interest.................................... 102,130
Other assets................................................ 23,386
-----------
Total assets.............................................. 99,873,417
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 34,239
Investments purchased..................................... 85,125
Fund shares repurchased................................... 13,670
Management fee............................................ 59,816
12b-1 service and distribution fees....................... 36,277
Other payables to related parties......................... 34,259
Accrued expenses............................................ 16,222
-----------
Total liabilities......................................... 279,608
-----------
NET ASSETS.................................................. $99,593,809
===========
CLASS A
Net asset value and redemption price per share
($71,487,096/5,159,172 shares outstanding)................ $ 13.86
===========
Maximum offering price per share ($13.86 x 100/94.25)*...... $ 14.71
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($23,735,119/1,726,981 shares outstanding).......... $ 13.74
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($4,178,647/306,215 shares outstanding)............. $ 13.65
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($192,947/13,915 shares outstanding)................ $ 13.87
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $77,204,308
Accumulated net realized loss on investments.............. (145,372)
Accumulated net investment loss........................... (267,982)
Net unrealized appreciation on investments................ 22,802,855
-----------
NET ASSETS.................................................. $99,593,809
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
(See Notes to Financial Statements)
<PAGE> 90
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 666,128
Interest.................................................. 272,048
----------
938,176
----------
EXPENSES
Management fee............................................ $367,259
Transfer agent............................................ 111,847
Administrative services fee............................... 48,968
Custodian fees............................................ 5,499
Blue Sky fees............................................. 21,982
Auditing and accounting fees.............................. 10,259
Shareholder reports....................................... 10,499
Fund accounting........................................... 47,709
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 208,169
Legal..................................................... 11,941
Other..................................................... 29,578
----------
Total expenses.......................................... 877,945
----------
NET INVESTMENT INCOME....................................... 60,231
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 5,338,598
Net unrealized appreciation during the period on
investments............................................. 4,428,977
----------
Net gain on investment transactions................... 9,767,575
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $9,827,806
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 91
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 60,231 $ 364,445
Net realized gain (loss) on
Investments............................................. 5,338,598 10,191,136
Options................................................. -- (553,068)
Net unrealized appreciation during the period on
Investments............................................. 4,428,977 6,207,015
Options................................................. -- 223,772
----------- -----------
Net increase resulting from operations................ 9,827,806 16,433,300
----------- -----------
Class A distributions
From net investment income................................ (60,121) (181,666)
In excess of net investment income........................ (204,498) --
From net realized gain.................................... -- (5,979,580)
----------- -----------
Total distributions to Class A shareholders........... (264,619) (6,161,246)
----------- -----------
Class B distributions
From net investment income................................ -- (46,840)
In excess of net investment income........................ (85,346) --
From net realized gain.................................... -- (1,644,525)
----------- -----------
Total distributions to Class B shareholders........... (85,346) (1,691,365)
----------- -----------
Class C distributions
From net investment income................................ -- (1,929)
In excess of net investment income........................ (16,707) --
From net realized gain.................................... -- (380,885)
----------- -----------
Total distributions to Class C shareholders........... (16,707) (382,814)
----------- -----------
Class D distributions
From net investment income................................ -- (915)
From net realized gain.................................... -- (1,831)
----------- -----------
Total distributions to Class D shareholders........... -- (2,746)
----------- -----------
Advisor Class distributions
From net investment income................................ (110) --
In excess of net investment income........................ (119) --
----------- -----------
Total distributions to Advisor Class shareholders..... (229) --
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (5,142,137) (482,774)
Class B................................................... 1,524,430 5,280,128
Class C................................................... (610,906) 4,566,407
Class D................................................... -- (931,565)
Advisor Class............................................. 192,818 --
----------- -----------
Net (decrease) increase resulting from Fund share
transactions......................................... (4,035,795) 8,432,196
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 5,425,110 16,627,325
NET ASSETS
Beginning of period....................................... 94,168,699 77,541,374
----------- -----------
END OF PERIOD............................................. $99,593,809 $94,168,699
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 38,689
=========== ===========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 92
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
CLASS A MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ -------------------------------------------------------------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 12.59 $ 11.38 $ 10.98 $ 9.08 $ 9.70 $ 9.21
------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment income............... .02 .08 .08 .11 .17 .08
Net realized and unrealized gain
(loss) on investment
transactions...................... 1.30 2.37 2.16 2.13 (.36) 1.30
------- ------- ------- ------- ------- -------
Total from investment
operations...................... 1.32 2.45 2.24 2.24 (.19) 1.38
------- ------- ------- ------- ------- -------
Less distributions
From net investment income.......... .01 .03 .08 .08 .17 .06
In excess of net investment
income............................ .04 -- .03 -- .01 --
From net realized gain.............. -- 1.21 1.73 .26 .25 .83
------- ------- ------- ------- ------- -------
Total distributions............... .05 1.24 1.84 .34 .43 .89
------- ------- ------- ------- ------- -------
Net asset value, end of period........ $ 13.86 $ 12.59 $ 11.38 $ 10.98 $ 9.08 $ 9.70
======= ======= ======= ======= ======= =======
Total return (%)...................... 10.48(b) 21.57(a) 20.46(a) 24.93(a) (2.03)(a) 15.07(a)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $71,487 $69,742 $63,219 $59,054 $26,017 $22,669
Ratio of expenses to average net
assets (%).......................... 1.60(c) 1.59 1.81 1.96 1.84 2.14
Ratio of net investment income to
average net assets (%).............. .32(c) .58 .68 1.06 1.83 .88
Portfolio turnover rate (%)........... 20 36 138 81 36 85
Average commission rate (d)........... $ .0680 $ .0800 $ .0580 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ ---------------------------------------------- ----------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 12.54 $ 11.36 $ 10.98 $ 9.08 $ 9.70 $ 10.43
------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment (loss) income........... (.03) (.02) (.01) .03 .09 --
Net realized and unrealized gain (loss)
on investment transactions........... 1.28 2.37 2.15 2.13 (.36) .05
------- ------- ------- ------- ------- -------
Total from investment operations..... 1.25 2.35 2.14 2.16 (.27) .05
------- ------- ------- ------- ------- -------
Less distributions
From net investment income............. -- .03 -- .01 .09 .01
In excess of net investment income..... .05 -- .08 -- .01 --
From net realized gain................. -- 1.14 1.68 .25 .25 .77
------- ------- ------- ------- ------- -------
Total distributions.................. .05 1.17 1.76 .26 .35 .78
------- ------- ------- ------- ------- -------
Net asset value, end of period........... $ 13.74 $ 12.54 $ 11.36 $ 10.98 $ 9.08 $ 9.70
======= ======= ======= ======= ======= =======
Total return (%)......................... 9.96(b) 20.74(a) 19.59(a) 23.94(a) (2.88)(a) .61(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $23,735 $20,071 $13,473 $ 8,868 $ 5,849 $ 888
Ratio of expenses to average net
assets(%).............................. 2.33(c) 2.31 2.55 2.75 2.70 3.09(c)
Ratio of net investment (loss) income to
average net assets(%).................. (.41)(c) (.13) (.06) .27 .97 (.07)(c)
Portfolio turnover rate(%)............... 20 36 138 81 36 85
Average commission rate (d).............. $ .0680 $ .0800 $ .0580 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 93
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE APRIL 30, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $12.44 $11.37 $11.73
------ ------ ------
Income from investment operations
Net investment loss....................................... (.02) (.01) (.08)
Net realized and unrealized gain on investment
transactions............................................ 1.28 2.35 1.53
------ ------ ------
Total from investment operations........................ 1.26 2.34 1.45
------ ------ ------
Less distributions
In excess of net investment income........................ .05 -- .08
From net realized gain.................................... -- 1.27 1.73
------ ------ ------
Total distributions..................................... .05 1.27 1.81
------ ------ ------
Net asset value, end of period.............................. $13.65 $12.44 $11.37
====== ====== ======
Total return(%)............................................. 10.13 (b) 20.70(a) 12.37 (b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $4,179 $4,356 $ 28
Ratio of expenses to average net assets(%).................. 2.25 (c) 2.23 3.02 (c)
Ratio of net investment loss to average net assets(%)....... (.33)(c) (.05) (.53)(c)
Portfolio turnover rate(%).................................. 20 36 138
Average commission rate(d).................................. $.0680 $.0800 $.0580
</TABLE>
(See Notes to Financial Statements)
<PAGE> 94
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE PERIOD AUGUST 16, 1993
CLASS D (e) JANUARY 1, 1997 FOR THE YEAR ENDED (COMMENCEMENT)
TO AUGUST 16, DECEMBER 31, TO DECEMBER 31,
---------------- ------------------------------- ---------------
1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ---------------- ------- ------ ------ ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 11.39 $ 10.98 $ 9.08 $ 9.70 $ 9.83
------- ------- ------ ------ ------
Income (loss) from investment operations
Net investment (loss) income......................... (.01) (.02) .03 .09 --
Net realized and unrealized gain (loss) on investment
transactions......................................... 1.88 2.14 2.13 (.36) .73
------- ------- ------ ------ ------
Total from investment operations..................... 1.87 2.12 2.16 (.27) .73
------- ------- ------ ------ ------
Less distributions
From net investment income............................. .02 -- .01 .09 .06
In excess of net investment income..................... -- .08 -- .01 --
From net realized gain................................. .04 1.63 .25 .25 .80
------- ------- ------ ------ ------
Total distributions.................................. .06 1.71 .26 .35 .86
------- ------- ------ ------ ------
Net asset value, end of period........................... $ 13.20 $ 11.39 $10.98 $ 9.08 $ 9.70
======= ======= ====== ====== ======
Total return (%)......................................... 16.37 (b) 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(%)............... 2.41 (c) 2.63 2.75 2.70 3.09 (c)
Ratio of net investment (loss) income to average net
assets(%).............................................. (.11)(c) (.14) .27 .97 (.07)(c)
Portfolio turnover rate(%)............................... 36 138 81 36 85
Average commission rate(d)............................... $ .0800 $ .0580 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 95
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
--------------
1998*
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $13.88
------
Income from investment operations
Net investment income..................................... .02
------
Total from investment operations........................ .02
------
Less distributions
From net investment income................................ .01
In excess of net investment income........................ .02
------
Total distributions..................................... .03
------
Net asset value, end of period.............................. $13.87
======
Total return (%)(b)......................................... .12
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 193
Ratio of expenses to average net assets(%)(c)............... 1.20
Ratio of net investment income to average net
assets(%)(c).............................................. .72
Portfolio turnover rate(%).................................. 20
Average commission rate(d).................................. $.0680
</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) 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.
(e) On August 16, 1997, all Class D shares outstanding were converted to Class A
shares so that the value of a Class D shareholder's account immediately
after conversion was the same value as the shareholder's account before the
conversion.
*Unaudited
(See Notes to Financial Statements)
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Growth with Income Fund (the "Fund"), is a diversified series of shares
of Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998, 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.
CASH AND CASH EQUIVALENTS -- The Fund classifies as cash amounts on deposit
with the Fund's custodian. These amounts earn interest at variable interest
rates. At June 30, 1998 the interest rate was 5.25%.
OPTIONS -- The Fund may write (sell) put options on securities and stock
indices, 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 (the "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 of
1986 (the "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
$5,652,000 as of December 31, 1997, which may be applied against any realized
net taxable capital gains of each succeeding fiscal year until fully utilized or
until the expiration date, whichever occurs first. The Fund's capital loss
carryforward was realized by Mackenzie North American Fund prior to the Fund's
acquisition of all the net assets on April 1, 1995. The carryforward expires
$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 quarterly (or at redemption, if
earlier). An additional distribution in December will include any remaining
undistributed net investment income and net realized capital gain.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
value of securities, and dividends and interest receivable, are translated at
the closing daily rate of exchange; and (ii) purchases and sales of investment
securities are translated at the rate at which related foreign contracts are
obtained or at the exchange rate prevailing on the date of the transaction.
Exchange gains or losses from currency translation of other assets and
liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 foreign denominated
securities, foreign forward currency contracts, distributions received from
pass-through entities (such as REITs), 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 Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .75% of
the Fund's average net assets.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $4,537.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net assets of shares issued after December 31, 1991, excluding Advisor Class.
Class B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net assets attributable to Class B and Class
C. IMDI may use such distribution fee for purposes of advertising and marketing
shares of the Fund. Such fees of $72,738, $113,351, and $22,080, 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 $88,304, $21,142, $2,383, and $18, for Class A, Class B,
Class C and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from
the Fund, which is reflected as Trustees' fees in the Statement of Operations.
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C, Class D and Advisor
Class were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 291,678 $ 3,882,176 863,122 $ 11,052,530
Issued on reinvestment of
distributions............. 16,285 225,787 433,425 5,287,143
Repurchased................ (687,305) (9,250,100) (1,371,170) (17,581,243)
Issued in connection with
the conversion Of Class D
Shares*................... -- -- 57,311 758,796
-------- ----------- ---------- ------------
Net decrease............... (379,342) $(5,142,137) (17,312) $ (482,774)
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 450,164 $ 5,822,468 526,577 $ 6,713,382
Issued on reinvestment of
distributions............. 5,271 72,533 130,880 1,588,622
Repurchased................ (329,554) (4,370,571) (242,195) (3,021,876)
-------- ----------- ---------- ------------
Net increase............... 125,881 $ 1,524,430 415,262 $ 5,280,128
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 17,808 $ 224,626 323,372 $ 4,278,774
Issued on reinvestment of
distributions............. 1,160 15,857 29,916 359,941
Repurchased................ (62,837) (851,389) (5,696) (72,308)
-------- ----------- ---------- ------------
Net (decrease)/increase.... (43,869) $ (610,906) 347,592 $ 4,566,407
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -------------------------
CLASS D* SHARES AMOUNT SHARES AMOUNT
- -------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... -- -- 175 $ 2,101
Exchanged upon conversion
to Class A Shares......... -- -- (57,485) (758,796)
Repurchased................ -- -- (14,737) (174,870)
-------- ----------- ---------- ------------
Net decrease............... (72,047) $ (931,565)
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
----------------------
ADVISOR CLASS SHARES AMOUNT
- ------------- -------- -----------
<S> <C> <C> <C> <C>
Sold....................... 14,244 $ 197,328
Issued on reinvestment of
distributions............. 3 42
Repurchased................ (332) (4,552)
-------- -----------
Net increase............... 13,915 $ 192,818
======== ===========
</TABLE>
* On August 16, 1997 all outstanding Class D shares were converted to Class A
shares.
03IVYIX063098
<PAGE> 99
June 30, 1998 IVY FUNDS(R)
IVY
US EMERGING
GROWTH
FUND
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
Fueled by the potent combination of subdued inflation and solid economic growth,
the US stock market continued to demonstrate remarkable growth through the first
half of 1998. Based on our research, we believe that in spite of record-low
unemployment and tight labor markets, inflation has remained in check, reducing
the likelihood that the Federal Reserve will raise interest rates. As a result,
in our view, investors have been willing to pay more for stocks as evidenced by
higher price to earnings (P/E) ratios. Solid earnings growth, supported by the
robust US economy, in combination with these higher P/E ratios, goes a long way
in explaining the extraordinary performance of the market over the last several
years.
The economic crisis in Asia remains a serious concern, and many analysts now
believe its impact on the US economy will likely be felt over the next six to
nine months. We believe that moderating economic growth may put pressure on
large-cap stocks due to their susceptibility to changing economic conditions. We
believe that small-cap stocks, which, in our view, are driven more by their
earnings capacity and product life cycles, are less vulnerable to economic
conditions and should benefit as investors seek alternatives to US large caps.
We believe, further, that one positive effect of the Asian crisis is that lower
import prices, coupled with reduced export demand, should have a deflationary
effect on the economy and reduce the possibility of an interest rate hike. This
environment would be favorable for equity investing and the Ivy US Emerging
Growth Fund.
For most of the last two years, investors have favored liquid, large-cap stocks.
In late April, this tendency became even more pronounced when renewed worries
about Asia surfaced. We believe this willingness to pay a high premium for
liquidity is the major reason why small-cap growth stocks have lagged behind the
large-cap sector. In our opinion, it has also caused rather rich valuations for
many large-cap stocks.
According to our research, most of the companies in the Ivy US Emerging Growth
Fund portfolio continue to show excellent fundamentals and robust earnings
growth. We expect the majority of the holdings in the Fund to experience
significant increases in earnings this year. By contrast, the healthy profit
growth experienced by many large companies over the last few years is beginning
to slow. Much of their growth was the result of profit margin expansion from
corporate restructuring, not from higher sales. Obviously, this cannot go on
indefinitely, since there is only so much excess that can be cut.
Investors' strong preference for liquidity, as opposed to superior earnings
growth, has not only created a divergence in performance between small- and
large-company stocks, but also a valuation disparity. This is reflected in the
relative P/E ratio of the emerging growth sector, which remains near the bottom
of its historic range. We believe that at some point this disparity will be
corrected, creating a very favorable environment for small companies that can
continue to deliver robust earnings growth. For the future, our focus remains on
identifying such companies early in their life cycle and then holding them
through their strong growth phase, with the belief that over the long term their
superior earnings growth will translate into attractive shareholder returns.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 100
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 96.29% SHARES VALUE
- -------------------------------------------
<S> <C> <C>
BIOTECHNOLOGY -- 2.45%
Agouron Pharmaceuticals, Inc.(b)........... 20,200 $ 612,312
Alkermes, Inc.(b).......................... 14,700 262,762
ArQule, Inc.(b)............................ 24,100 311,794
Geltex Pharmaceuticals, Inc.(b)............ 21,600 402,300
NeoRx Corporation(b)....................... 31,300 154,544
PathoGenesis Corp.(b)...................... 14,500 420,500
Pharmacyclics, Inc.(b)..................... 18,300 434,625
US Bioscience, Inc.(b)..................... 56,000 458,500
------------
3,057,337
------------
BUSINESS & FINANCIAL SERVICES -- 34.75%
ABR Information Services, Inc.(b).......... 70,000 1,662,500
Abacus Direct Corporation(b)............... 18,500 960,844
Advantage Learning Systems, Inc.(b)........ 17,300 473,587
Applied Graphics Technologies, Inc.(b)..... 18,800 860,100
Ballantyne of Omaha, Inc.(b)............... 72,750 609,281
BrightStar Information Technology
Group, Inc(b)............................ 11,500 159,563
CBT Group Public Limited Company(b)........ 31,500 1,685,250
CHS Electronics, Inc.(b)................... 65,900 1,177,962
Cambridge Technology Partners, Inc.(b)..... 13,100 715,588
Children's Comprehensive Services,
Inc.(b).................................. 58,200 865,725
Condor Technology Solutions, Inc.(b)....... 35,000 516,250
Cornell Corrections, Inc.(b)............... 46,200 970,200
Cotelligent Group, Inc.(b)................. 25,800 603,075
Dendrite International, Inc.(b)............ 25,600 963,200
FactSet Research Systems Inc.(b)........... 48,900 1,589,250
Federal Agricultural Mortgage Corp.
Class C(b)............................... 9,350 531,781
Forrester Research, Inc.(b)................ 13,600 540,600
Gartner Group, Inc. -- Class A(b).......... 28,600 1,001,000
HA-LO Industries, Inc.(b).................. 38,700 1,204,537
Ingram Micro, Inc.(b)...................... 14,500 641,625
Inspire Insurance Solutions, Inc.(b)....... 28,500 947,625
Intelligroup, Inc.(b)...................... 35,100 623,025
International Network Services(b).......... 25,000 1,025,000
International Telecommunication Data
Systems, Inc.(b)......................... 39,000 1,131,000
LECG, Inc.(b).............................. 67,300 1,009,500
Lason Holdings, Inc.(b).................... 37,000 2,016,500
Litchfield Financial Corp. ................ 47,327 993,867
MSC Industrial Direct Co, Inc.(b).......... 59,000 1,681,500
Maximus, Inc.(b)........................... 24,300 709,256
Meta Group, Inc.(b)........................ 44,700 988,987
Metro Networks, Inc.(b).................... 32,400 1,397,250
PMT Services, Inc.(b)...................... 61,400 1,561,863
Paychex, Inc. ............................. 8,100 329,569
Profit Recovery Group International,
Inc. (The)(b)............................ 66,700 1,863,431
Renaissance Worldwide, Inc.(b)............. 22,400 487,200
Rental Service Corporation(b).............. 33,000 1,109,625
Sapient Corporation(b)..................... 15,400 812,350
Steven Myers & Associates, Inc.(b)......... 34,000 654,500
Sykes Enterprises, Inc.(a)(b).............. 54,000 1,083,375
Technisource, Inc.(b)...................... 34,800 382,800
U.S.A. Floral Products, Inc.(b)............ 49,500 779,625
Wackenhut Corrections Corporation(b)....... 52,000 1,215,500
Whittman-Hart, Inc.(b)..................... 28,400 1,373,850
Willis Lease Finance Corporation(b)........ 64,100 1,466,288
------------
43,375,404
------------
COMPUTER SOFTWARE -- 10.38%
Aspect Development, Inc.(b)................ 21,600 1,633,500
Cadence Design Systems, Inc.(b)............ 18,200 568,750
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ----------------------------------------
<S> <C> <C>
Concord Communications, Inc.(b)............ 33,500 $ 856,344
Deltek Systems, Inc.(b).................... 60,100 1,472,450
Great Plains Software, Inc.(b)............. 13,800 467,475
H.T.E., Inc.(b)............................ 126,200 1,703,700
Micromuse Inc.(b).......................... 18,700 763,194
Network Associates, Inc.(b)................ 15,150 725,306
New Era of Networks, Inc.(b)............... 31,600 963,800
Pegasystems Inc.(b)........................ 15,600 423,150
Peoplesoft, Inc.(b)........................ 10,200 479,400
Peregrine Systems, Inc.(b)................. 32,500 926,250
Veritas Software Corp.(b).................. 17,250 713,719
Visio Corporation(b)....................... 26,300 1,255,825
------------
12,952,863
------------
CONSUMER PRODUCTS & SERVICES -- 6.48%
Apollo Group, Inc.(b)...................... 18,000 595,125
Blyth Industries, Inc.(b).................. 29,400 977,550
Carriage Services, Inc.(b)................. 25,000 628,125
Cutter & Buck, Inc.(b)..................... 49,200 1,328,400
Dave & Buster's, Inc.(b)................... 24,750 615,656
Equity Corporation International(b)........ 23,700 568,800
Extended Stay America, Inc.(b)............. 15,700 176,625
International Speedway Corporation -- Class
A........................................ 20,600 585,812
Penske Motorsports, Inc.(b)................ 14,000 408,625
Premier Parks, Inc.(b)..................... 24,700 1,645,638
Rock of Ages Corporation(b)................ 20,800 322,400
Speedway Motorsports, Inc.(b).............. 9,400 240,288
------------
8,093,044
------------
HEALTHCARE -- 12.08%
American Oncology Resources, Inc.(b)....... 43,900 536,403
Coast Dental Services, Inc.(b)............. 28,400 401,150
Curative Health Services, Inc.(b).......... 17,500 498,750
Health Management Associates, Inc.(b)...... 32,750 1,095,078
Horizon Health Corporation(b).............. 61,550 1,077,125
IMPATH, Inc.(b)............................ 31,200 758,550
MedQuist Inc.(b)........................... 41,100 1,186,762
NCS Healthcare, Inc. Class A(b)............ 24,500 698,250
Omnicare, Inc. ............................ 15,100 575,687
Orthodontic Centers of America, Inc.(b).... 70,100 1,467,719
Pediatrix Medical Group, Inc.(b)........... 26,200 974,313
PhyCor, Inc.(b)............................ 26,000 430,625
Serologicals Corporation(b)................ 59,700 1,925,325
Total Renal Care Holdings, Inc.(b)......... 69,674 2,403,753
Ventana Medical Systems, Inc.(b)........... 23,000 644,000
Vision Twenty-One, Inc.(b)................. 64,600 411,825
------------
15,085,315
------------
INTERNET & ELECTRONIC COMMERCE -- 4.18%
Broadvision, Inc.(b)....................... 27,500 656,562
Exodus Communications, Inc.(b)............. 19,000 850,250
NetGravity, Inc.(b)........................ 34,800 456,750
Pegasus Systems, Inc.(b)................... 43,100 1,104,438
QRS Corporation(b)......................... 27,700 1,042,212
Transaction Systems Architects, Inc.(b).... 28,900 1,112,650
------------
5,222,862
------------
MISCELLANEOUS TECHNOLOGY -- 2.69%
EarthShell Corportaion(b).................. 33,800 329,550
Encad, Inc.(b)............................. 21,000 286,125
Gemstar International Group Ltd.(b)........ 34,300 1,284,106
Jabil Circuit, Inc.(b)..................... 9,600 317,400
Molecular Devices Corporation(b)........... 41,700 672,412
Sanmina Corporation(b)..................... 10,800 468,450
------------
3,358,043
------------
</TABLE>
<PAGE> 101
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- -------------------------------------------
<S> <C> <C>
NETWORK & TELECOMMUNICATION
EQUIPMENT -- 7.78%
ADC Telecommunications Inc.(b)............. 16,800 $ 613,725
Advanced Fibre Communications(b)........... 40,800 1,634,550
American Power Conversion Corp.(b)......... 44,000 1,320,000
Ascend Communications Inc.(b).............. 15,500 768,219
CIENA Corporation(b)....................... 27,000 1,879,875
Network Appliance, Inc.(b)................. 46,000 1,791,125
NICE-Systems Ltd. -- Sponsored ADR(b)...... 20,000 750,000
Uniphase Corporation(b).................... 15,300 960,553
------------
9,718,047
------------
PHARMACEUTICALS -- 3.67%
Anesta Corp.(b)............................ 31,100 449,006
ChiRex Inc.(b)............................. 49,000 860,563
Cima Labs Inc.(b).......................... 18,000 60,188
EPIX Medical, Inc.(b)...................... 48,000 492,000
Inhale Therapeutic Systems(b).............. 17,400 430,650
Nastech Pharmaceutical Co.(b).............. 26,000 211,250
Penederm Inc.(b)........................... 28,800 576,000
Sepracor, Inc.(b).......................... 18,100 751,150
Theragenics Corporation(b)................. 28,600 745,388
------------
4,576,195
------------
RETAIL -- 3.45%
Dollar Tree Stores, Inc.(b)................ 23,775 965,859
Guitar Center, Inc.(b)..................... 28,900 870,613
Hibbet Sporting Goods, Inc.(b)............. 31,200 1,248,000
Party City Corp.(b)........................ 29,500 866,562
Restoration Hardware, Inc.(b).............. 14,000 351,750
------------
4,302,784
------------
SEMICONDUCTORS & EQUIPMENT -- 3.86%
ASM Lithography Holding NV(a)(b)........... 7,200 209,250
Advanced Energy Industries, Inc.(b)........ 15,800 183,675
Applied Micro Circuits Corporation(b)...... 10,400 269,100
Artisan Components, Inc.(b)................ 52,500 708,750
Cerprobe Corporation(b).................... 29,700 389,813
Etec Systems, Inc.(b)...................... 15,600 548,925
Genesis Microchip Inc.(b).................. 21,000 166,688
Maxim Integrated Products, Inc.(b)......... 19,800 627,412
Photronics, Inc.(b)........................ 34,000 750,125
Sipex Corparation(b)....................... 13,000 279,500
Vitesse Semiconductor Corporation(b)....... 22,000 679,250
------------
4,812,488
------------
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ----------------------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES -- 4.52%
Amdocs Limited(b).......................... 15,800 $ 238,975
Corsair Communications, Inc.(b)............ 67,400 627,663
DSET Corporation(b)........................ 43,700 660,962
SCC Communications Corp.(b)................ 72,400 886,900
Saville Systems Ireland ADR(b)............. 33,800 1,694,225
Transaction Network Services, Inc.(b)...... 54,000 1,137,375
West TeleServices Corporation(b)........... 33,000 400,125
------------
5,646,225
------------
TOTAL INVESTMENTS -- 96.29%
(Cost -- $88,283,178)(c)................. 120,200,607
OTHER ASSETS, LESS LIABILITIES -- 3.71%.... 4,631,607
------------
NET ASSETS -- 100%......................... $124,832,214
============
ADR -- American Depository Receipt
NV -- Non-voting
(a) Foreign security
(b) Non-income producing security
(c) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 36,680,067
Gross unrealized depreciation.................... (4,762,638)
------------
Net unrealized appreciation.................. $ 31,917,429
============
Purchases and sales of securities other than short-term obligations
aggregated $40,752,657 and $55,158,828, respectively, for the period
ended June 30, 1998.
Transactions in written put options during the period ended June 30,
1998 were:
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS
NUMBER OF RECEIVED/
CONTRACTS (PAID)
--------- ------------
<S> <C> <C>
Outstanding at January 1, 1998............ -- $ --
Contracts written..................... 1,373 1,435,979
Contracts expired..................... (1,373) (1,435,979)
------ ------------
Outstanding at June 30, 1998.............. -- $ --
====== ============
</TABLE>
(See Notes to Financial Statements)
<PAGE> 102
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $88,283,178)...... $120,200,607
Cash........................................................ 5,311,810
Receivable for fund shares sold............................. 138,453
Other assets................................................ 16,630
------------
Total assets.............................................. 125,667,500
------------
LIABILITIES
Payables
Investments purchased..................................... 433,742
Fund shares repurchased................................... 199,570
Management fee............................................ 82,071
12b-1 service and distribution fees....................... 63,542
Other payables to related parties......................... 42,204
Accrued expenses............................................ 14,157
------------
Total liabilities......................................... 835,286
------------
NET ASSETS.................................................. $124,832,214
============
CLASS A
Net asset value and redemption price per share
($63,398,437/2,091,580 shares outstanding)................ $ 30.31
============
Maximum offering price per share ($30.31 x 100/94.25)*...... $ 32.16
============
CLASS B
Net asset value, offering price and redemption price** per
share ($50,671,140/1,703,129 shares outstanding).......... $ 29.75
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($10,220,945/343,917 shares outstanding)............ $ 29.72
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($541,692/17,841 shares outstanding)................ $ 30.36
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 92,276,447
Undistributed net realized gain on investments............ 1,762,514
Accumulated net investment loss........................... (1,124,176)
Net unrealized appreciation on investments................ 31,917,429
------------
NET ASSETS.................................................. $124,832,214
============
</TABLE>
<TABLE>
<S> <C>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 103
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 2,812
Interest.................................................. 132,908
-----------
135,720
-----------
EXPENSES
Management fee............................................ $523,212
Transfer agent............................................ 152,086
Administrative services fee............................... 61,554
Custodian fees............................................ 10,406
Blue Sky fees............................................. 26,875
Auditing and accounting fees.............................. 11,910
Shareholder reports....................................... 14,280
Fund accounting........................................... 49,370
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 374,513
Legal..................................................... 12,238
Other..................................................... 19,217
-----------
Total expenses...................................... 1,259,896
-----------
NET INVESTMENT LOSS......................................... (1,124,176)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments............................................. 5,922,807
Options................................................. (1,435,979)
Net unrealized appreciation during the period on
investments............................................. 7,589,753
-----------
Net gain on investment transactions................. 12,076,581
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $10,952,405
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 104
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $(1,124,176) $ (1,956,614)
Net realized gain (loss) on
Investments............................................. 5,922,807 (2,724,314)
Options................................................. (1,435,979) --
Net unrealized appreciation during the period on
investments............................................. 7,589,753 10,129,785
------------ ------------
Net increase resulting from operations.............. 10,952,405 5,448,857
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (7,414,875) 5,850,880
Class B................................................... (1,330,695) 10,569,687
Class C................................................... (111,596) 5,031,194
Advisor Class............................................. 553,902 --
------------ ------------
Net (decrease) increase resulting from Fund share
transactions........................................... (8,303,264) 21,451,761
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 2,649,141 26,900,618
NET ASSETS
Beginning of period....................................... 122,183,073 95,282,455
------------ ------------
END OF PERIOD............................................. $124,832,214 $122,183,073
============ ============
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 105
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MARCH 3, 1993
CLASS A MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ ---------------------------------------------- ---------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 27.67 $ 26.54 $ 24.12 $ 18.38 $ 17.93 $ 10.00
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment loss.................... (.21)(g) (.41)(g) (.35) (.24) (.24)(a) (.07)(a)
Net realized and unrealized gain on
investment transactions.............. 2.85(g) 1.54(g) 4.84 7.90 .82 8.29
------- ------- ------- ------- ------- -------
Total from investment operations..... 2.64 1.13 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........... $ 30.31 $ 27.67 $ 26.54 $ 24.12 $ 18.38 $ 17.93
======= ======= ======= ======= ======= =======
Total return(%).......................... 9.54(e) 4.26(b) 18.52(b) 42.07(b) 3.29(b) 45.33(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $63,398 $64,910 $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(%)....... 1.69(d) 1.67 1.76 1.95 2.22 2.33(d)
Ratio of net investment loss to average
net assets(%).......................... (1.47)(d) (1.37) (1.31) (1.39) (1.72)(a) (1.30)(a)(d)
Portfolio turnover rate(%)............... 34 65 68 86 67 41
Average commission rate(f)............... $ .0960 $ .0710 $ .0601 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 106
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ ---------------------------------------------- ----------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 27.26 $ 26.33 $ 24.12 $ 18.38 $ 17.93 $ 18.21
------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment loss.................... (.32)(g) (.33)(g) (.40) (.35) (.29)(a) (.04)(a)
Net realized and unrealized gain on
investment transactions.............. 2.81(g) 1.26(g) 4.68 7.85 .74 .03
------- ------- ------- ------- ------- -------
Total from investment operations..... 2.49 .93 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........... $ 29.75 $ 27.26 $ 26.33 $ 24.12 $ 18.38 $ 17.93
======= ======= ======= ======= ======= =======
Total return(%).......................... 9.13(e) 3.53(b) 17.65(b) 41.03(b) 2.51(b) (.05) (e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $50,671 $47,789 $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(%)....... 2.44(d) 2.43 2.52 2.70 2.97 3.08(d)
Ratio of net investment loss to average
net assets(%).......................... (2.22)(d) (2.13) (2.07) (2.14) (2.47)(a) (2.05)(a)(d)
Portfolio turnover rate(%)............... 34 65 68 86 67 41
Average commission rate(f)............... $ .0960 $ .0710 $ .0601 N/A N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 107
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE APRIL 30, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 27.23 $ 26.29 $ 29.69
------- ------- -------
Income (loss) from investment operations
Net investment loss....................................... (.31)(g) (.34)(g) (.14)
Net realized and unrealized gain (loss) on investment
transactions............................................ 2.80(g) 1.28(g) (1.19)
------- ------- -------
Total from investment operations........................ 2.49 .94 (1.33)
------- ------- -------
Less distributions
From net realized gain.................................... -- -- 2.07
------- ------- -------
Total distributions..................................... -- -- 2.07
------- ------- -------
Net asset value, end of period.............................. $ 29.72 $ 27.23 $ 26.29
======= ======= =======
Total return(%)............................................. 9.14(e) 3.58(b) (4.48)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $10,221 $ 9,484 $ 4,018
Ratio of expenses to average net assets
Without expense reimbursement(%).......................... 2.40(d) 2.39 2.52(d)
Ratio of net investment loss to average net assets(%)....... (2.18)(d) (2.09) (2.07)(d)
Portfolio turnover rate(%).................................. 34 65 68
Average commission rate(f).................................. $ .0960 $ .0710 $ .0601
</TABLE>
(See Notes to Financial Statements)
<PAGE> 108
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 18, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
-----------------
1998*
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $ 28.82
-------
Income (loss) from investment operations
Net investment loss(g).................................... (.08)
Net realized and unrealized gain on investment
transactions(g)......................................... 1.62
-------
Total from investment operations........................ 1.54
-------
Net asset value, end of period.............................. $ 30.36
=======
Total return(%)(e).......................................... 5.34
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 542
Ratio of expenses to average net assets
Without expense reimbursement(%)(d)....................... 1.23
Ratio of net investment loss to average net assets(%)(d).... (1.01)
Portfolio turnover rate(%).................................. 34
Average commission rate(f).................................. $ .0960
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Net investment loss is net of expenses reimbursed by
manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return since April
30, 1993 (when the Fund became available for sale to the
public) and does not reflect a sales charge.
(d) Annualized
(e) Total return represents aggregate total return and does not
reflect a sales charge.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 109
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy US 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, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998, 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
indices, 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 (the "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.
CASH AND CASH EQUIVALENTS -- The Fund classifies as cash amounts on deposit
with the Fund's custodian. These amounts earn interest at variable interest
rates. At June 30, 1998 the interest rate was 5.25%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The fund has a net tax-basis capital loss carryforward of approximately
$1,852,000 as of December 31, 1997, 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 carryforward expires in
2005.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to certain securities sold at a
loss. As a result, Net
<PAGE> 110
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .85% of
the Fund's average net assets. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, 12b-1 fees, brokerage commissions,
interest, litigation and indemnification expenses, and other extraordinary
expenses) to an annual rate of 1.95% of its average net assets. The voluntary
expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $6,353.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $80,029,
$245,225 and $49,259, 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 $79,850, $61,878, $10,319 and $39, for Class A, Class B,
Class C and Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 252,208 $ 7,417,220 2,170,667 $ 56,373,000
Repurchased............... (506,275) (14,832,095) (1,933,287) (50,522,120)
-------- ------------ ---------- ------------
Net (decrease)/increase... (254,067) $ (7,414,875) 237,380 $ 5,850,880
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 161,742 $ 4,734,066 864,508 $ 22,228,831
Repurchased............... (211,793) (6,064,761) (452,583) (11,659,144)
-------- ------------ ---------- ------------
Net (decrease)/increase... (50,051) $ (1,330,695) 411,925 $ 10,569,687
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 72,519 $ 2,114,980 267,610 $ 6,926,383
Repurchased............... (76,926) (2,226,576) (72,128) (1,895,189)
-------- ------------ ---------- ------------
Net (decrease)/increase... (4,407) $ (111,596) 195,482 $ 5,031,194
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 18, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
-----------------------
ADVISOR CLASS SHARES AMOUNT
------------- -------- ------------
<S> <C> <C>
Sold...................... 19,941 $ 616,114
Repurchased............... (2,100) (62,212)
-------- ------------
Net increase.............. 17,841 $ 553,902
======== ============
</TABLE>
03IEGF063098
<PAGE> 111
June 30, 1998 IVY FUNDS(R)
IVY
GROWTH
FUND
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
Market Commentary
The Ivy Growth Fund continues to combine investments in US emerging growth and
international stocks with a core portfolio of mid- and large-capitalization US
stocks. We believe allocating investments to international markets and small-cap
growth stocks could be among the most important actions to be taken over the
next several years.
In the US, we expect growth as a whole to moderate, which would slow the upward
trend of US stocks. Furthermore, according to our research, investors have
clearly favored liquid, large-cap stocks when selecting US equities, which
became even more pronounced recently when renewed worries about Asia surfaced in
late April. This has created a valuation disparity between small- and
large-company US stocks, which is reflected in the low price to earnings (P/E)
ratio of the emerging growth sector when compared to that of the S&P 500. We
believe that at some point this disparity will be corrected, creating a very
favorable environment for small companies that can deliver robust earnings
growth.
In the first half of 1998 in the US, a potent combination of subdued inflation
and solid economic growth continued to drive the stock market higher. Economic
turmoil in Asia, when combined with a strong US dollar, has helped boost US
stocks, particularly large caps. This is primarily because the US market is
viewed as a safe haven for foreign money. However, many analysts now believe
that the impact of the Asian turmoil on our economy will be felt over the next
six to nine months as the earnings of many larger companies will be directly
impacted by the economic slowdown in Asia. Also, larger companies have been the
prime beneficiaries of all the corporate restructuring that has taken place
during the past decade. We believe that the Asia slowdown, combined with a
winding down of restructuring activity, could lead to slower revenue growth for
large caps going forward. So, in the core portion of the Ivy Growth Fund, much
of the focus has been on the mid-cap sector, especially given the already rather
rich valuations for many large-company stocks.
Most of the companies in the emerging growth component of the Fund continue to
show excellent fundamentals and robust earnings growth. We continue to focus on
identifying dynamic growth companies early in their life cycles and then holding
them through their strong-growth phase in the belief that over the long term
their superior earnings growth will translate into attractive returns.
On the international front, Europe continues to do well, with the momentum
established in 1997 being combined with optimism for Economic and Monetary Union
(EMU), which will unite most of Europe under one economic roof. We believe that
the implementation of EMU will reinforce some very positive trends already under
way, including corporate restructuring, cross-border consolidation and removal
of trade barriers. Asia continues to be weak, but we are selectively optimistic
about the region, and are finding undervalued companies in Hong Kong, Singapore
and Malaysia, as well as Australia, and, for the first time in about a decade,
Japan. Our approach regarding international investing in the Fund continues to
entail a search for companies which our research indicates represent long-term
value.
We believe that the Ivy Growth Fund provides broad economic and geographic
diversification, and, in our view, offers investors the opportunity for capital
appreciation.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
Legal Counsel
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 112
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 94.47% SHARES VALUE
- ------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 6.99%
AKZO Nobel NV(a).......................... 6,000 $ 1,333,777
Anglo-American Corporation of South Africa
Limited(a).............................. 18,100 614,599
AssiDoman AB(a)........................... 24,200 704,005
Billiton Plc(a)........................... 282,200 572,083
Broken Hill Proprietary Company
Limited(a).............................. 93,800 792,865
Companhia Vale do Rio Doce -- Preferred
A....................................... 10,000 203,180
Companhia Vale do Rio Doce -- Sponsored
ADR(a).................................. 30,000 609,600
Crown Cork & Seal Company, Inc. .......... 87,000 4,132,500
Du Pont (E.I.) De Numours & Company....... 11,500 858,188
Enso OY -- R Shares(a).................... 72,000 778,203
Ferro Corporation......................... 27,000 683,438
Fletcher Challenge Building(a)............ 183,750 228,917
Fletcher Challenge Forests(a)............. 129,566 72,636
Fletcher Challenge Paper(a)............... 184,500 204,951
Hanson plc................................ 16,000 485,000
Harsco Corporation........................ 67,500 3,092,344
Holderbank Financiere Glaris AG(a)........ 1,520 1,934,058
Imperial Chemical Industries PLC --
Sponsored ADR(a)........................ 19,000 1,225,500
Inco Limited(a)........................... 19,600 267,235
Lubrizol Corporation, The................. 28,000 847,000
Nampak Limited(a)......................... 93,100 221,289
Rio Tinto plc(a).......................... 51,000 574,806
Stora Kopparbergs Bergslags Aktiebolag
Aktiebolag (STORA) -- A Shares(a)....... 46,200 727,039
Trelleborg AB B Free Shares(a)............ 106,300 1,399,570
Union Carbide Corporation Holding
Company................................. 12,000 640,500
UPM-Kymmene OY(a)......................... 28,840 793,739
------------
23,997,022
------------
BUSINESS SERVICES -- 14.57%
ABR Information Services, Inc.(b)......... 65,500 1,555,625
Abacus Direct Corporation(b).............. 16,000 831,000
Advantage Learning Systems, Inc.(b)....... 17,200 470,850
Amdocs Limited(b)......................... 14,900 225,363
Applied Graphics Technologies, Inc.(b).... 20,200 924,150
Banta Corporation......................... 83,000 2,562,625
CBT Group Public Limited Company(b)....... 35,400 1,893,900
CHS Electronics, Inc.(b).................. 58,650 1,048,369
Cambridge Technology Partners, Inc.(b).... 10,900 595,413
Children's Comprehensive Services,
Inc.(b)................................. 40,400 600,950
Cornell Corrections, Inc.(b).............. 31,300 657,300
Corporate Services Group Plc(a)........... 158,000 628,741
Corporate Services Group Plc
Rights(a)(b)............................ 39,500 7,579
Cotelligent Group, Inc.(b)................ 17,900 418,413
Dendrite International, Inc.(b)........... 20,600 775,075
Electronic Data Systems Corp.(b).......... 145,000 5,800,000
FactSet Research Systems Inc.(b).......... 42,900 1,394,250
First Data Corporation.................... 167,000 5,563,188
Gartner Group, Inc.(b).................... 33,600 1,176,000
HA-LO Industries, Inc.(b)................. 36,600 1,139,175
Harte-Hanks Communications................ 120,000 3,097,500
Inacom Corp.(b)........................... 20,000 635,000
Ingram Micro, Inc.(b)..................... 14,000 619,500
Inspire Insurance Solutions, Inc.(b)...... 27,400 911,050
International Network Services(b)......... 26,600 1,090,600
LECG, Inc.(b)............................. 53,300 799,500
Lason Holdings, Inc.(b)................... 35,300 1,923,850
MSC Industrial Direct Co., Inc.(b)........ 54,000 1,539,000
Metro Networks, Inc.(b)................... 28,200 1,216,125
PMT Services, Inc.(b)..................... 70,000 1,780,625
Paychex, Inc. ............................ 22,500 915,469
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Profit Recovery Group International,
Inc.(b)................................. 76,400 $ 2,134,425
Rental Service Corporation(b)............. 30,000 1,008,750
Sykes Enterprises, Inc.(b)................ 45,800 918,863
Transaction Network Services, Inc.(b)..... 63,750 1,342,734
U.S.A. Floral Products, Inc.(b)........... 47,400 746,550
Wackenhut Corrections Corporation(b)...... 47,200 1,103,300
------------
50,050,807
------------
CAPITAL GOODS -- 3.28%
AGCO Corporation.......................... 88,000 1,809,500
American Standard Companies, Inc.(b)...... 20,300 907,156
Ballantyne of Omaha, Inc.(b).............. 55,500 464,813
Fluor Corporation......................... 10,000 510,000
Foster Wheeler Corporation................ 15,000 321,563
Kaydon Corporation........................ 16,000 565,000
Rauma OY(a)............................... 21,803 447,069
S.K.F. AB Series "B"(a)................... 32,000 581,822
Schneider, S.A.(a)........................ 15,379 1,226,295
Tecumseh Products Company................. 9,000 475,313
Tenneco, Inc. ............................ 13,000 494,813
Tyco International Ltd. .................. 33,880 2,134,440
US Filter Corporation(b).................. 47,000 1,318,938
------------
11,256,722
------------
CONGLOMERATES -- 0.86%
Benpres Holdings Corp. -- Sponsored
GDR.(a)(b).............................. 57,000 139,650
Cheung Kong(a)............................ 139,000 683,467
Genting Berhad(a)......................... 140,000 253,164
Guangdong Investments(a).................. 400,000 89,822
Jardine Matheson Holdings Ltd.(a)......... 75,200 203,040
Jardine Strategic Holdings Ltd.(a)........ 171,562 325,968
Metro Pacific Corporation(a)(b)........... 2,064,958 47,043
New World Development Company
Ltd.(a)................................. 114,654 221,951
Pacific Dunlop Ltd.(a).................... 315,000 509,114
Sime Darby Bhd(a)......................... 387,000 266,865
Swire Pacific Ltd. Class A(a)............. 57,000 215,168
------------
2,955,252
------------
CONSUMER DURABLES -- 2.48%
Brunswick Corp. .......................... 11,500 284,625
Daimler-Benz AG(a)........................ 8,250 808,987
Electrolux AB(a).......................... 62,500 1,073,675
Fiat Sp A(a).............................. 291,500 1,275,840
Harley-Davidson, Inc. .................... 17,000 658,750
Perusahaan Otomobil Nasional
Berhad(a)............................... 228,000 145,678
Peugeot Citroen(a)........................ 6,200 1,333,106
Volkswagen AG(a).......................... 2,200 2,114,641
Volvo AB B Shares(a)...................... 28,000 833,861
------------
8,529,163
------------
CONSUMER NON-DURABLES -- 8.54%
Blyth Industries, Inc.(b)................. 26,150 869,488
Cadbury Schweppes PLC(a).................. 27,000 418,059
Cutter & Buck Inc.(b)..................... 43,400 1,171,800
Diageo plc -- Sponsored ADR(a)............ 23,417 1,128,406
Fraser & Neave Ltd(a)..................... 130,000 349,338
Fuji Photo Film(a)........................ 22,000 765,644
Gallaher Group Plc(a)..................... 134,000 742,841
Groupe Danone(a).......................... 4,500 1,240,732
Gucci Group(a)............................ 33,000 1,688,754
Hasbro, Inc. ............................. 34,500 1,356,281
Mattel, Inc. ............................. 64,000 2,708,000
Nestle AG Registered(a)................... 613 1,311,830
Next Plc(a)............................... 89,000 766,242
Nine West Group, Inc.(b).................. 177,000 4,745,813
PepsiCo, Inc. ............................ 55,000 2,265,313
President Enterprises(a)(b)............... 147,600 133,164
</TABLE>
<PAGE> 113
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------
<S> <C> <C>
Rembrandt Group Limited(a)................ 51,000 $ 320,372
Scholastic Corporation(b)................. 27,500 1,096,563
South African Breweries Ltd.(a)........... 10,022 207,586
South African Breweries Ltd. Sponsored
ADR(a).................................. 5,200 107,708
Swatch Group, The AG(a)................... 1,000 772,673
Tate & Lyle PLC(a)........................ 109,000 865,230
Tsingtao Brewery Series H(a)(b)........... 415,400 64,867
Tupperware Corporation.................... 26,500 745,313
Unilever NV ADR(a)........................ 14,300 1,128,806
Vina Concha y Toro S.A.(a)................ 9,800 279,300
Warnaco Group, Inc. Class A............... 49,400 2,096,413
------------
29,346,536
------------
CONSUMER SERVICES -- 8.21%
Apollo Group, Inc. -- Class A(b).......... 14,850 490,978
Carnival Corporation Class A.............. 54,000 2,139,750
Dave & Buster's, Inc.(b).................. 25,000 621,875
Deutsche Lufthansa AG(a).................. 13,600 341,312
Dollar Tree Stores, Inc.(b)............... 26,400 1,072,500
Equity Corporation International(b)....... 25,200 604,800
Extended Stay America, Inc.(b)............ 27,000 303,750
Far Eastern Department Stores Ltd.(a)..... 215,773 156,992
Federated Department Stores, Inc.(b)...... 7,000 376,688
Galeries Lafayette(a)..................... 1,220 1,216,765
Guitar Center, Inc.(b).................... 27,300 822,413
Harcourt General, Inc. ................... 19,000 1,130,500
International Speedway Corp. -- Class A... 23,800 676,813
J.C. Penney Co., Inc. .................... 25,000 1,807,813
Lowe's Companies, Inc. ................... 31,000 1,257,438
Lusomundo-SGPS S.A. Preferred
Shares(a)............................... 51,200 675,201
McDonald's Corporation.................... 48,500 3,346,500
Penske Motorsports, Inc.(b)............... 14,200 414,463
Premier Parks, Inc.(b).................... 26,200 1,745,575
Robinson Department Store Public Company
Limited(a)(b)........................... 272,100 7,847
Royal Caribbean Cruises Ltd. ............. 18,800 1,494,600
SGS Societe Generale de Surveillance
Holding, SA(a).......................... 1,200 412,972
Safeway plc(a)............................ 139,000 913,770
Santa Isabel S.A. Sponsored ADR(a)........ 2,925 32,175
Sears, Roebuck & Co. ..................... 14,500 885,406
Singapore Airlines Ltd(a)................. 136,000 635,935
Speedway Motorosports, Inc.(b)............ 8,400 214,725
Sun International Hotels Ltd.(b).......... 22,000 1,001,000
Tourism Holdings Limited(a)(b)............ 669,856 382,484
Tricon Global Restaurants, Inc.(b)........ 25,100 795,356
Walt Disney Company, The.................. 8,000 840,500
Westwood One, Inc.(b)..................... 55,000 1,387,031
------------
28,205,927
------------
ENERGY -- 3.49%
Dresser Industries, Inc. ................. 24,000 1,057,500
Elf Aquitaine S.A.(a)..................... 5,700 801,352
Enron Corporation......................... 43,000 2,324,688
Fletcher Challenge Energy(a).............. 133,750 319,367
Helmerich & Payne, Inc. .................. 40,000 890,000
Noble Drilling Corporation(b)............. 45,000 1,082,813
Norsk Hydro A.S. Sponsored ADR(a)......... 12,100 533,913
Nuevo Energy Company(b)................... 17,300 555,763
Offshore Logistics, Inc.(b)............... 7,146 126,842
Repsol SA -- Sponsored ADR(a)............. 8,000 440,000
Schlumberger, Ltd. ....................... 18,000 1,229,625
Shell Transport & Trading Co.(a).......... 112,000 786,731
Total S.A. ADR(a)......................... 20,155 1,317,633
YPF S.A. Sponsored ADR(a)................. 16,800 505,050
------------
11,971,277
------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
FINANCIAL SERVICES -- 12.78%
ABN Amro Bank(a).......................... 20,800 $ 486,712
A.F.P. Provida S.A. Sponsored ADR(a)...... 10,300 171,881
AMBAC, Inc. .............................. 31,000 1,813,500
AMMB Holdings Bhd(a)...................... 100,000 52,562
Aegon NV.................................. 20,294 1,755,431
Arab Malaysian Corporation Berhad(a)...... 189,000 40,785
Australia & New Zealand Banking Group
Ltd.(a)................................. 78,000 538,076
BG Bank A/S(a)............................ 6,800 421,160
Banca Popolare di Milano(a)............... 135,000 1,074,653
Bangkok Bank Public Company
Limited(a).............................. 45,000 55,319
Bank of Ireland(a)........................ 48,175 991,089
Bankers Trust Corporation................. 7,000 812,438
Banque Nationale de Paris(a).............. 10,700 874,260
Barclays PLC(a)........................... 30,500 880,892
Compagnie Financiere de Paribas(a)........ 12,455 1,332,839
Den Danske Bank(a)........................ 3,900 467,862
Exel Limited.............................. 33,000 2,567,813
Federal Agricultural Mortgage Corp. Class
C(b).................................... 8,000 455,000
Federal National Mortgage Association..... 45,000 2,733,750
First Chicago NBD Corporation............. 6,000 531,750
First Union Corporation................... 28,000 1,631,000
Fortis Amev NV(a)......................... 24,500 1,434,430
Freddie Mac............................... 61,000 2,870,813
HSBC Holdings plc(a)...................... 42,997 1,051,539
ING Group NV(a)........................... 19,156 1,254,327
J.P. Morgan & Company Inc. ............... 7,500 878,438
Krung Thai Bank Public Company
Limited(a)(b)........................... 75,000 9,929
Krung Thai Thanakit PLC(a)(b)............. 26,000 3,995
Liberty Life Association of Africa
Limited(a).............................. 20,000 392,528
Litchfield Financial Corp. ............... 43,500 913,500
National Australia Bank Ltd.(a)........... 42,000 553,978
National Westminster Bank PLC(a).......... 41,500 742,974
NationsBank Corporation................... 15,100 1,155,150
Nava Finance and Securities Public Company
Limited(a)(c)........................... 40,000 --
Norwest Corporation....................... 41,600 1,554,800
Overseas Union Bank Ltd.(a)............... 106,000 232,142
PennCorp Financial, Inc. ................. 39,000 799,500
Peregrine Investments Holdings
Limited(a)(c)(d)........................ 428,000 --
Providian Corporation..................... 29,000 2,278,313
RHB Capital Berhad(a)..................... 103,000 41,970
RHB Sakura Merchant Bankers
Berhad(a)............................... 5,150 1,341
Resource Bancshares Mortgage
Group, Inc. ............................ 63,000 1,173,375
SG Asia Credit Company PLC
Limited(a)(b)........................... 23,800 4,726
Societe Generale(a)....................... 4,700 977,154
Terra Nova (Bermuda) Holdings Ltd. ....... 30,000 941,250
Travelers, Inc. .......................... 39,315 2,383,472
Unidanmark A/S(a)......................... 5,600 503,241
United Overseas Bank Ltd.(a).............. 60,000 186,448
Westpac Banking Corp. Ltd.(a)............. 84,000 512,365
Willis Lease Finance Corporation(b)....... 58,200 1,331,325
------------
43,871,795
------------
HEALTHCARE -- 9.32%
Agouron Pharmaceuticals, Inc.(b).......... 15,100 457,719
Alkermes, Inc.(b)......................... 20,000 357,500
Allegiance Corporation.................... 28,000 1,435,000
American Oncology Resources, Inc.(b)...... 40,100 489,972
ArQule, Inc.(b)........................... 20,000 258,750
</TABLE>
<PAGE> 114
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------
<S> <C> <C>
Astra AB -- B Free Shares(a).............. 72,800 $ 1,451,445
Boston Scientific Corporation(b).......... 7,000 501,375
CIMA Labs, Inc.(b)........................ 21,600 72,225
ChiRex Inc.(b)............................ 43,600 765,725
Coast Dental Services, Inc.(b)............ 24,500 346,063
Columbia/HCA Healthcare Corp. ............ 31,500 917,438
Elan Corp. PLC -- Sponsored
ADR.(a)(b).............................. 42,000 2,701,125
Geltex Pharmaceuticals, Inc.(b)........... 20,000 372,500
Health Management Associates, Inc.(b)..... 37,500 1,253,906
Horizon Mental Health Management,
Inc.(b)................................. 58,700 1,027,250
IMPATH, Inc.(b)........................... 25,000 607,813
Johnson & Johnson......................... 15,000 1,106,250
Medpartners, Inc.(b)...................... 39,000 312,000
MedQuist, Inc.(b)......................... 28,500 822,938
Merck KGaA(a)............................. 24,000 1,072,999
NCS HealthCare, Inc. Class A(b)........... 15,400 438,900
Omnicare, Inc. ........................... 39,200 1,494,500
Orthodontic Centers of America, Inc.(b)... 110,900 2,321,969
PathoGenesis Corp.(b)..................... 14,200 411,800
Pediatrix Medical Group Inc.(b)........... 26,500 985,469
Penederm, Inc.(b)......................... 5,500 110,000
Pharmacia & Upjohn, Inc.(a)............... 23,000 1,060,875
Pharmacyclics, Inc.(b).................... 8,000 190,000
PhyCor, Inc.(b)........................... 20,000 331,250
Sepracor, Inc.(b)......................... 15,900 659,850
Serologicals Corporation(b)............... 53,400 1,722,150
Theragenics Corp.(b)...................... 20,000 521,250
Total Renal Care Holdings,Inc.(b)......... 78,740 2,716,530
Trinity Biotech PLC ADR Warrants B(b)..... 30,000 3,750
US Surgical Corp. ........................ 40,000 1,825,000
Ventana Medical Systems, Inc.(b).......... 19,500 546,000
Vertex Pharmaceuticals, Inc.(b)........... 7,000 157,500
Yung Shin Pharmaceuticals Industries
Co.(a).................................. 82,500 194,482
------------
32,021,268
------------
INDUSTRIAL -- 1.61%
Clipsal Industries Ltd.(a)................ 252,000 225,540
General Electric Company.................. 24,500 2,229,500
Hunter Douglas NV(a)...................... 19,800 1,075,546
Societe Generale d'Enterprises SA(a)(b)... 7,500 354,654
Suez Lyonnaise des Eaux(a)................ 6,499 1,069,545
Waste Management International
plc.(a)(b).............................. 51,400 558,975
------------
5,513,760
------------
INTERNET & ELECTRONIC COMMERCE -- 1.52%
America Online, Inc. ..................... 10,000 1,060,000
Broadvision, Inc.(b)...................... 26,000 620,750
Pegasus Systems, Inc.(b).................. 35,200 902,000
QRS Corporation(b)........................ 26,400 993,300
Sterling Commerce, Inc.(b)................ 13,000 630,500
Transactions Systems Architects,
Inc.(b)................................. 26,400 1,016,400
------------
5,222,950
------------
PROPERTY DEVELOPERS & INVESTMENT -- 0.07%
DBS Land Limited(a)....................... 157,000 130,099
Sime UEP Properties Berhad(a)............. 200,000 114,768
------------
244,867
------------
TECHNOLOGY -- 17.80%
ADC Telecommunications Inc.(b)............ 15,300 558,928
ASM Lithography Holding NV(a)(b).......... 8,400 244,125
Acer Incorporation(a)(b).................. 68,750 82,435
Advanced Fibre Communications(b).......... 33,600 1,346,100
American Power Conversion Corp.(b)........ 52,200 1,566,000
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Artisan Components, Inc.(b)............... 24,500 $ 330,750
Ascend Communications Inc.(b)............. 13,000 644,313
Aspect Development, Inc.(b)............... 19,600 1,482,250
Bell & Howell Holdings Company(b)......... 84,000 2,168,250
Cabletron Systems, Inc.(b)................ 18,000 241,875
Cadence Design Systems, Inc.(b)........... 21,000 656,250
Canon Inc.(a)............................. 39,000 885,182
CIENA Corporation(b)...................... 25,100 1,747,588
Cisco Systems, Inc.(b).................... 92,500 8,515,781
Concord Communications, Inc.(b)........... 30,500 779,656
Corsair Communications, Inc.(b)........... 64,300 598,794
Deltek Systems, Inc.(b)................... 37,400 916,300
Diebold Incorporated...................... 47,500 1,371,563
ENCAD, Inc.(b)............................ 20,000 272,500
EarthShell Corporation(b)................. 27,900 272,025
Elec & Eltek International Co. Ltd.(a).... 159,500 539,110
Etec Systems, Inc.(b)..................... 14,900 524,294
Gemstar International Group Limited(b).... 32,700 1,224,206
Gilat Satellite Networks Ltd.(b).......... 15,000 501,563
HNC Software Inc.(b)...................... 15,000 612,188
H.T.E., Inc.(b)........................... 60,800 820,800
Hewlett-Packard Company................... 14,000 838,250
Intel Corp. .............................. 33,000 2,446,125
International Business Machines Corp. .... 13,000 1,492,563
International Telecommunication Data
Systems, Inc.(b)........................ 39,750 1,152,750
Jabil Circuit, Inc.(b).................... 7,700 254,581
KLA-Tencor Corporation(b)................. 17,000 470,688
Linear Technology Corporation............. 8,000 482,500
Loral Space & Communications Ltd.(b)...... 50,500 1,426,625
Matsushita Electric Industrial Company,
Ltd(a).................................. 50,000 803,401
Maxim Integrated Products, Inc.(b)........ 24,800 785,850
Microsoft Corporation(b).................. 32,100 3,478,838
Molecular Devices Corporation(b).......... 200 3,225
Motorola, Inc. ........................... 14,000 735,875
Network Appliance, Inc.(b)................ 36,200 1,409,538
Network Associates, Inc.(b)............... 16,050 768,394
New Era of Networks, Inc.(b).............. 24,500 747,250
Oracle Systems Corp.(b)................... 23,000 564,938
Pegasystems Inc.(b)....................... 16,200 439,425
Peoplesoft, Inc.(b)....................... 12,000 564,000
Philips Electronics NV(a)................. 16,800 1,412,235
Photronics, Inc.(b)....................... 39,700 875,881
Renaissance Worldwide, Inc.(b)............ 24,000 522,000
Sanmina Corporation(b).................... 8,800 381,700
Saville Systems Ireland plc.(b)........... 30,100 1,508,763
Sharp Corporation(a)...................... 116,000 939,467
Sony Corporation(a)....................... 14,600 1,257,124
Tellabs, Inc.(b).......................... 33,400 2,392,275
Uniphase Corporation(b)................... 13,300 834,991
Veritas Software Corporation(b)........... 23,250 961,969
Visio Corporation(b)...................... 24,400 1,165,100
Whittman-Hart, Inc.(b).................... 23,000 1,112,625
------------
61,131,772
------------
TELEPHONE & ELECTRIC -- 2.95%
Cia. de Telecomunicaciones de Chile
S.A.(a)................................. 10,625 215,820
Citizens Utilities Company -- CL B(b)..... 243,720 2,345,808
Empresa Nacional de Electridad S.A.(a).... 11,800 168,150
Endesa S. A -- Sponsored ADR.............. 65,600 1,418,600
Nextel Communications, Inc.(b)............ 29,000 721,375
Portugal Telecom S.A. -- ADR(a)........... 10,800 571,725
Telecom Corporation of New Zeland
Limited(a).............................. 119,000 490,463
</TABLE>
<PAGE> 115
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ------------------------------------------
<S> <C> <C>
Telecomunicacoes Brasileiral S.A.
ADR(Telebras)........................... 13,400 $ 1,463,113
Telefonica de Argentina -- ADS(a)......... 9,100 295,181
Telefonica de Espana S.A. -- ADR(a)....... 14,800 2,058,125
Western Wireless Corp. ................... 19,000 378,813
------------
10,127,173
------------
TOTAL EQUITY SECURITIES
(Cost -- $234,669,486).................. 324,446,291
------------
REAL ESTATE INVESTMENT TRUSTS
(REITS) -- 0.96%
- ------------------------------------------
Amli Residential Properties Trust......... 40,500 868,219
Apartment Investment & Management Co. .... 35,000 1,382,500
First Industrial Realty Trust, Inc. ...... 33,000 1,047,750
------------
TOTAL REITS
(Cost -- $2,706,000).................... 3,298,469
------------
TOTAL INVESTMENTS -- 95.43%
(Cost -- $237,375,486)(e)............... 327,744,760
OTHER ASSETS, LESS LIABILITIES -- 4.57%... 15,683,779
------------
NET ASSETS -- 100%........................ $343,428,539
============
ADR -- American Depository Receipt
ADS -- American Depository Share
GDR -- Global Depository Receipt
NV -- Non-voting
(a) Foreign security
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(b) Non-income producing security
(c) Securities valued in good faith by the Valuation Committee of
the Board of Trustees. The cost of these securities aggregated
$777,574. See Note 1 to the Financial Statements.
(d) Peregrine Investments Holdings Limited has filed for liquidation
under the laws of Hong Kong.
(e) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $110,940,178
Gross unrealized depreciation.................... (20,570,904)
------------
Net unrealized appreciation.................. $ 90,369,274
============
Purchases and sales of securities other than short-term obligations
aggregated $59,052,967 and $77,475,988 respectively, for the period
ended June 30, 1998.
Transactions in written put options during the period ended June 30,
1998 were:
</TABLE>
<TABLE>
<CAPTION>
NUMBER PREMIUMS
OF RECEIVED/
CONTRACTS (PAID)
--------- ----------
<S> <C> <C>
Outstanding at January 1, 1998.............. -- $ --
Contracts written......................... 1,134 1,185,075
Contracts expired......................... (1,134) (1,185,075)
------ ----------
Outstanding at June 30, 1998................ -- $ --
====== ==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 116
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $237,375,486)..... $327,744,760
Cash........................................................ 16,819,289
Receivables
Investments sold.......................................... 415,085
Fund shares sold.......................................... 32,516
Dividends and interest.................................... 407,837
Other assets................................................ 41,682
------------
Total assets.............................................. 345,461,169
------------
LIABILITIES
Payables
Investments purchased..................................... 1,401,598
Fund shares repurchased................................... 237,375
Management fee............................................ 234,328
12b-1 service and distribution fees....................... 20,768
Other payables to related parties......................... 95,083
Accrued expenses............................................ 43,478
------------
Total liabilities......................................... 2,032,630
------------
NET ASSETS.................................................. $343,428,539
============
CLASS A
Net asset value and redemption price per share
($337,761,711/16,781,888 shares outstanding).............. $ 20.13
============
Maximum offering price per share ($20.13 x 100/94.25)*...... $ 21.36
============
CLASS B
Net asset value, offering price and redemption price** per
share ($5,176,441/259,581 shares outstanding)............. $ 19.94
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($169,344/8,623 shares outstanding)................. $ 19.64
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($321,043/15,949 shares outstanding)................ $ 20.13
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $228,492,138
Undistributed net realized gain on investments and foreign
currency transactions................................... 24,120,177
Undistributed net investment income....................... 454,124
Net unrealized appreciation on investments and foreign
currency transactions................................... 90,362,100
------------
NET ASSETS.................................................. $343,428,539
============
</TABLE>
<TABLE>
<S> <C>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 117
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $146,409 foreign taxes withheld......... $ 2,031,699
Interest.................................................. 556,063
-----------
2,587,762
-----------
EXPENSES
Management fee............................................ $1,425,808
Transfer agent............................................ 370,619
Administrative services fee............................... 167,742
Custodian fees............................................ 45,967
Blue Sky fees............................................. 22,011
Auditing and accounting fees.............................. 39,980
Shareholder reports....................................... 24,108
Fund accounting........................................... 53,618
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 117,221
Legal..................................................... 12,903
Other..................................................... 30,392
-----------
Total expenses...................................... 2,314,604
-----------
NET INVESTMENT INCOME....................................... 273,158
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments and foreign currency transactions........... 20,620,737
Options................................................. (1,185,075)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 21,549,681
-----------
Net gain on investment transactions................. 40,985,343
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $41,258,501
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 118
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 273,158 $ 391,047
Net realized gain (loss) on
Investments and foreign currency transactions........... 20,620,737 37,355,207
Options................................................. (1,185,075) (1,152,465)
Net unrealized appreciation (depreciation) during the
period on
Investments and foreign currency transactions........... 21,549,681 (1,186,211)
Options................................................. -- 472,707
Forward foreign currency contracts...................... -- 70,156
------------ ------------
Net increase resulting from operations.............. 41,258,501 35,950,441
------------ ------------
Class A distributions
From net investment income................................ -- (388,231)
In excess of net investment income........................ -- (2,099,612)
From net realized gain.................................... -- (29,374,568)
------------ ------------
Total distributions to Class A shareholders......... -- (31,862,411)
------------ ------------
Class B distributions
From net investment income................................ -- (2,415)
In excess of net investment income........................ -- (13,058)
From net realized gain.................................... -- (391,020)
------------ ------------
Total distributions to Class B shareholders......... -- (406,493)
------------ ------------
Class C distributions
From net investment income................................ -- (401)
In excess of net investment income........................ -- (2,173)
From net realized gain.................................... -- (36,669)
------------ ------------
Total distributions to Class C shareholders......... -- (39,243)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (22,929,769) 1,470,182
Class B................................................... 193,691 566,456
Class C................................................... (251,925) 307,343
Advisor Class............................................. 324,335 --
------------ ------------
Net (decrease) increase resulting from Fund share
transactions........................................... (22,663,668) 2,343,981
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 18,594,833 5,986,275
NET ASSETS
Beginning of period....................................... 324,833,706 318,847,431
------------ ------------
END OF PERIOD............................................. $343,428,539 $324,833,706
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 454,124 $ 180,966
============ ============
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 119
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
CLASS A MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ ----------------------------------------------------------------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 17.80 $ 17.76 $ 16.75 $ 13.91 $ 15.14 $ 14.98
-------- -------- -------- -------- -------- --------
Income (loss) from investment
operations
Net investment income............... .02(g) .02 .02(a) .05(a) .05(a) .10(a)
Net realized and unrealized gain
(loss) on investment
transactions...................... 2.31(g) 1.98 2.86 3.73 (.49) 1.74
-------- -------- -------- -------- -------- --------
Total from investment operations.. 2.33 2.00 2.88 3.78 (.44) 1.84
-------- -------- -------- -------- -------- --------
Less distributions
From net investment income.......... -- .02 .02 .02 .05 .10
In excess of net investment
income............................ -- .13 .11 -- -- --
From net realized gain.............. -- 1.81 1.74 .89 .74 1.58
In excess of net realized gain...... -- -- -- .03 -- --
-------- -------- -------- -------- -------- --------
Total distributions............... -- 1.96 1.87 .94 .79 1.68
-------- -------- -------- -------- -------- --------
Net asset value, end of period........ $ 20.13 $ 17.80 $ 17.76 $ 16.75 $ 13.91 $ 15.14
======== ======== ======== ======== ======== ========
Total return(%)....................... 13.09(c) 11.69(b) 17.22(b) 27.33(b) (2.97)(b) 12.29(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $337,762 $320,000 $314,908 $289,954 $231,446 $268,533
Ratio of expenses to average net
assets
With expense reimbursement(%)....... -- -- 1.45 1.59 1.38 1.33
Without expense reimbursement(%).... 1.36(d) 1.38 1.45 1.60 1.49 1.43
Ratio of net investment income to
average net assets(%)............... .18(d) .13 .13(a) .32(a) .32(a) .64(a)
Portfolio turnover rate(%)............ 19 39 72 41 39 77(e)
Average commission rate(f)............ $ .0390 $ .0480 $ .0439 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX OCTOBER 23, 1993
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ ------------------------------------------ ----------------
1998* 1997 1996 1995 1994 1993
SELECTED PER SHARE DATA ------------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $17.72 $17.69 $16.75 $13.91 $15.14 $16.42
------ ------ ------ ------ ------ ------
Income (loss) from investment operations
Net investment loss........................ (.07)(g) (.14) (.13)(a) (.08)(a) (.04)(a) --
Net realized and unrealized gain (loss) on
investment transactions.................. 2.29(g) 1.96 2.81 3.71 (.54) .37
------ ------ ------ ------ ------ ------
Total from investment operations......... 2.22 1.82 2.68 3.63 (.58) .37
------ ------ ------ ------ ------ ------
Less distributions
From net investment income................. -- -- -- -- -- .07
In excess of net investment income......... -- .07 -- -- -- --
From net realized gain..................... -- 1.72 1.74 .73 .52 1.58
In excess of net realized gain............. -- -- -- .06 .13 --
------ ------ ------ ------ ------ ------
Total distributions...................... -- 1.79 1.74 .79 .65 1.65
------ ------ ------ ------ ------ ------
Net asset value, end of period............... $19.94 $17.72 $17.69 $16.75 $13.91 $15.14
====== ====== ====== ====== ====== ======
Total return(%).............................. 12.53(c) 10.69(b) 16.02(b) 26.13(b) (3.90)(b) 2.34(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $5,176 $4,433 $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(%)........... 2.29(d) 2.30 2.37 2.56 2.45 2.44(d)
Ratio of net investment loss to average net
assets(%).................................. (.75)(d) (.79) (.79)(a) (.64)(a) (.64)(a) (.33)(a)(d)
Portfolio turnover rate(%)................... 19 39 72 41 39 77(e)
Average commission rate(f)................... $.0390 $.0480 $.0439 N/A N/A N/A
</TABLE>
<PAGE> 120
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE APRIL 30, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $17.47 $17.59 $18.46
------ ------ ------
Income from investment operations
Net investment loss....................................... (.08)(g) (.07) (.06)(a)
Net realized and unrealized gain on investment
transactions............................................ 2.25(g) 1.86 1.02
------ ------ ------
Total from investment operations........................ 2.17 1.79 .96
------ ------ ------
Less distributions
In excess of net investment income........................ -- .13 .09
From net realized gain.................................... -- 1.78 1.74
------ ------ ------
Total distributions..................................... -- 1.91 1.83
------ ------ ------
Net asset value, end of period.............................. $19.64 $17.47 $17.59
====== ====== ======
Total return(%)............................................. 12.42(c) 10.58(b) 5.20(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 169 $ 400 $ 90
Ratio of expenses to average net assets
With expense reimbursement(%)............................. -- -- 2.44(d)
Without expense reimbursement(%).......................... 2.48(d) 2.33 2.44(d)
Ratio of net investment loss to average net assets(%)....... (.94)(d) (.82) (.86)(a)(d)
Portfolio turnover rate(%).................................. 19 39 72
Average commission rate(f).................................. $.0390 $.0480 $.0439
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
--------------
1998*
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $ 20.36
-------
Loss from investment operations
Net investment income..................................... .02(g)
Net realized and unrealized loss on investment
transactions............................................ (.25)(g)
-------
Total from investment operations........................ (.23)
-------
Net asset value, end of period.............................. $ 20.13
=======
Total return(%)............................................. (1.13)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 321
Ratio of expenses to average net assets
Without expense reimbursement(%).......................... 1.15(d)
Ratio of net investment income to average net assets(%)..... .39(d)
Portfolio turnover rate(%).................................. 19
Average commission rate(f).................................. $ .0390
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized
(e) The portfolio turnover rate excludes sales of portfolio
securities made following the February 1, 1993
reorganization between the Fund and American Investors
Growth Fund, Inc. to realign the Fund's portfolio and
reflects an adjustment to the monthly average value of the
portfolio securities owned by the Fund during the year ended
December 31, 1993.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding
*Unaudited
</TABLE>
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Growth Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of June 30, 1998, such securities were
determined to have no value by the Valuation Committee and have been noted as
such in the Portfolio of Investments.
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
indices, 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 (the "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.
CASH AND CASH EQUIVALENTS -- The Fund classifies as cash amounts on deposit
with the Fund's custodian. These amounts earn interest at variable interest
rates. At June 30, 1998 the interest rate was 5.25%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
FORWARD FOREIGN CURRENCY CONTRACTS -- Forward foreign currency contracts
may be entered into for purposes of hedging specific securities denominated in
for-
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
eign 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 Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .85% of
the Fund's average net assets.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a
wholly-owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $6,649.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate not to exceed .25% of its average
net assets of shares issued after December 31, 1991, excluding Advisor Class.
Class B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net assets of Class B and Class C . IMDI may
use such distribution fee for purposes of advertising and marketing shares of
the Fund. Such fees of $92,640, $23,670 and $911, 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 $365,379, $4,858, $353 and $29, for Class A, Class B, Class
C and Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 347,033 $ 6,555,333 2,926,280 $ 55,575,299
Issued on reinvestment of
distributions........... -- -- 1,722,605 29,508,347
Repurchased.............. (1,537,879) (29,485,102) (4,406,743) (83,613,464)
---------- ------------ ---------- ------------
Net (decrease)/increase.. (1,190,846) $(22,929,769) 242,142 $ 1,470,182
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 41,018 $ 785,656 65,628 $ 1,231,249
Issued on reinvestment of
distributions............ -- -- 22,508 383,770
Repurchased............... (31,566) (591,965) (55,634) (1,048,563)
-------- ------------ ---------- ------------
Net increase.............. 9,452 $ 193,691 32,502 $ 566,456
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 3,912 $ 71,706 37,235 $ 674,963
Issued on reinvestment of
distributions............ -- -- 2,037 34,248
Repurchased............... (18,207) (323,631) (21,478) (401,868)
-------- ------------ ---------- ------------
Net (decrease)/increase... (14,295) $ (251,925) 17,794 $ 307,343
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1988
(COMMENCEMENT)
TO JUNE 30, 1998
-----------------------
ADVISOR CLASS SHARES AMOUNT
------------- -------- ------------
<S> <C> <C>
Sold...................... 16,366 $ 332,669
Repurchased............... (417) (8,334)
-------- ------------
Net increase.............. 15,949 $ 324,335
======== ============
</TABLE>
03IGFX063098
<PAGE> 123
June 30, 1998 IVY FUNDS(R)
IVY
SOUTH AMERICA
FUND
SEMIANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the share-holders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
South American markets have performed poorly since the beginning of the year. In
our view, concerns about lower commodity prices, widening current account
deficits across the region and general emerging market malaise have led to net
outflows from dedicated Latin American market portfolios virtually every week
since the beginning of January. We believe that this negative sentiment has put
downward pressure on prices, and has created significant opportunities for
longer-term investors in the Ivy South America Fund.
While prospects for regional growth in 1998 have been hampered by spillover from
the Asian crisis in the second half of last year, we believe that the magnitude
of this year's sell-off has been largely unwarranted by changes in economic
fundamentals. According to our research, policy makers across the region have
responded proactively to the challenges presented by the Asian crisis and, in
doing so, have softened its impact.
In addition to improved macroeconomic management, we believe that restructuring
at the corporate level has improved the ability of companies throughout the
region to withstand turmoil in global markets. Lower corporate leverage and
restructured financial systems, combined with aggressive policy responses, have
helped contain the impact of the recent crisis.
At 56% of total assets, the Ivy South America Fund's largest country weighting
continues to be in Brazil. Although that market was among the hardest hit by
fears stemming from the Asian crisis, our research confirms that growth
prospects have actually been revised upward since the beginning of the year, as
interest rates have eased more quickly than had been expected. As a result, the
market has been a regional outperformer, although it remains in negative
territory for the year. We believe that as volatility in other emerging markets
subsides, this portion of the Fund should make a positive contribution to
performance.
Despite negative investor sentiment, the Brazilian government remains firm in
its commitment to go ahead with the long-awaited privatization of the Telebras
system in the second half of this year. Strategic investors view the sale as a
once-in-a-lifetime opportunity, given the size and potential of the Brazilian
telecom sector. As a result, global telecom operators are expected to bid
aggressively. The successful sale of Telebras is likely to serve not only as an
important catalyst for the Brazilian stock market, but also for its economy as a
whole. We believe that improved sentiment toward Brazil could well lead to
increased investor interest in the rest of the region.
According to our research, valuations in South America are currently close to a
three-year low. The region is now trading at about 10 times estimated 1998
earnings, with expected earnings growth in excess of 15%. As a comparison, the
S&P 500 is currently trading at over 21 times estimated 1998 earnings with
growth rates of about 8%. As volatility in these markets subsides, investors are
likely to find valuations much too compelling to ignore. While there are no
guarantees, in the medium term, steady economic growth and better-than-expected
corporate earnings should provide solid returns once capital flows into the
region. We believe that the Ivy South America Fund is well positioned to capture
this upside opportunity.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
Legal Counsel
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 124
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 98.28% SHARES VALUE
- -----------------------------------------
<S> <C> <C>
ARGENTINA -- 14.78%
Banco Frances S.A.(a).................... 8,900 $ 67,292
Bansud S.A.(a)........................... 11,600 91,558
Cia Naviera Perez Companc 'B'............ 13,055 65,544
Inversiones y Representaciones S.A.
(IRSA)................................. 28,107 82,645
Quilmes Industrial S.A................... 7,750 75,563
Telecom Argentina S.A. ADR............... 3,800 113,288
Telefonica de Argentina S.A. ADR......... 3,000 97,313
Transportadora de Gas Sur................ 20,400 45,701
YPF S.A. Sponsored ADR................... 3,900 117,244
------------
756,148
------------
BRAZIL -- 55.80%
Aracruz Celulose S.A. ADR................ 5,850 66,909
Banco Bradesco S.A. Preferred............ 14,936,032 125,263
Banco Itau............................... 131,000 74,753
Brasmotor S.A. Preferred................. 410,000 37,575
Centrais Electricas Brasileiras S.A.
Preferred (Electrobras)................ 4,920,000 148,884
Centrais Electricas de Santa Catarina
S.A. Preferred B (CELESC).............. 83,201 61,864
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar Preferred.......... 2,900,000 65,191
Companhia Cervejaria Brahma Preferred.... 136,551 85,004
Companhia Cimento Portland Itau
Preferred.............................. 320,000 58,378
Companhia Energetica de Minas Gerais
Preferred (CEMIG)...................... 3,548,933 111,997
Companhia Paranaense de Energia --
Copel.................................. 6,800,000 53,501
Companhia Paulista de Forca e Luz
(CPFL)(a).............................. 500,000 51,876
Companhia Paulista de Forca e Luz (CPFL)
Preferred(a)........................... 2,905 274
Companhia Paulista de Forca e Luz (CPFL)
Preferred Receipts(a).................. 2,141 167
Companhia Saneamento Basico (SABESP)..... 520,030 62,497
Companhia Siderurgica de Tubarao......... 3,400,000 47,034
Companhia Vale do Rio Doce Preferred A
(with 8,300 Debentures(a))............. 10,300 209,276
Elevadores Atlas S.A. 144A............... 9,400 158,481
Gerdau S.A............................... 4,600,000 63,634
Ipiranga Brasileira de Petroleo
Preferred.............................. 4,700,000 42,912
Light Servicos de Eletricidade S.A....... 170,000 52,178
Marco Polo S.A. Preferred................ 37,000 63,660
OSA S.A. Preferred....................... 8,700,000 38,212
Petroleo Brasileiro S.A. Preferred
(Petrobras)............................ 934,000 172,812
Rossi Residencial S.A. GDR............... 10,000 45,625
Tam Transport Aereos Regionais S.A.
Preferred.............................. 2,450,000 152,515
Telecomunicacoes Brasileiras S.A. ADR
(Telebras)............................. 3,000 327,563
Telecomunicacoes de Minas Gerais
(Telemig).............................. 4,861 147
Telecomunicacoes de Minas Gerais
(Telemig) Preferred B (with 354
rights(a))............................. 570,726 39,471
Telecomunicacoes de Sao Paulo S.A.
(Telesp)(a)............................ 6,856 1,025
Telecomunicacoes de Sao Paulo S.A.
(Telesp) Preferred..................... 559,807 132,860
Telecomunicacoes de Sao Paulo S.A.
(Telesp) Preferred Rights(a)........... 31,989 512
Telecomunicacoes do Parana Preferred
(Telepar) (with 5,971 rights(a))....... 176,690 44,302
Telecomunicacoes do Rio de Janeiro S.A.
Preferred (Telerj) (with 2,850
rights(a))............................. 316,013 23,770
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -----------------------------------------
<S> <C> <C>
Telemig Celular S.A.(a).................. 4,861 $ 66
Telemig Celular S.A. Preferred C(a)...... 570,726 16,777
Telepar Celular S.A. Preferred(a)........ 176,690 16,039
Telerj Celular S.A. Preferred B(a)....... 316,013 18,579
Telesp Celular S.A.(a)................... 6,856 291
Telesp Celular S.A. Preferred B(a)....... 673,807 55,344
Unibanco -- Units........................ 1,379,847 81,602
Usinas Siderurgicas de Minas Gerais S.A.
Preferred (USIMINAS)................... 9,010 45,727
------------
2,854,547
------------
CHILE -- 15.26%
A.F.P. Provida S.A. ADR.................. 4,100 68,419
Antofagasta Holdings PLC................. 11,700 49,292
Banco de Santiago........................ 1,700 28,475
Banco Santander Chile Sponsored ADR...... 4,200 54,075
Compania de Telecomunicaciones de Chile
S.A. ADR............................... 2,975 60,430
Cristalerias de Chile Sponsored ADR...... 7,200 93,600
Empresa Nacional Electricidad S.A........ 4,200 59,850
Gener S.A. Sponsored ADR................. 1,728 31,536
Laboratorio Chile S.A. ADR............... 6,400 92,000
Madeco S.A. ADR.......................... 5,200 45,825
Quimica Minera Chile S.A. Sponsored
ADR.................................... 2,200 73,700
Santa Isabel S.A. ADR.................... 1,895 20,845
Vina Concha y Toro S.A. ADR.............. 3,600 102,600
------------
780,647
------------
COLOMBIA -- 2.84%
Bancolombia S.A. Sponsored ADR........... 6,900 75,469
Cememtos Diamante ADR 144A............... 8,300 70,031
------------
145,500
------------
MEXICO -- 1.97%
Panamerican Beverages Inc................ 3,200 100,600
------------
PERU -- 6.12%
Banco Wiese ADR.......................... 15,200 52,250
Credicorp Limited........................ 5,273 77,447
Southern Peru Copper Corp................ 6,100 79,300
Telefonica del Peru S.A. -- B............ 50,500 103,937
------------
312,934
------------
VENEZUELA -- 1.51%
CANTV CIA Anonima Telef.................. 3,100 77,500
------------
TOTAL INVESTMENTS -- 98.28%
(Cost -- $5,313,959)(b)................ 5,027,876
OTHER ASSETS, LESS
LIABILITIES -- 1.72%................... 87,717
------------
NET ASSETS -- 100%....................... $ 5,115,593
============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 769,534
Gross unrealized depreciation.................... (1,055,617)
------------
Net unrealized depreciation.................. $ (286,083)
============
Purchases and sales of securities other than short-term obligations
aggregated $719,156 and $3,577,577, respectively, for the period
ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 125
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $5,313,959)....... $ 5,027,876
Receivables
Investments sold.......................................... 45,578
Dividends and interest.................................... 32,986
Manager for expense reimbursement......................... 16,103
Deferred organization expenses.............................. 16,558
Other assets................................................ 13,552
------------
Total assets.............................................. 5,152,653
------------
LIABILITIES
Payables
Fund shares repurchased................................... 9,502
Management fee............................................ 4,324
12b-1 service and distribution fees....................... 2,703
Other payables to related parties......................... 3,898
Due to custodian............................................ 1,570
Accrued expenses............................................ 15,063
------------
Total liabilities......................................... 37,060
------------
NET ASSETS.................................................. $ 5,115,593
============
CLASS A
Net asset value and redemption price per share
($2,906,131/372,615 shares outstanding)................... $ 7.80
============
Maximum offering price per share ($7.80 X 100/94.25)*....... $ 8.28
============
CLASS B
Net asset value, offering price and redemption price** per
share ($1,926,604/248,568 shares outstanding)............. $ 7.75
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($282,858/36,708 shares outstanding)................ $ 7.71
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 5,392,765
Accumulated net realized loss on investments and foreign
currency transactions................................... (44,843)
Undistributed net investment income....................... 54,116
Net unrealized depreciation on investments and foreign
currency transactions................................... (286,445)
------------
NET ASSETS.................................................. $ 5,115,593
============
</TABLE>
<TABLE>
<S> <C>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 126
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $15,397 foreign taxes withheld.......... $ 141,919
-----------
EXPENSES
Management fee............................................ $ 34,309
Transfer agent............................................ 11,321
Administrative services fee............................... 3,431
Custodian fees............................................ 29,219
Blue Sky fees............................................. 19,916
Auditing and accounting fees.............................. 9,198
Shareholder reports....................................... 2,645
Amortization of organization expenses..................... 6,176
Fund accounting........................................... 9,865
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 19,531
Legal..................................................... 11,755
Other..................................................... 1,600
-----------
163,201
Expenses reimbursed by manager............................ (68,943)
Fees paid indirectly...................................... (7,811)
-----------
Net expenses........................................ 86,447
-----------
NET INVESTMENT INCOME....................................... 55,472
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (121,431)
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (840,793)
-----------
Net loss on investment transactions................. (962,224)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ (906,752)
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 55,472 $ 31,048
Net realized (loss) gain on investments and foreign
currency transactions................................... (121,431) 154,205
Net unrealized (depreciation) appreciation during the
period on investments and foreign currency
transactions............................................ (840,793) 64,801
------------ ------------
Net (decrease) increase resulting from operations... (906,752) 250,054
------------ ------------
Class A distributions
From net investment income................................ -- (26,281)
From net realized gain.................................... -- (60,670)
------------ ------------
Total distributions to Class A shareholders......... -- (86,951)
------------ ------------
Class B distributions
From net realized gain.................................... -- (19,985)
------------ ------------
Total distributions to Class B shareholders......... -- (19,985)
------------ ------------
Class C distributions
From net realized gain.................................... -- (4,054)
------------ ------------
Total distributions to Class C shareholders......... -- (4,054)
------------ ------------
Fund share transactions (Note 5)
Class A................................................... (2,222,769) 1,541,795
Class B................................................... (784,037) 950,516
Class C................................................... (123,592) 369,599
------------ ------------
Net (decrease) increase resulting from Fund share
transactions........................................... (3,130,398) 2,861,910
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (4,037,150) 3,000,974
NET ASSETS
Beginning of period....................................... 9,152,743 6,151,769
------------ ------------
END OF PERIOD............................................. $ 5,115,593 $ 9,152,743
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 54,116 $ --
============ ============
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 127
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX NOVEMBER 1, 1994
CLASS A MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ --------------------------------- ----------------
1998* 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------ ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 8.96 $ 8.51 $ 6.88 $ 8.37 $ 10.00
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income(a)............................ .09(g) .06 .01 .01 --
Net realized and unrealized gain (loss) on
investment transactions........................... (1.25)(g) .53 1.66 (1.45) (1.63)
------- ------- ------- ------- -------
Total from investment operations.............. (1.16) .59 1.67 (1.44) (1.63)
------- ------- ------- ------- -------
Less distributions
From net investment income.......................... -- .04 -- -- --
From net realized gain.............................. -- .10 .04 -- --
From capital paid-in................................ -- -- -- .05 --
------- ------- ------- ------- -------
Total distributions........................... -- .14 .04 .05 --
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 7.80 $ 8.96 $ 8.51 $ 6.88 $ 8.37
======= ======= ======= ======= =======
Total return (%)...................................... (12.95)(b) 7.03(c) 24.22(c) (17.28)(c) (16.10)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $ 2,906 $ 5,671 $ 4,016 $ 2,015 $ 571
Ratio of expenses to average net assets(e)
With expense reimbursement (%)...................... 2.41(d) 2.45 2.55 2.61 2.20(d)
Without expense reimbursement (%)................... 4.42(d) 3.18 4.89 9.26 16.22(d)
Ratio of net investment income to average net
assets(%)(a)........................................ 1.95(d) .65 .24 .22 .21(d)
Portfolio turnover rate(%)............................ 11 10 20 45 82
Average commission rate(f)............................ $ .0000 $ .0002 $ .0002 N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX NOVEMBER 1 1994
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ --------------------------------- ---------------
1998* 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------ ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 8.94 $ 8.48 $ 6.88 $ 8.37 $ 10.00
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (loss) (a).................... .05(g) (.01) (.03) (.02) (.01)
Net realized and unrealized gain (loss) on
investment transactions........................... (1.24)(g) .53 1.63 (1.47) (1.62)
------- ------- ------- ------- -------
Total from investment operations.............. (1.19) .52 1.60 (1.49) (1.63)
------- ------- ------- ------- -------
Less distributions
From net realized gain.............................. -- .06 -- -- --
------- ------- ------- ------- -------
Total distributions........................... -- .06 -- -- --
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 7.75 $ 8.94 $ 8.48 $ 6.88 $ 8.37
======= ======= ======= ======= =======
Total return (%)...................................... (13.31)(b) 6.18(c) 23.26(c) (17.90)(c) (16.20)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $ 1,927 $ 3,028 $ 2,025 $ 684 $ 122
Ratio of expenses to average net assets(e)
With expense reimbursement(%)....................... 3.20(d) 3.23 3.33 3.36 2.95(d)
Without expense reimbursement (%)................... 5.21(d) 3.96 5.67 10.01 16.97(d)
Ratio of net investment income (loss) to average net
assets (%)(a)....................................... 1.17(d) (.13) (.54) (.53) (.54)(d)
Portfolio turnover rate(%)............................ 11 10 20 45 82
Average commission rate(f)............................ $ .0000 $ .0002 $ .0002 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 128
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE APRIL 30, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.89 $ 8.46 $ 7.96
------- ------- -------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .05(g) (.02) (.02)
Net realized and unrealized gain (loss) on investment
transactions............................................ (1.23)(g) .53 .55
------- ------- -------
Total from investment operations.................... (1.18) .51 .53
Less distributions
From net realized gain.................................... -- .08 .03
------- ------- -------
Total distributions................................. -- .08 .03
------- ------- -------
Net asset value, end of period.............................. $ 7.71 $ 8.89 $ 8.46
======= ======= =======
Total return (%)............................................ (13.27)(b) 6.06(c) 6.66(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 283 $ 453 $ 111
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............................ 3.25(d) 3.30 3.46(d)
Without expense reimbursement (%)......................... 5.26(d) 4.03 5.80(d)
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. 1.12(d) (.20) (.68)(d)
Portfolio turnover rate(%).................................. 11 10 20
Average commission rate(f).................................. $ .0000 $ .0002 $ .0002
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) Total return represents aggregate total return and does not
reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Annualized
(e) Beginning in 1995, total expenses include fees paid
indirectly, through an expense offset arrangement, if any.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy South America 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, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998 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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 foreign denominated
securities, passive foreign investment companies, certain securities sold at a
loss, and nondeductible organization expenses. 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 percentage of
quarterly cumulative credits resulting from cash balances on deposit with the
custodian are used to offset custody fees, including transaction and
out-of-pocket expenses. For the six months ended June 30, 1998, custody fees
were reduced by $7,811 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding
<PAGE> 130
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
taxes, 12b-1 fees, brokerage commissions, interest, litigation and
indemnification expenses, and other extraordinary expenses) to an annual rate of
1.95% of its average net assets. The voluntary expense limitation may be
terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $188.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $4,926,
$12,718 and $1,887, 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 $6,111, $4,456 and $754, 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 South
America. Therefore, the Fund is more susceptible to factors adversely affecting
securities in South America than is an equity fund that is not concentrated in
such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and Class C were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 34,912 $ 300,218 378,980 $ 3,715,905
Issued on reinvestment of
distributions............ -- -- 8,757 73,733
Repurchased............... (294,967) (2,522,987) (226,858) (2,247,843)
-------- ------------ ---------- ------------
Net (decrease)/increase... (260,055) $ (2,222,769) 160,879 $ 1,541,795
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 14,262 $ 124,676 224,612 $ 2,200,555
Issued on reinvestment of
distributions............ -- -- 1,372 11,530
Repurchased............... (104,335) (908,713) (126,124) (1,261,569)
-------- ------------ ---------- ------------
Net (decrease)/increase... (90,073) $ (784,037) 99,860 $ 950,516
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -----------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Sold....................... 2,760 $ 26,279 41,166 $ 400,890
Issued on reinvestment of
distributions............. -- -- 167 1,391
Repurchased................ (17,040) (149,871) (3,514) (32,682)
-------- ------------ -------- ------------
Net (decrease)/increase.... (14,280) $ (123,592) 37,819 $ 369,599
======== ============ ======== ============
</TABLE>
03ISAF063098
<PAGE> 131
June 30, 1998 IVY FUNDS(R)
IVY
BOND
FUND
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
Corporate bonds have underperformed US Treasury bonds in the first half of the
year. Bond-friendly economic data helped the long end of the Treasury market to
rally, while an oversupply of corporate bond issues relative to investor demand
hurt the corporate bond market. In managing the Ivy Bond Fund within this
environment, we have not deviated from the Fund's value-oriented strategy of
investing in corporate bonds. Therefore, the Fund has approximately 94% of net
assets invested in corporate bonds.
On the economic front, inflation remains low. According to our research, the
economy is moderating on its own due to high, real short-term rates and the
strength of the US dollar, which is slowing down exports and foreign capital
inflows. We believe fundamentals remain positive for continued economic growth,
but at a more moderate pace. Low levels of unemployment, coupled with a high
rate of new job creation, have led many analysts to become concerned that prices
at the consumer level will rise, thus leading to renewed inflation. Higher
productivity, however, is relieving some of this inflationary pressure. In
addition, the strong US dollar and the Asian currency depreciation have made
imports cheaper, which directly impacts consumers and also manufacturers who
import components.
The corporate bond market has seen more new issues so far this year than in all
of 1997. In our view, this has had several significant effects. In the beginning
of the year, cash flows into corporate bond mutual funds were quite strong, and
investor demand was strong enough to place all of the bonds coming to market.
More recently, however, these cash flows, as well as investor demand, have
slowed, which has caused an imbalance in the supply and demand for corporate
bonds, creating downward pressure on corporate bond prices. We believe this
imbalance should be viewed as temporary. As new bond issues in the primary
market are being priced lower, issues already trading in the secondary market
must also reprice to remain attractive to investors. So, despite the rally in
the Treasury market, corporate bonds have lagged behind. These effects have been
broad-based across all industries. Despite the divergence of Treasury and
corporate bond yields, there have been rating upgrades in some of the below
investment grade bonds owned by the Ivy Bond Fund. Going forward, we expect that
new issues will remain strong in the second half of 1998, but at a slower pace
than during the first half of the year. With yields at more attractive levels
and continued cash flow into the market, this imbalance of issuance and demand
should slowly disappear and the market should firm. As this occurs, we believe
that the Ivy Bond Fund is positioned to benefit.
Currently, the Fund holds approximately 14% in emerging market corporate bonds.
Companies issuing these bonds are located primarily in Latin America with
minimal exposure to Asia. Since the Asian financial crisis has caused a
repricing of risk across all emerging markets, these bonds have not performed
well this year. However, we continue to believe that these companies offer
significant value to the Fund, which should be recognized as the emerging market
universe begins to stabilize.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 132
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. CORPORATE BONDS - 80.32% PRINCIPAL VALUE
- -----------------------------------------
<S> <C> <C>
Affinity Group Inc., 11.50%,
10/15/03(b)............................ $1,000,000 $ 1,053,750
American President Co. Ltd., 8.00%,
01/15/24(b)............................ 1,000,000 853,750
Amresco Inc, 9.875%, 03/15/05(a)(b)...... 1,000,000 1,021,250
BRE Properties, 7.125%, 02/15/13(a)...... 2,000,000 2,010,000
Burlington Industries, 7.25%, 09/15/05... 1,000,000 1,021,250
Burlington Industries, 7.25%,
08/01/27............................... 1,000,000 1,032,500
CHS Electronics, 9.875%,
04/15/05(a)(b) ........................ 2,000,000 1,962,500
Circus Circus Enterprises, 7.625%,
07/15/13(b)............................ 1,000,000 908,750
Comcast Cablevision, 9.375%,
05/15/05(b)............................ 2,500,000 2,681,250
Crescent Real Estate, 7.125%,
09/15/07............................... 2,000,000 1,992,500
Cyprus Amax Minerals, 8.375%, 02/01/23... 1,575,000 1,657,687
Darden Restaurants Inc, 7.125%,
02/01/16............................... 1,250,000 1,260,938
Delphi Financial Group Inc., 8.00%,
10/01/03............................... 2,500,000 2,612,500
Delta Air Lines, 9.30%, 01/02/11......... 1,000,000 1,185,000
Delta Air Lines, 9.59%, 01/12/17......... 1,500,000 1,899,375
Developers Diversified Realty Corp.,
6.96%, 12/17/07........................ 2,000,000 2,020,000
Developers Diversified Realty Corp.,
6.625%, 01/15/08....................... 1,000,000 980,000
Equimar Shipholdings Ltd, 9.875%,
07/01/07(b)............................ 2,000,000 1,845,000
Farmers Insurance Exchange, 8.625%,
05/01/24............................... 2,000,000 2,375,000
Franchise Finance Corp America, 6.86%,
06/15/07............................... 3,000,000 2,988,750
Freeport-McMoRan Copper & Gold, 7.50%,
11/15/06(b)............................ 2,000,000 1,622,500
Goldman Sachs Group LP, 7.20%,
03/01/07............................... 1,000,000 1,062,500
Goldman Sachs Group LP 144A, 7.20%,
10/24/12............................... 1,000,000 1,045,000
Goss Graphic Systems Inc., 12.00%,
10/15/06(b)............................ 1,000,000 1,057,500
Gothic Energy Corp, 14.125%,
05/01/06(a)(b)......................... 875,000 498,750
Green Tree Financial, 6.50%, 09/26/02.... 3,000,000 2,955,000
Indianapolis Life Ins. Co. 144A, 8.66%,
04/01/11............................... 2,000,000 2,232,500
Indiantown Cogeneration, 9.77%,
12/15/20............................... 1,500,000 1,938,750
International Knife & Saw, 11.375%,
11/15/06(b)............................ 1,000,000 1,070,000
JDN Realty Corp, 6.918%, 03/31/13(a)..... 2,000,000 2,000,000
Jackson National Life Ins. Co. 144A,
8.15%, 03/15/27........................ 1,000,000 1,132,500
Jefferies Group Inc. 7.50%, 08/15/07..... 2,500,000 2,606,250
Leucadia National Corp., 7.75%,
08/15/13............................... 2,415,000 2,439,150
Lumbermens Mutual Casualty 144A, 9.15%,
07/01/26............................... 2,000,000 2,405,000
McCaw International Ltd., 0.00%,
04/15/07(a)(b)......................... 2,000,000 1,320,000
McDermott Inc., 8.75%, 05/19/23(b)....... 2,000,000 2,102,500
Medpartners Inc., 7.375%, 10/01/06(b).... 2,500,000 2,256,250
Navigator Gas Transport 144A, 10.50%,
06/30/07(b)............................ 2,050,000 2,137,125
News America Holdings, 7.75%, 01/20/24... 2,000,000 2,152,500
News America Holdings, 7.70%, 10/30/25... 1,000,000 1,067,500
Northrop Grumman Corp., 9.375%,
10/15/24............................... 2,000,000 2,417,500
Overseas Shipholding Group, Inc., 8.75%,
12/01/13............................... 3,000,000 3,341,250
PDV America Inc., 7.875%, 08/01/03....... 3,000,000 3,093,750
Pegasus Media & Communications, 12.50%,
07/01/05(b)............................ 1,000,000 1,130,000
Pioneer-Standard, 8.50%, 08/01/06........ 3,000,000 3,285,000
Praxair Inc., 8.70%, 07/15/22............ 2,500,000 2,762,500
</TABLE>
<TABLE>
<CAPTION>
U.S. CORPORATE BONDS PRINCIPAL VALUE
<S> <C> <C>
Pulte Corp., 7.625%, 10/15/17............ $1,500,000 $ 1,567,500
RJR Nabisco Inc., 8.75%, 07/15/07........ 2,000,000 2,100,000
Royal Carribean Cruises, 7.50%,
10/15/27............................... 3,300,000 3,448,500
Servicemaster Company, 7.25%,
03/01/38(a)............................ 3,000,000 3,052,500
Silverleaf Resorts Inc, 10.50%,
04/01/08(a)(b)......................... 2,000,000 1,905,000
Sithe/Independence Funding, 9.00%,
12/30/13............................... 2,000,000 2,375,000
Spieker Properties, 7.35%, 12/01/17...... 2,000,000 2,062,500
Storage USA Partnership L.P., 7.00%,
12/01/07............................... 1,200,000 1,221,000
Storage USA Partnership L.P., 8.20%,
06/01/17............................... 2,240,000 2,514,400
TCI Communications, Inc., 8.75%,
08/01/15............................... 1,000,000 1,203,750
TCI Communications, Inc., 7.125%,
02/15/28(a)............................ 1,000,000 1,047,500
TE Products Pipeline Co, 7.51%,
01/15/28(a)............................ 2,000,000 2,030,000
Tele Communications Inc, 9.25%,
01/15/23............................... 2,000,000 2,317,500
Terex Corp. 144A, 8.875%,
04/01/08(a)(b)......................... 2,000,000 1,965,000
Time Warner Inc., 9.125%, 01/15/13....... 1,500,000 1,841,250
Time Warner Inc., 9.15%, 02/01/23........ 2,000,000 2,535,000
Torchmark Corp, 7.875%, 05/15/23......... 2,000,000 2,200,000
Trump Atlantic City Associates, 11.25%,
05/01/06(b)............................ 2,500,000 2,431,250
Turner Broadcasting System, 8.40%,
02/01/24............................... 1,000,000 1,070,000
USX Marathon Group, 9.375%,
05/15/22. . ........................... 1,000,000 1,268,750
United Air Lines, 9.75%, 08/15/21........ 2,500,000 3,246,875
United Refining, 10.75%, 06/15/07(b)..... 1,000,000 962,500
US Surgical Corp, 7.25%, 03/15/08(a)..... 3,000,000 3,172,500
Watson Pharmaceuticals, 7.125%,
05/15/08(a)............................ 3,500,000 3,513,125
------------
TOTAL U.S. CORPORATE BONDS
(Cost -- $129,040,824)................. 135,544,425
------------
U.S. DOLLAR DENOMINATED FOREIGN CORPORATE
BONDS -- 13.63%
- -----------------------------------------
APP Fin II Mauritius LTD 12.00%,
12/29/49(b)............................ 1,000,000 660,000
Abitibi Consolidated Inc, 7.50%,
04/01/28(a)............................ 2,000,000 2,042,500
Acindar Industries, 11.25%,
02/15/04(b)............................ 1,500,000 1,513,125
Buenos Aires Embotelladora 8.50%,
12/29/00(b)(c)......................... 500,000 302,500
Canadian Occidental Petroleum, 7.40%,
05/01/28(a)............................ 1,500,000 1,543,125
Cemex S.A. 144A, 12.75%, 07/15/06(b)..... 1,000,000 1,146,250
Cia Latino Americana 144A, 11.625%,
06/01/04(b)............................ 1,000,000 995,000
Companhia Suzano Papel, 10.25%,
10/06/01(b)............................ 900,000 873,000
Espirito Santo-Escelsa 144A, 10.00%,
07/15/07(b)............................ 900,000 767,250
GS Superhighway Holdings, 10.25%,
08/15/07(b)............................ 1,000,000 695,000
Greater Beijing 144A, 9.50%,
06/15/07(b) ........................... 1,000,000 630,000
Grupo Azucarero Mexico 144A, 11.50%,
01/15/05(a)(b)......................... 1,500,000 1,245,000
Grupo Industrial Durango, 12.00%,
07/15/01(b)............................ 500,000 519,375
Grupo Televisa S.A., 0.00%,
05/15/08(a)(b)......................... 1,000,000 817,500
Industrias Unidas, 8.50%, 01/27/99(b).... 1,000,000 998,750
</TABLE>
<PAGE> 133
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. DOLLAR DENOMINATED
FOREIGN CORPORATE BONDS PRINCIPAL VALUE
- -----------------------------------------
<S> <C> <C>
Iochpe-Maxion S.A. 144A, 12.375%,
11/08/02(b)............................ $ 900,000 $ 739,125
Ionica PLC Units, 15.00%,
05/01/07(a)(b)......................... 2,500,000 500,000
MRS Logistica S.A. 144A, 10.625%,
08/15/05(b)............................ 1,000,000 851,250
Mastellone Hermanos 144A, 11.75%,
04/01/08(a)(b)......................... 1,000,000 1,002,500
Mechala Group Jamaica, 12.75%,
12/30/99(b)............................ 1,000,000 910,000
Metalurgica Gerdau S.A., 10.25%,
11/23/01(b)............................ 500,000 487,500
Metalurgica Gerdau S.A., 11.125%,
05/24/04(b)............................ 500,000 498,750
Ongko International Finance Co. 144A,
10.50%, 03/29/04(b)(c)................. 1,000,000 150,000
Petroleo Ipiranga, 10.625%,
02/25/02(b)............................ 1,000,000 975,000
Polysindo International Finance, 11.375%,
06/15/06(b)(c)......................... 1,000,000 380,000
Sideco Americana S.A. 144A, 9.125%,
08/01/02(b)............................ 1,000,000 892,500
Trikem S.A. 144A, 10.625%,
07/24/07(b). .......................... 1,000,000 865,000
------------
TOTAL U.S. DOLLAR DENOMINATED FOREIGN
CORPORATE BONDS
(Cost -- $26,839,663).................. 23,000,000
------------
U.S. GOVERNMENT OBLIGATIONS -- 3.58%
- -----------------------------------------
U.S. Treasury Bond, 5.625%,
05/15/01(a) ........................... 3,500,000 3,511,165
U.S. Treasury Bond, 5.75%, 04/30/03(a)... 2,500,000 2,522,250
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost -- $6,024,829)................... 6,033,415
------------
RIGHTS & WARRANTS -- 0.10% SHARES
- ----------------------------------------- ----------
Gothic Energy Restricted Warrants(a)..... 4,767 --
</TABLE>
<TABLE>
<CAPTION>
RIGHTS & WARRANTS SHARES VALUE
FOREIGN CORPORATE BONDS
<S> <C> <C>
Gothic Energy Warrants(a)................ 6,941 $ --
Gothic Energy 144A Warrants(a)........... 14,000 14,000
McCaw International Ltd. 144A
Warrants(a)............................ 2,000 1,000
RSL Communications Ltd. 144A
Warrants(a)............................ 1,000 70,000
Terex Corp. -- Appreciation Rights (a)... 4,000 88,000
------------
TOTAL RIGHTS & WARRANTS
(Cost -- $0)........................... 173,000
------------
TOTAL INVESTMENTS -- 97.63%
(Cost -- $161,905,316)(d).............. 164,750,840
OTHER ASSETS, LESS
LIABILITIES -- 2.37%................... 4,002,880
------------
NET ASSETS -- 100%....................... $168,753,720
============
(a) Non-income producing security
(b) Below investment grade security
(c) Issuer is in default on interest payments.
(d) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
Financial Statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 8,323,473
Gross unrealized depreciation.................... (5,477,949)
------------
Net unrealized appreciation.................. $ 2,845,524
============
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $89,674,696 and
$50,679,004, respectively, for the period ended June 30, 1998.
Purchases and sales of U.S. Government and Government Agency
obligations aggregated $18,329,258 and $15,695,079, respectively,
for the period ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 134
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $161,905,316)..... $164,750,840
Cash........................................................ 654,436
Receivables
Fund shares sold.......................................... 418,614
Interest.................................................. 3,574,121
Other assets................................................ 34,636
------------
Total assets.............................................. 169,432,647
------------
LIABILITIES
Payables
Distributions to shareholders............................. 375,019
Fund shares repurchased................................... 92,418
Management fee............................................ 89,530
12b-1 service and distribution fees....................... 65,160
Other payables to related parties......................... 38,467
Accrued expenses............................................ 18,333
------------
Total liabilities......................................... 678,927
------------
NET ASSETS.................................................. $168,753,720
============
CLASS A
Net asset value and redemption price per share
($123,777,236/12,237,121 shares outstanding).............. $ 10.11
============
Maximum offering price per share ($10.11 x 100/95.25)*...... $ 10.61
============
CLASS B
Net asset value, offering price and redemption price** per
share ($34,040,335/3,368,435 shares outstanding).......... $ 10.11
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($10,498,821/1,036,559 shares outstanding).......... $ 10.13
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($437,328/43,243 shares outstanding)................ $ 10.11
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $169,420,703
Accumulated net realized loss on investments.............. (3,465,732)
Accumulated net investment loss........................... (46,775)
Net unrealized appreciation on investments................ 2,845,524
------------
NET ASSETS.................................................. $168,753,720
============
</TABLE>
<TABLE>
<S> <C>
* On sales of more than $100,000 the offering price is
reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 135
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 6,181,234
-----------
EXPENSES
Management fee............................................ $500,993
Transfer agent............................................ 104,906
Administrative services fee............................... 75,404
Custody fees.............................................. 20,808
Blue Sky fees............................................. 21,893
Auditing and accounting fees.............................. 26,269
Shareholder reports....................................... 8,640
Fund accounting........................................... 51,014
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 325,099
Legal..................................................... 12,744
Other..................................................... 28,964
-----------
Total expenses...................................... 1,180,969
-----------
NET INVESTMENT INCOME....................................... 5,000,265
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments.......................... 921,858
Net unrealized depreciation during the period on
investments............................................. (2,700,811)
-----------
Net loss on investments............................. (1,778,953)
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 3,221,312
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 136
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 5,000,265 $ 7,717,084
Net realized gain on
Investments............................................. 921,858 972,876
Options................................................. -- 16,281
Net unrealized (depreciation) appreciation during the
period on
Investments............................................. (2,700,811) 3,318,851
Options................................................. -- 23,031
------------ ------------
Net increase resulting from operations.............. 3,221,312 12,048,123
------------ ------------
Class A distributions
From net investment income................................ (3,881,845) (6,965,108)
In excess of net investment income........................ (11,926) (2,835)
------------ ------------
Total distributions to Class A shareholders......... (3,893,771) (6,967,943)
------------ ------------
Class B distributions
From net investment income................................ (853,854) (599,739)
In excess of net investment income........................ (33,354) (243)
------------ ------------
Total distributions to Class B shareholders......... (887,208) (599,982)
------------ ------------
Class C distributions
From net investment income................................ (255,246) (152,237)
In excess of net investment income........................ (8,344) (61)
------------ ------------
Total distributions to Class C shareholders......... (263,590) (152,298)
------------ ------------
Advisor Class distributions
From net investment income................................ (9,320) --
In excess of net investment income........................ (957) --
------------ ------------
Total distributions to Advisor Class shareholders... (10,277) --
------------ ------------
Fund share transactions (Note 4)
Class A................................................... 18,588,270 4,600,092
Class B................................................... 15,953,365 12,937,647
Class C................................................... 4,027,854 5,911,303
Advisor Class............................................. 441,532 --
------------ ------------
Net increase resulting from Fund share transactions..... 39,011,021 23,449,042
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 37,177,487 27,776,942
NET ASSETS
Beginning of period....................................... 131,576,233 103,799,291
------------ ------------
END OF PERIOD............................................. $168,753,720 $131,576,233
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 7,806
============ ============
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 137
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE SIX MONTHS
CLASS A MONTHS ENDED ENDED FOR THE YEAR ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
------------ ----------------------------------- ------------ ----------------------
1998* 1997 1996 1995 1994 1994 1993
SELECTED PER SHARE DATA ------------ -------- ------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 10.34 $ 9.95
-------- -------- ------- -------- -------- -------- --------
Income from investment
operations
Net investment income..... .34 .80 .72 .67(a) .33(a) .63 .55
Net realized and
unrealized gain (loss)
on investments.......... (.11) .42 .03 .84 (.29) (.60) 1.00
-------- -------- ------- -------- -------- -------- --------
Total from investment
operations............ .23 1.22 .75 1.51 .04 .03 1.55
-------- -------- ------- -------- -------- -------- --------
Less distributions
From net investment
income.................. .34 .80 .72 .63 .32 .61 .64
In excess of net
investment income....... -- -- .01 -- -- -- --
From net realized gain.... -- -- -- -- -- .38 .52
In excess of net realized
gain.................... -- -- -- -- .09 -- --
From capital paid-in...... -- -- -- .11 -- -- --
-------- -------- ------- -------- -------- -------- --------
Total distributions..... .34 .80 .73.... .74 .41 .99 1.16
-------- -------- ------- -------- -------- -------- --------
Net asset value, end of
period.................... $ 10.11 $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 10.34
======== ======== ======= ======== ======== ======== ========
Total return (%)............ 2.30(c) 11.87(b) 8.06(b) 17.41(b) .43(c) .00(b) 16.29(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)............ $123,777 $106,497 $97,881 $108,840 $110,232 $120,073 $132,721
Ratio of expenses to average
net assets
With expense
reimbursement(%)........ -- -- -- 1.54 1.50(d) -- --
Without expense
reimbursement(%)........ 1.39(d) 1.47 1.56 1.54 1.52(d) 1.45 1.49
Ratio of net investment
income to average net
assets (%)................ 6.81(d) 7.08 7.36 7.09(a) 6.92(a)(d) 6.19 6.42
Portfolio turnover
rate(%)................... 34 71 90 93 44 78 134
</TABLE>
(See Notes to Financial Statements)
<PAGE> 138
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
FOR THE SIX MONTHS APRIL 1, 1994
CLASS B MONTHS ENDED ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, TO JUNE 30,
------------ --------------------------------- ------------ --------------
1998* 1997 1996 1995 1994 1994
SELECTED PER SHARE DATA ------------ ------- ------- ------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38 $ 9.82
------- ------- ------- ------- ------- -------
Income (loss) from investment
operations
Net investment income................ .30 .68 .64 .60(a) .30(a) .10
Net realized and unrealized gain
(loss) on investments.............. (.10) .46 .04 .84 (.29) (.32)
------- ------- ------- ------- ------- -------
Total from investment operations... .20 1.14 .68 1.44 .01 (.22)
------- ------- ------- ------- ------- -------
Less distributions
From net investment income........... .30 .72 .64 .56 .29 .14
In excess of net investment income... .01 -- .02 -- -- --
From net realized gain............... -- -- -- -- -- .08
In excess of net realized gain....... -- -- -- -- .09 --
From capital paid-in................. -- -- -- .11 -- --
------- ------- ------- ------- ------- -------
Total distributions................ .31 .72 .66 .67 .38 .22
------- ------- ------- ------- ------- -------
Net asset value, end of period......... $ 10.11 $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38
======= ======= ======= ======= ======= =======
Total return(%)........................ 1.95(c) 11.12(b) 7.25(b) 16.54(b) .06(c) (2.24)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................... $34,040 $18,499 $ 5,300 $ 5,184 $ 2,420 $ 761
Ratio of expenses to average net assets
With expense reimbursement(%)........ -- -- -- 2.29 2.25(d) --
Without expense
reimbursement(%)................... 2.12(d) 2.21 2.29 2.29 2.27(d) 2.20(d)
Ratio of net investment income to
average net assets(%)................ 6.08(d) 6.35 6.62 6.34(a) 6.17(a)(d) 5.44(d)
Portfolio turnover rate(%)............. 34 71 90 93 44 78
</TABLE>
(See Notes to Financial Statements)
<PAGE> 139
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE APRIL 30, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.24 $ 9.82 $ 9.44
------- ------- -------
Income from investment operations
Net investment income..................................... .30 .64 .39
Net realized and unrealized (loss) gain on investments.... (.10) .48 .43
------- ------- -------
Total from investment operations........................ .20 1.12 .82
------- ------- -------
Less distributions
From net investment income................................ .30 .70 .39
In excess of net investment income........................ .01 -- .05
------- ------- -------
Total distributions..................................... .31 .70 .44
------- ------- -------
Net asset value, end of period.............................. $ 10.13 $ 10.24 $ 9.82
======= ======= =======
Total return(%)............................................. 1.94(c) 11.11(b) 8.81(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $10,499 $ 6,580 $ 618
Ratio of expenses to average net assets(%).................. 2.12(d) 2.20 2.35(d)
Ratio of net investment income to average net assets(%)..... 6.08(d) 6.35 6.56(d)
Portfolio turnover rate(%).................................. 34 71 90
</TABLE>
(See Notes to Financial Statements)
<PAGE> 140
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 20, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
----------------
1998*
SELECTED PER SHARE DATA ----------------
<S> <C>
Net asset value, beginning of period........................ $ 10.28
-------
Income from investment operations
Net investment income..................................... .33
Net realized and unrealized loss on investments........... (.14)
-------
Total from investment operations........................ .19
-------
Less distributions
From net investment income................................ .33
In excess of net investment income........................ .03
-------
Total distributions..................................... .36
-------
Net asset value, end of period.............................. $ 10.11
=======
Total return(%)(c).......................................... 1.85
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 437
Ratio of expenses to average net assets(%)(d)............... 1.11
Ratio of net investment income to average net
assets(%)(d).............................................. 7.09
Portfolio turnover rate(%).................................. 34
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 141
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Bond Fund (the "Fund"), is a diversified series of shares of Ivy Fund.
The shares of beneficial interest are assigned no par value and an unlimited
number of shares of Class A, Class B, Class C, Advisor Class and Class I are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Debt securities (other than short-term obligations
and commercial paper) are valued on the basis of valuations furnished by a
pricing service authorized by the Board of Trustees (the "Board"), which
determines valuations based upon market transactions for normal,
institutional-size trading units of such securities. Short-term obligations and
commercial paper are valued at amortized cost, which approximates market. All
other securities are valued at their fair value as determined in good faith by
the Valuation Committee of the Board; as of June 30, 1998, there were no such
securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
Realized gains and losses from security transactions are calculated on an
identified cost basis.
OPTIONS -- The Fund may write (sell) covered put options and covered call
options on securities and stock indices 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 (the "net premium"), the opportunity to profit during the
option period from an increase in the market value of the underlying security or
currency above the exercise price.
The liability representing the Fund's obligation under an exchange traded
written call option is valued at the last sale price or, in the absence of a
sale, the last offering price.
In addition, the Fund may purchase put and call options on securities and
stock indices, and engage in options on interest rate and currency futures
contracts. Exchange traded purchased options are valued at the last sales price
or, in the absence of a sale, the last bid price.
CASH AND CASH EQUIVALENTS -- The Fund classifies as cash amounts on deposit
with the Fund's custodian. These amounts earn interest at variable interest
rates. At June 30, 1998 the interest rate was 5.25%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986 (the "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
$4,902,000 as of December 31, 1997 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 $1,476,000 in
1998, $984,000 in 1999 and $2,443,000 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared monthly. Distributions from net realized capital gains, if any, are
declared in December.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to certain securities sold at a
loss. As a result, Net investment income (loss) and Net realized gain (loss) on
investments may differ significantly in amount and character from distributions
during such period. Accordingly, the Fund may make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
<PAGE> 142
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of .75% of
the first $100 million in average net assets, and .50% of average net assets in
excess of $100 million.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. As compensation for these services, the Fund pays MIMI
fees plus certain out-of-pocket expenses. Such fees and expenses are reflected
as Administrative services fee and Fund accounting in the Statement of
Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the period ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $18,017.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Class I and Advisor Class. Class B and Class C shares are also
subject to an ongoing distribution fee at an annual rate of .75% of the average
net assets attributable to Class B and Class C. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$142,543, $140,553, and $42,003, 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 $81,727, $17,794, $5,235 and $150, for Class A, Class B,
Class C and Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 2,825,344 $ 28,864,031 2,873,269 $ 29,019,071
Issued on reinvestment of
distributions........... 243,145 2,474,383 443,606 4,445,919
Repurchased.............. (1,248,227) (12,750,144) (2,888,523) (28,864,898)
---------- ------------ ---------- ------------
Net increase............. 1,820,262 $ 18,588,270 428,352 $ 4,600,092
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,907,922 $ 19,421,716 1,494,334 $ 15,193,566
Issued on reinvestment of
distributions........... 43,005 437,298 37,455 376,600
Repurchased.............. (393,394) (3,905,649) (261,864) (2,632,519)
---------- ------------ ---------- ------------
Net increase............. 1,557,533 $ 15,953,365 1,269,925 $ 12,937,647
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 510,422 $ 5,221,488 702,503 $ 7,121,264
Issued on reinvestment of
distributions........... 5,757 58,670 5,368 54,367
Repurchased.............. (122,400) (1,252,304) (128,052) (1,264,328)
---------- ------------ ---------- ------------
Net increase............. 393,779 $ 4,027,854 579,819 $ 5,911,303
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 20, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
-------------------------
ADVISOR CLASS SHARES AMOUNT
------------- ---------- ------------
<S> <C> <C>
Sold..................... 51,572 $ 526,770
Issued on reinvestment of
distributions........... 380 3,853
Repurchased.............. (8,709) (89,091)
---------- ------------
Net increase............. 43,243 $ 441,532
========== ============
</TABLE>
03IBFX063098
<PAGE> 143
June 30, 1998 IVY FUNDS(R)
IVY
DEVELOPING
NATIONS
FUND
SEMIANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the share-holders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
Market Commentary
Emerging markets have performed poorly since the beginning of the year,
continuing the sell-off that began midway through 1997. Allocation to emerging
markets by US mutual funds is at a four-year low as many investors are bypassing
the asset class in favor of US and European markets. Poor performance by
emerging markets, while developed markets have stormed ahead, has contributed to
a widening discount between emerging market stocks and their developed market
counterparts. We believe that as volatility sub sides and investor interest
returns, there is potential for this price disparity to narrow. It would appear
that these markets are too cheap for investors to continue to ignore.
Fifty-three percent of the Ivy Developing Nations Fund is currently allocated to
Asia where, in our view, markets represent compelling long-term value, with many
stocks trading at substantial discounts to net asset values. While short-to
medium-term prospects for the region are somewhat mixed, reforms and economic
restructuring should dramatically improve prospects for long-term growth. The
Fund has significant exposure to developments in Southeast Asia, with 21% of
total assets invested in the area. As undervalued currencies return to more
normal levels and investor sentiment improves, this portion of the Fund should
make a positive contribution to performance.
Thirty-eight percent of the Fund is invested in Latin America. While fallout
from the Asian turmoil and lower commodity prices are expected to contribute to
lower growth this year, policy makers have responded proactively to the crisis.
Going forward, we believe that a renewed commitment to reforms is likely to
improve prospects for sustainable growth. Currently, valuations in Latin America
are at a three-year low, with an average price to earnings (P/E) ratio of less
than 10 times 12-month forward earnings, with expected earnings growth of over
15%.
The Fund continues to be underweight in emerging Europe (8% of assets), as we
feel that valuations do not adequately reflect the risks inherent to many of
those economies. About 4% of the Fund is invested in South Africa-an economy
poised to benefit from nascent restructuring efforts in the corporate sector and
the beginnings of a cyclical recovery, which we expect will gain momentum in
1999.
Despite record levels of pessimism, we believe that over the longer term,
emerging economies will continue to contribute a significant portion of world
economic growth. Accordingly, in our view, exposure to equities of emerging
economies should be considered an integral part of a well-diversified portfolio.
At the moment, valuations are compelling, sentiment is depressed, and the
allocation of mutual fund assets to emerging markets is at a four-year low.
Therefore, we believe that now is the time to build positions in many of these
markets.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 144
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 103.12% SHARES VALUE
- -------------------------------------------------
<S> <C> <C>
AFRICA -- 3.96%
- ------------------------------------------
SOUTH AFRICA -- 3.96%
Anglo American Corporation S.A................... 8,700 $ 295,415
Rembrandt Group Ltd.............................. 42,300 265,721
------------
561,136
------------
ASIA/PACIFIC -- 52.60%
- ------------------------------------------
CHINA -- 0.96%
Guangdong Kelon Electrical Holdings
-- H. Shares................................... 45,000 35,426
Huaneng Power International, Inc. ADR(a)......... 1,200 16,125
Inner Mongolia Erdos Cashmere Products Co. 'B'... 64,000 15,488
Quinling Motors Company.......................... 67,000 18,590
Shanghai Diesel Engine Co. Ltd. 'B'(a)........... 81,200 13,642
Shanghai Post & Telecommunications Equipment
'B'............................................. 55,900 15,987
Tingyi (Cayman Islands) Holding Co............... 128,000 7,847
Zhenhai Refining and Chemical Company Ltd........ 100,000 12,906
------------
136,011
------------
HONG KONG -- 15.37%
Cheung Kong Holdings Ltd......................... 32,000 157,345
Citic Pacific.................................... 44,000 77,795
Esprit Asia Holdings Ltd......................... 400,000 121,313
Gold Peak Industries............................. 456,000 155,951
Gold Peak Industries Warrants(a)................. 91,200 1,883
Guangdong Investments............................ 227,000 50,974
Guangdong Investments Warrants(a)................ 30,200 164
Guangdong Tannery Ltd............................ 9,600 434
HSBC Holdings.................................... 10,241 250,455
Jardine Matheson Holdings Ltd.................... 13,500 36,450
Jardine Strategic................................ 109,062 207,218
Li & Fung........................................ 346,000 558,167
National Mutual Asia Ltd......................... 428,000 273,418
Peregrine Investments Holdings Limited(b)........ 121,000 --
Techtronic Industries Company.................... 644,000 132,979
Union Bank of Hong Kong Ltd...................... 113,600 72,204
Wharf Holdings Ltd. (with 4,100 Warrants(a))..... 82,000 80,957
------------
2,177,707
------------
INDONESIA -- 0.67%
PT Astra International Inc....................... 58,000 3,919
PT Bank Bali..................................... 90,000 5,169
PT Bank Dagang Nasional -- Foreign Registered
(with 43,126 Warrants)(a)....................... 301,876 1,550
PT Citatah....................................... 65,000 3,074
PT Hanjaya Mandala Sampoerna..................... 72,500 9,920
PT Matahari Putra Prima TBK...................... 438,000 4,439
PT Mulia Industrindo............................. 239,900 4,052
PT Semen Gresik.................................. 12,000 6,811
PT Telekomunikasi Indonesia...................... 189,000 53,316
PT Tempo Scan Pacific............................ 138,000 2,098
------------
94,348
------------
ISRAEL -- 2.34%
Koor Industries Ltd. -- Sponsored ADR............ 14,200 331,925
------------
MALAYSIA -- 6.19%
Arab Malaysian Corporation Berhad................ 140,000 30,211
Arab Malaysian Finance Foreign................... 138,000 27,783
Berjaya Sports Toto Berhad....................... 35,000 51,899
Edaran Otomobil Nasional Berhad.................. 42,000 40,506
Genting Berhad................................... 41,000 74,141
KFC Holdings (Malaysia) Berhad(a)................ 97,000 51,453
Land & General Berhad............................ 197,000 22,324
Lion Land Berhad................................. 300,000 26,763
London & Pacific Insurance Company Berhad........ 45,200 46,862
Malayan Banking Berhad........................... 58,000 58,455
Perusahaan Otomobil Nasional Berhad.............. 88,000 56,227
Public Bank Berhad............................... 139,200 41,282
Public Bank Berhad -- Foreign.................... 102,000 30,741
RHB Capital Berhad............................... 152,400 62,099
RHB Sakura Merchant Bankers Berhad............... 2,620 682
Resorts World Berhad............................. 46,000 50,575
Sime UEP Properties Berhad....................... 160,000 91,814
Sungei Way Holdings Berhad....................... 200,000 30,862
Technology Resources Industries Berhad........... 119,000 81,772
------------
876,451
------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -------------------------------------------------
<S> <C> <C>
PHILIPPINES -- 3.19%
Alaska Milk Corporation(a)....................... 1,700,000 $ 75,827
Asian Terminals, Inc............................. 677,500 22,746
Bacnotan Cement Corporation...................... 180,000 24,173
Belle Corporation (with 61,400 Warrants) (a)..... 607,000 15,515
Benpres Holdings Corp. GDR(a).................... 15,000 36,750
C & P Homes, Inc.(a)............................. 810,500 40,816
La Tondena Distillers Inc........................ 140,000 70,503
Metropolitan Bank & Trust Company................ 9,774 57,426
Mondragon International Philippines, Inc.(a)..... 1,512,600 25,391
SM Prime Holdings, Inc........................... 339,000 53,655
Southeast Asia Cement Holdings, Inc.(a).......... 992,000 8,326
Universal Robina Corporation..................... 201,000 20,486
------------
451,614
------------
SINGAPORE -- 7.05%
Clipsal Industries Limited....................... 131,000 117,245
DBS Land Limited................................. 176,000 145,844
Development Bank of Singapore -- Foreign
Registered Limited.............................. 44,200 244,614
Elec & Eltek International Co. Ltd............... 25,300 85,514
Fraser & Neave Ltd. ORD.......................... 90,000 241,849
Singapore Airlines Ltd. -- Foreign Registered.... 35,000 163,660
------------
998,726
------------
SOUTH KOREA -- 6.87%
Hana Bank........................................ 2,463 8,880
Hyundai Motor Company Ltd. GDR................... 8,000 80,990
Hyundai Motor Company Ltd. GDR 144A.............. 500 919
Keum Kang Development Ind. Company............... 3,800 19,484
Korea Electric Power Corp........................ 12,000 128,041
Korea Electric Power Corp. Sponsored ADR......... 12,400 88,350
Pohang Iron & Steel Co. Ltd...................... 4,000 133,384
Pohang Iron & Steel Co. Ltd. ADR................. 2,700 32,400
Samsumg Electronics Co........................... 9,489 293,723
Samsung Electronics Co. GDR...................... 255 4,064
Samsung Electronics Co. GDR 144A Registered...... 2,662 22,294
Samsung Fire & Marine Insurance.................. 588 98,071
Shinhan Bank(a).................................. 11,833 39,300
Ssangyong Oil Refining Co. Ltd................... 3,600 24,385
------------
974,285
------------
TAIWAN -- 6.41%
Acer Incorporation(a)............................ 60,000 71,943
Compeq Manufacturing Co. (a)..................... 41,160 219,213
Far Eastern Department Stores Ltd................ 188,442 137,107
President Enterprises(a)......................... 129,600 116,925
Systex Corporation(a)............................ 101,200 187,023
Systex Corporation Rights(a)..................... 13,170 8,241
Yung Shin Pharmaceuticals Industries Co.......... 71,500 168,551
------------
909,003
------------
THAILAND -- 3.55%
Bangkok Bank Public Company Ltd.................. 20,000 20,567
Bangkok Bank Public Company Ltd -- Foreign
Registered...................................... 51,000 62,695
Bank of Ayudhya Ltd -- Foreign Registered........ 183,450 23,853
Krung Thai Thanakit PLC -- Foreign
Registered(a)................................... 24,000 3,688
Robinson Department Store Public Company
Limited -- Foreign Registered(a)................ 437,200 12,610
S.G. Asia Credit Company PLC(a).................. 8,300 1,648
S.G. Asia Credit Company PLC -- Foreign
Registered(a)................................... 82,320 16,347
Siam Cement Public Co. Ltd. (The) -- Foreign
Registered(a)................................... 9,300 44,851
Siam Makro Public Company Limited -- Foreign
Registered...................................... 123,800 169,749
Thai Airways Int'l. Public Co., Ltd. -- Foreign
Registered(a)................................... 121,300 101,083
Thai Telephone & Communication Public Co.
Ltd. -- Foreign Registered(a)................... 370,000 46,359
------------
503,450
------------
VIETNAM -- 0.00%
Beta Vietnam Fund Warrants(a).................... 370 148
------------
EUROPE -- 7.78%
- ------------------------------------------
CZECH REPUBLIC -- 0.85%
Restitucni Invest Fund........................... 1,200 34,344
</TABLE>
<PAGE> 145
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -------------------------------------------------
<S> <C> <C>
Skoda Plzen a.s.(a).............................. 2,000 $ 19,918
Zivnobanka -- Investicni Fond.................... 5,300 66,586
------------
120,848
------------
HUNGARY -- 1.32%
Pick Szeged Rights............................... 3,200 187,074
------------
POLAND -- 0.30%
Bank Rozwoju Eksportu S.A........................ 1,550 42,006
Bank Rozwoju Eksportu S.A. Rights(a)............. 1,550 444
------------
42,450
------------
PORTUGAL -- 4.04%
Colep -- Cia. Portuguesa de Embalagens(a)........ 7,300 96,783
Companhia de Seguros Mundial Confianca
S.A.(a)......................................... 4,200 111,639
Investec-Consultoria Internacional S.A........... 1,650 75,917
Lusomundo SGPS S.A.(a)........................... 4,600 68,482
Portugal Telecom S.A. ADR........................ 2,700 142,931
Sonae Industria E Investimentos.................. 1,400 76,465
------------
572,217
------------
RUSSIA -- 0.25%
Gorkovsky Auto Plant (GAZ)(a).................... 500 36,000
------------
TURKEY -- 1.02%
Cimentas A.S.(a)................................. 561,725 31,629
Otokar Otobus Karoseri(a)........................ 537,500 64,564
Turkiye Garanti Bankasi A.S.(a).................. 1,041,675 47,900
------------
144,093
------------
SOUTH AND CENTRAL AMERICA -- 38.78%
- ------------------------------------------
ARGENTINA -- 3.94%
Bansud S.A.(a)................................... 15,200 119,973
Inversiones y Representaciones S.A. (IRSA)....... 52,000 152,898
Quilmes Industrial............................... 13,500 131,625
YPF S.A. Sponsored ADR........................... 5,100 153,319
------------
557,815
------------
BRAZIL -- 22.31%
Centrais Electricas Brasileiras S.A.............. 10,200,000 299,843
Centrais Electricas Brasileiras S.A. Preferred
B............................................... 4,380,000 132,543
Centrais Electricas de Santa Catarina S.A.
(CELESC)........................................ 25,000 18,589
Centrais Geradoras do Sul do Brasil S.A.(a)...... 10,200,000 13,934
Centrais Geradoras do Sul do Brasil S.A
Preferred B(a).................................. 4,380,000 6,324
Companhia Energetica de Minas Gerais (CEMIG). ... 979,016 30,896
Companhia Energetica de Sao Paulo (CESP)(a)...... 900,000 24,900
Companhia Paranaense de Energia (Copel).......... 2,200,000 17,309
Companhia Paulista de Forca e Luz (CPFL)(a)...... 270,000 28,013
Companhia Paulista de Forca e Luz Dividend
Preferred Receipts(a)........................... 1,155 90
Companhia Paulista de Forca e Luz Preferred
(CPFL)(a)....................................... 1,568 148
Companhia Siderurgica de Tubarao................. 9,900,000 136,952
Companhia Vale do Rio Doce Preferred Shares (with
5000 Non Tradeable Debentures(a))............... 7,000 142,226
Elevadores Atlas S.A. 144A....................... 13,700 230,977
Gerdau S.A Preferred............................. 6,300,000 87,151
Itaubanco........................................ 266,000 151,789
Marcopolo S.A. -- B.............................. 124,000 213,348
Petroleo Brasileiro S.A. (Petrobras)............. 1,760,000 325,642
Tam Transport Aereos............................. 9,200,000 572,710
Telecomunicacoes Brasileiras S.A. (Telebras)
ADR............................................. 4,900 535,019
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- -------------------------------------------------
<S> <C> <C>
Uniao de Bancos Brasileiros S.A.................. 4,600,000 $ 131,246
Unibanco-Units................................... 1,050,000 62,095
------------
3,161,744
------------
CHILE -- 6.72%
A.F.P. Provida S.A. ADR.......................... 11,000 183,562
Antofagasta Holdings PLC......................... 24,463 103,062
Cristalerias de Chile -- Sponsored ADR........... 14,800 192,400
Embotelladora Andina S.A. Sponsored ADR (Class
A).............................................. 3,400 59,500
Embotelladora Andina S.A. Sponsored ADR (Class
B).............................................. 3,400 53,125
Gener S.A. Sponsored ADR......................... 3,590 65,517
Laboratorio Chile S.A. ADR....................... 4,000 57,500
Quimica Minera Chile S.A. Sponsored ADR.......... 2,400 80,400
Vina Concha y Toro S.A. ADR...................... 5,500 156,750
------------
951,816
------------
COLOMBIA -- 1.75%
Bancolombia S.A. -- Spons ADR.................... 22,700 248,281
------------
MEXICO -- 0.70%
Grupo Posadas S.A. -- 'A'(a)..................... 83,785 50,722
Telefonos de Mexico S.A. ADR Class L............. 1,000 48,062
------------
98,784
------------
PERU -- 3.36%
CPT Telefonica del Peru S.A. -- 'B'.............. 162,000 333,421
Credicorp Ltd.................................... 9,754 143,262
------------
476,683
------------
TOTAL EQUITY SECURITIES
(Cost -- $25,792,535)........................... 14,612,609
------------
CORPORATE BONDS -- 0.54% PRINCIPAL
- ------------------------------------------------- -----------
Piltel International Holding Corp. (Convertible),
1.75%, 07/17/06 (Cost -- $99,021)............... $ 100,000 76,500
------------
TOTAL INVESTMENTS -- 103.66%
(Cost -- $25,891,556)(c)........................ 14,689,109
OTHER ASSETS, LESS LIABILITIES -- (3.66%)........ (518,222)
------------
NET ASSETS -- 100%............................... $ 14,170,887
============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
ORD -- Ordinary
(a) Non-income producing security
(b) Peregrine Investments Holdings Limited filed for liquidation under the
laws of Hong Kong. This security is valued in good faith by the Valuation
Committee of the Board of Trustees. The cost of this security aggregated
$194,408. See Note 1 to the Financial Statements.
(c) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for financial
statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.............................. $ 1,344,027
Gross unrealized depreciation.............................. (12,546,474)
------------
Net unrealized depreciation............................ $(11,202,447)
============
Purchases and sales of securities other than short-term obligations
aggregated $2,873,198 and $4,860,806 respectively, for the period ended June
30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 146
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $25,891,556)...... $ 14,689,109
Cash denominated in foreign currencies (cost -- $37,190).... 29,939
Receivables
Investments sold.......................................... 74,398
Fund shares sold.......................................... 14,336
Dividends and interest.................................... 97,671
Manager for expense reimbursement......................... 18,592
Deferred organization expenses.............................. 13,160
Other assets................................................ 14,289
------------
Total assets.............................................. 14,951,494
------------
LIABILITIES
Payables
Fund shares repurchased................................... 58,953
Management fee............................................ 12,460
12b-1 service and distribution fees....................... 9,352
Other payables to related parties......................... 10,289
Due to custodian............................................ 654,875
Accrued expenses............................................ 34,678
------------
Total liabilities......................................... 780,607
------------
NET ASSETS.................................................. $ 14,170,887
============
CLASS A
Net asset value and redemption price per share
($5,494,699/956,073 shares outstanding)................... $ 5.75
============
Maximum offering price per share ($5.75 x 100/94.25)*....... $ 6.10
============
CLASS B
Net asset value, offering price and redemption price** per
share ($6,775,271/1,192,785 shares outstanding)........... $ 5.68
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,846,977/323,787 shares outstanding)............. $ 5.70
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($53,940/9,375 shares outstanding).................. $ 5.75
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 26,801,208
Accumulated net realized loss on investments and foreign
currency transactions................................... (1,423,072)
Undistributed net investment income....................... 4,127
Net unrealized depreciation on investments and foreign
currency transactions................................... (11,211,376)
------------
NET ASSETS.................................................. $ 14,170,887
============
</TABLE>
<TABLE>
<S> <C>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 147
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $31,407 foreign taxes withheld.......... $ 281,456
Interest.................................................. 6,108
-----------
287,564
-----------
EXPENSES
Management fee............................................ $ 92,485
Transfer agent............................................ 36,740
Administrative services fee............................... 9,248
Custodian fees............................................ 48,613
Blue Sky fees............................................. 20,372
Auditing and accounting fees.............................. 9,980
Shareholder reports....................................... 7,344
Amortization of organization expenses..................... 4,896
Fund accounting........................................... 18,050
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 63,708
Legal..................................................... 11,804
Other..................................................... 5,100
-----------
332,575
Expenses reimbursed by manager............................ (88,680)
-----------
Net expenses........................................ 243,895
-----------
NET INVESTMENT INCOME....................................... 43,669
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (837,094)
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (1,962,515)
-----------
Net loss on investment transactions................. (2,799,609)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $(2,755,940)
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 148
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 43,669 $ (85,818)
Net realized (loss) gain on investments and foreign
currency transactions................................... (837,094) 814,367
Net unrealized depreciation during the period on
investments and foreign currency transactions........... (1,962,515) (10,222,275)
------------ ------------
Net decrease resulting from operations.............. (2,755,940) (9,493,726)
------------ ------------
Class A distributions
In excess of net investment income........................ -- (14,575)
From net realized gain.................................... -- (382,865)
In excess of net realized gain............................ -- (222,371)
------------ ------------
Total distributions to Class A shareholders......... -- (619,811)
------------ ------------
Class B distributions
In excess of net investment income........................ -- (10,338)
From net realized gain.................................... -- (339,775)
In excess of net realized gain............................ -- (197,344)
------------ ------------
Total distributions to Class B shareholders......... -- (547,457)
------------ ------------
Class C distributions
In excess of net investment income........................ -- (2,619)
From net realized gain.................................... -- (91,727)
In excess of net realized gain............................ -- (53,275)
------------ ------------
Total distributions to Class C shareholders......... -- (147,621)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (1,950,929) 3,513,031
Class B................................................... (455,420) 6,879,152
Class C................................................... (227,671) 1,861,647
Advisor Class............................................. 68,490 --
------------ ------------
Net (decrease) increase resulting from Fund share
transactions........................................ (2,565,530) 12,253,830
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (5,321,470) 1,445,215
NET ASSETS
Beginning of period....................................... 19,492,357 18,047,142
------------ ------------
END OF PERIOD............................................. $14,170,887 $ 19,492,357
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 4,127 $ --
============ ============
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 149
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX NOVEMBER 1, 1994
CLASS A MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ --------------------------------- ----------------
1998* 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------ ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 6.82 $ 10.12 $ 9.05 $ 8.64 $ 10.00
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (loss)(a)..................... .03(g) .01 (.02) .01 --
Net realized and unrealized (loss) gain on
investment transactions........................... (1.10)(g) (2.80) 1.09 .54 (1.36)
------- ------- ------- ------- -------
Total from investment operations.................. (1.07) (2.79) 1.07 .55 (1.36)
------- ------- ------- ------- -------
Less distributions
From net investment income.......................... -- -- -- .01 --
In excess of net investment income.................. -- .01 -- -- --
From net realized gain.............................. -- .30 -- .10 --
In excess of net realized gain...................... -- .20 -- .03 --
------- ------- ------- ------- -------
Total distributions............................... -- .51 -- .14 --
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 5.75 $ 6.82 $ 10.12 $ 9.05 $ 8.64
======= ======= ======= ======= =======
Total return(%)....................................... (15.69)(c) (27.42)(b) 11.83(b) 6.40(b) (13.50)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $ 5,495 $ 8,584 $ 9,925 $ 3,435 $ 611
Ratio of expenses to average net assets(e)
With expense reimbursement(%)....................... 2.16(d) 2.31 2.45 2.55 2.20(d)
Without expense reimbursement(%).................... 3.12(d) 2.39 2.82 7.18 20.74(d)
Ratio of net investment income (loss) to average net
assets(%)(a)........................................ .95(d) .09 (.23) .24 .52(d)
Portfolio turnover rate(%)............................ 16 42 27 14 --
Average commission rate(f)............................ $ .0010 $ .0020 $ .0018 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 150
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX NOVEMBER 1, 1994
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, TO DECEMBER 31,
------------ --------------------------------- ----------------
1998* 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------ ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 6.77 $ 10.04 $ 9.05 $ 8.64 $ 10.00
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (loss)(a)..................... .01(g) (.06) (.06) (.02) --
Net realized and unrealized (loss) gain on
investment transactions........................... (1.10)(g) (2.76) 1.05 .51 (1.36)
------- ------- ------- ------- -------
Total from investment operations.................. (1.09) (2.82) .99 .49 (1.36)
------- ------- ------- ------- -------
Less distributions
In excess of net investment income.................. -- .01 -- -- --
From net realized gain.............................. -- .28 -- .08 --
In excess of net realized gain...................... -- .16 -- -- --
------- ------- ------- ------- -------
Total distributions............................... -- .45 -- .08 --
------- ------- ------- ------- -------
Net asset value, end of period........................ $ 5.68 $ 6.77 $ 10.04 $ 9.05 $ 8.64
======= ======= ======= ======= =======
Total return(%)....................................... (16.10)(c) (27.93)(b) 10.95(b) 5.62(b) (13.60)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $ 6,775 $ 8,488 $ 6,269 $ 945 $ 121
Ratio of expenses to average net assets(e)
With expense reimbursement(%)....................... 2.98(d) 3.09 3.20 3.30 2.95(d)
Without expense reimbursement(%).................... 3.94(d) 3.17 3.57 7.93 21.49(d)
Ratio of net investment income (loss) to average net
assets(%)(a)........................................ .13(d) (.69) (.98) (.51) (.23)(d)
Portfolio turnover rate(%)............................ 16 42 27 14 --
Average commission rate(f)............................ $ .0010 $ .0020 $ .0018 N/A N/A
</TABLE>
(See Notes to Financial Statements)
<PAGE> 151
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR APRIL 30, 1996
CLASS C MONTHS ENDED ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.79 $ 10.06 $ 9.89
------- ------- -------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .01(g) (.07) (.02)
Net realized and unrealized (loss) gain on investment
transactions............................................ (1.10)(g) (2.76) .19
------- ------- -------
Total from investment operations........................ (1.09) (2.83) .17
------- ------- -------
Less distributions
In excess of net investment income........................ -- .01 --
From net realized gain.................................... -- .27 --
In excess of net realized gain............................ -- .16 --
------- ------- -------
Total distributions..................................... -- .44 --
------- ------- -------
Net asset value, end of period.............................. $ 5.70 $ 6.79 $ 10.06
======= ======= =======
Total return(%)............................................. (16.05)(c) (28.01) (b) 1.73(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,847 $ 2,420 $ 1,854
Ratio of expenses to average net assets(e)
With expense reimbursement(%)............................. 2.98(d) 3.12 3.16(d)
Without expense reimbursement(%).......................... 3.94(d) 3.20 3.53(d)
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .13(d) (.72) (.94)(d)
Portfolio turnover rate(%).................................. 16 42 27
Average commission rate(f).................................. $ .0010 $ .0020 $ .0018
</TABLE>
(See Notes to Financial Statements)
<PAGE> 152
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
--------------
1998*
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $ 7.48
-------
Income (loss) from investment operations
Net investment income (a)................................. .08(g)
Net realized and unrealized loss on investment
transactions............................................ (1.81)(g)
-------
Total from investment operations........................ (1.73)
-------
Net asset value, end of period.............................. $ 5.75
=======
Total return(%)............................................. (23.13)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 54
Ratio of expenses to average net assets(e)
With expense reimbursement(%)............................. 1.68(d)
Without expense reimbursement(%).......................... 2.64(d)
Ratio of net investment income to average net
assets(%)(a).............................................. 1.43(d)
Portfolio turnover rate(%).................................. 16
Average commission rate(f).................................. $ .0010
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Net investment income (loss) is net of expenses reimbursed
by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized
(e) Beginning in 1995, total expenses include fees paid
indirectly through an expense offset arrangement.
(f) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(g) Based on average shares outstanding
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 153
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Developing Nations 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 Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of June 30, 1998, such securities were
determined to have no value by the Valuation Committee and have been noted as
such in the Portfolio of Investments.
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 of
1986 (the "Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
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 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 Advisor 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.
<PAGE> 154
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the period ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $2,130.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class. Class B and Class C shares are also subject to
an ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $9,562,
$42,504 and $11,642, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI,
is the transfer and shareholder servicing agent for the Fund. For those
services, the Fund pays a monthly fee plus certain out-of-pocket expenses. Such
fees and expenses of $13,636, $18,119, $4,974 and $11, for Class A, Class B,
Class C and Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 72,292 $ 499,481 869,379 $ 9,079,143
Issued on reinvestment of
distributions............ -- -- 60,778 399,920
Repurchased............... (375,553) (2,450,410) (651,905) (5,966,032)
-------- ------------ ---------- ------------
Net (decrease)/increase... (303,261) $ (1,950,929) 278,252 $ 3,513,031
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 142,090 $ 960,189 938,685 $ 9,742,013
Issued on reinvestment of
distributions............ -- -- 41,091 268,328
Repurchased............... (203,960) (1,415,609) (349,402) (3,131,189)
-------- ------------ ---------- ------------
Net (decrease)/increase... (61,870) $ (455,420) 630,374 $ 6,879,152
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 26,466 $ 174,491 277,166 $ 2,892,984
Issued on reinvestment of
distributions............ -- -- 14,440 94,723
Repurchased............... (58,949) (402,162) (119,522) (1,126,060)
-------- ------------ ---------- ------------
Net (decrease)/increase... (32,483) $ (227,671) 172,084 $ 1,861,647
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
-----------------------
ADVISOR CLASS SHARES AMOUNT
------------- -------- ------------
<S> <C> <C> <C> <C>
Sold...................... 14,573 $ 102,020
Repurchased............... (5,198) (33,530)
-------- ------------
Net increase.............. 9,375 $ 68,490
======== ============
</TABLE>
03IDNF063098
<PAGE> 155
June 30, 1998 IVY FUNDS(R)
IVY
GLOBAL
SCIENCE &
TECHNOLOGY
FUND
SEMIANNUAL
REPORT
This report and the financial statements contained herein are submitted for the
general information of the share-holders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
Fueled by the potent combination of subdued inflation and solid economic growth,
the US stock market continued to demonstrate remarkable growth through the first
half of 1998. Our research supports our belief that in spite of record-low
unemployment and tight labor markets, inflation has remained in check, reducing
the likelihood that the Federal Reserve will raise interest rates. As a result,
in our view, investors have been willing to pay more for stocks as evidenced by
higher price to earnings (P/E) ratios. Solid earnings growth, supported by the
robust US economy, in combination with these higher P/E ratios, goes a long way
in explaining the extraordinary performance of the market over the last several
years.
The economic crisis in Asia remains a serious concern, and many analysts now
believe its impact on the US economy will likely be felt over the next six to
nine months. One positive effect of the Asian crisis is that lower import
prices, coupled with reduced export demand, should have a deflationary effect on
the economy and reduce the possibility of an interest rate hike, which would, in
turn, provide a favorable environment for equity investing and the Ivy Global
Science & Technology Fund.
As usual, the technology sector has experienced its fair share of volatility
thus far this year. On the positive side, the Internet has shown convincing
evidence that it is now part of the mainstream as more users log on and more
electronic commerce is conducted, both by businesses and consumers. Even though
most Internet companies are not yet profitable, according to our research,
valuations have been driven up to levels that may be difficult to sustain.
Therefore, we are somewhat cautious on this sector for the near term, but
certainly do not want to bet against it for the longer term.
One problem area this year has been in personal computers and the semiconductors
that power them. Thus, we have seen earnings disappointments from some of the
leading industry players, such as Intel, Hewlett-Packard and Compaq. Much of the
shortfall can be blamed on rapidly declining prices and a buildup of inventory
in the distribution channel as the personal computer business transitions to a
build-to-order model. This shortfall has been exacerbated by weakened demand in
Asia as compared to the US, which has generally shown modest growth, and Europe
which has experienced a strong recovery.
For most of the last two years, investors have favored liquid, large-cap stocks.
In late April, this tendency became even more pronounced when renewed worries
about Asia surfaced. We believe that this willingness to pay a high premium for
liquidity is the major reason why small-cap growth stocks have lagged behind the
large-cap sector. In our opinion, it has also caused rather rich valuations for
many large-cap stocks.
Most of the companies in the Ivy Global Science & Technology Fund portfolio
continue to show excellent fundamentals and robust earnings growth. The Fund is
diversified across a wide range of industries, with a particular focus on those
sectors-including software, networking, information services, and
telecommunications equipment-that are less susceptible to pricing competition
and are well positioned for long-term growth. Our focus continues to be
identifying such companies early in their life cycle and then holding them
through their strong growth phase, with the belief that over the long term their
superior earnings growth will translate into attractive shareholder returns.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 156
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS -- 98.29% SHARES VALUE
- ---------------------------------------------
<S> <C> <C>
BIOTECHNOLOGY -- 3.47%
Aastrom Biosciences, Inc.(a)................. 8,400 $ 31,500
Agouron Pharmaceuticals, Inc.(a)............. 5,600 169,750
Alkermes, Inc.(a)............................ 4,600 82,225
ArQule, Inc.(a).............................. 5,500 71,156
Geltex Pharmaceuticals, Inc.(a).............. 4,900 91,262
Gene Logic Inc.(a)........................... 13,000 91,000
Guilford Pharmaceuticals, Inc.(a)............ 3,000 52,875
PathoGenesis Corp.(a)........................ 3,400 98,600
Pharmacyclics, Inc.(a)....................... 4,200 99,750
US Bioscience, Inc.(a)....................... 11,500 94,156
Vertex Pharmaceuticals Inc.(a)............... 1,400 31,500
ViroPharma Inc.(a)........................... 4,500 104,625
-----------
1,018,399
-----------
BUSINESS & FINANCIAL SERVICES -- 26.82%
ABR Information Services, Inc.(a)............ 16,400 389,500
Advantage Learning Systems, Inc.(a).......... 5,400 147,825
Applied Graphics Technologies, Inc.(a)....... 4,400 201,300
CBT Group Public Limited Company(a).......... 6,700 358,450
CHS Electronics, Inc.(a)..................... 12,350 220,756
Cambridge Technology Partners, Inc.(a)....... 2,900 158,412
Condor Technology Solutions, Inc.(a)......... 7,000 103,250
Cotelligent Group, Inc.(a)................... 5,800 135,575
DA Consulting Group, Inc.(a)................. 6,000 86,250
Dendrite International, Inc.(a).............. 4,200 158,025
FactSet Research Systems Inc.(a)............. 11,300 367,250
Forrester Research, Inc.(a).................. 5,500 218,625
ForSoft Ltd(a)............................... 21,600 332,100
Gartner Group, Inc. -- Class A(a)............ 9,400 329,000
Inacom Corp.(a).............................. 5,200 165,100
Ingram Micro Inc. -- Class A(a).............. 3,100 137,175
Inspire Insurance Solutions, Inc.(a)......... 11,500 382,375
Intelligroup, Inc.(a)........................ 8,400 149,100
International Integration Incorporated(a).... 4,400 75,900
International Network Services(a)............ 5,400 221,400
International Telecommunication Data Systems,
Inc.(a).................................... 12,750 369,750
Lason Holdings, Inc.(a)...................... 8,800 479,600
Meta Group, Inc.(a).......................... 8,100 179,212
PMT Services, Inc.(a)........................ 14,700 373,931
Profit Recovery Group International,
Inc. (The)(a).............................. 15,100 421,856
RWD Technologies, Inc.(a).................... 11,000 259,875
Renaissance Worldwide, Inc.(a)............... 6,100 132,675
Sapient Corporation(a)....................... 3,800 200,450
Superior Consultant Holdings
Corporation(a)............................. 6,400 276,000
Sykes Enterprises, Inc.(a)(b)................ 12,400 248,775
Technisource, Inc.(a)........................ 8,200 90,200
Tier Technologies, Inc. -- Class B(a)........ 8,600 153,187
Whittman-Hart, Inc.(a)....................... 7,000 338,625
-----------
7,861,504
-----------
COMPUTER SOFTWARE -- 15.52%
Aspect Development, Inc.(a).................. 5,600 423,500
Best Software, Inc.(a)....................... 8,600 181,675
Cadence Design Systems, Inc.(a).............. 8,500 265,625
Citrix Systems, Inc.(a)...................... 1,300 88,887
Concord Communications, Inc.(a).............. 10,000 255,625
Deltek Systems, Inc.(a)...................... 13,900 340,550
Great Plains Software, Inc.(a)............... 3,600 121,950
HNC Software Inc.(a)......................... 3,900 159,169
H.T.E., Inc.(a).............................. 30,800 415,800
Memco Software Ltd.(a)....................... 10,000 190,000
Micromuse Inc.(a)............................ 5,500 224,469
Microsoft Corporation(a)..................... 3,700 400,987
Network Associates, Inc.(a).................. 5,700 272,887
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ---------------------------------------------
<S> <C> <C>
New Era of Networks, Inc.(a)................. 7,500 $ 228,750
Pegasystems Inc.(a).......................... 4,000 108,500
Peoplesoft, Inc.(a).......................... 2,000 94,000
Peregrine Systems, Inc.(a)................... 6,900 196,650
Veritas Software Corp.(a).................... 3,975 164,466
Visio Corporation(a)......................... 8,700 415,425
-----------
4,548,915
-----------
HEALTHCARE -- 4.98%
EPIX Medical, Inc.(a)........................ 10,000 102,500
HBO & Company................................ 7,840 276,360
IMPATH, Inc.(a).............................. 6,500 158,031
MedQuist Inc.(a)............................. 9,800 282,975
Serologicals Corporation(a).................. 14,850 478,912
Ventana Medical Systems, Inc.(a)............. 5,800 162,400
-----------
1,461,178
-----------
INTERNET & ELECTRONIC COMMERCE -- 9.16%
America Online, Inc. ........................ 5,000 530,000
At Home Corporation -- Series A(a)........... 4,000 189,250
BroadVision, Inc.(a)......................... 6,600 157,575
DoubleClick Inc.(a).......................... 1,900 94,406
Exodus Communications, Inc.(a)............... 5,500 246,125
NetGravity, Inc.(a).......................... 8,400 110,250
OzEmail Limited -- ADR....................... 7,500 169,687
Pegasus Systems, Inc.(a)..................... 12,500 320,313
QRS Corporation(a)........................... 6,600 248,325
SportsLine USA, Inc.(a)...................... 4,300 157,219
Sterling Commerce, Inc.(a)................... 3,200 155,200
Transactions Systems Architects, Inc.(a)..... 8,000 308,000
-----------
2,686,350
-----------
MISCELLANEOUS TECHNOLOGY -- 4.52%
Dell Computer Corporation(a)................. 1,700 157,781
Flextronics International Ltd.(a)............ 4,200 182,700
Gemstar International Group Ltd.(a).......... 8,200 306,988
Jabil Circuit, Inc.(a)....................... 3,800 125,638
ONTRACK Data International, Inc.(a).......... 10,900 148,512
Sanmina Corporation(a)....................... 5,200 225,550
Sun Microsystems, Inc.(a).................... 4,100 178,094
-----------
1,325,263
-----------
NETWORK & TELECOMMUNICATION
EQUIPMENT -- 14.63%
ADC Telecommunications Inc.(a)............... 5,800 211,881
Advanced Fibre Communications(a)............. 11,200 448,700
American Power Conversion Corp.(a)........... 8,700 261,000
Ascend Communications Inc.(a)................ 3,600 178,425
CIENA Corporation(a)......................... 7,400 515,225
Cisco Systems, Inc.(a)....................... 6,600 607,613
Comverse Technology Inc.(a).................. 4,000 207,500
Gilat Satellite Networks Ltd.(a)............. 5,000 167,188
Network Appliance, Inc.(a)................... 10,700 416,631
NICE-Systems Ltd. -- Sponsored ADR(a)........ 7,000 262,500
Orckit Communications Ltd.(a)................ 6,700 127,300
Tellabs, Inc.(a)............................. 9,300 666,113
Uniphase Corporation(a)...................... 3,500 219,734
-----------
4,289,810
-----------
PHARMACEUTICALS -- 3.43%
Anesta Corp.(a).............................. 7,600 109,725
ChiRex Inc.(a)............................... 11,400 200,213
Inhale Therapeutic Systems(a)................ 4,100 101,475
Nastech Pharmaceutical Co.(a)................ 5,500 44,688
Penederm Inc.(a)............................. 10,000 200,000
Sepracor, Inc.(a)............................ 4,200 174,300
Theragenics Corporation(a)................... 6,700 174,619
-----------
1,005,020
-----------
</TABLE>
<PAGE> 157
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCKS SHARES VALUE
- ---------------------------------------------
<S> <C> <C>
SEMICONDUCTORS & EQUIPMENT -- 10.19%
ASM Lithography Holding NV(a)(b)............. 1,600 $ 46,500
Advanced Energy Industries, Inc.(a).......... 3,400 39,525
Altera Corporation(a)........................ 4,200 124,163
Applied Materials, Inc.(a)................... 9,500 280,250
Applied Micro Circuits Corporation(a)........ 3,200 82,800
Artisan Components, Inc.(a).................. 12,100 163,350
CFM Technologies, Inc.(a).................... 7,600 110,200
Cerprobe Corporation(a)...................... 17,200 225,750
Etec Systems, Inc.(a)........................ 3,900 137,231
Genesis Microchip Inc.(a).................... 7,600 60,325
Intel Corp. ................................. 2,600 192,725
Level One Communications, Inc.(a)............ 4,000 94,000
Linear Technology Corporation................ 1,800 108,563
Maxim Integrated Products, Inc.(a)........... 7,700 243,994
Micrel, Inc.(a).............................. 3,400 110,500
Novellus Systems, Inc.(a).................... 4,100 146,319
Photronics, Inc.(a).......................... 9,400 207,388
Sipex Corporation(a)......................... 5,000 107,500
Texas Instruments Incorporated............... 5,500 320,719
Vitesse Semiconductor Corporation(a)......... 6,000 185,250
-----------
2,987,052
-----------
TELECOMMUNICATION SERVICES -- 5.57%
Corsair Communications, Inc.(a).............. 18,200 169,488
DSET Corporation(a).......................... 10,300 155,787
Nextel Communications, Inc.(a)............... 7,600 189,050
SCC Communications Corp.(a).................. 17,100 209,475
Saville Systems Ireland ADR(a)............... 8,100 406,012
Transaction Network Services, Inc.(a)........ 5,500 115,844
WorldCom, Inc.(a)............................ 8,000 387,500
-----------
1,633,156
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
<S> <C> <C>
TOTAL INVESTMENTS -- 98.29%
(Cost -- $21,568,948)(c)................... $28,816,647
OTHER ASSETS, LESS LIABILITIES -- 1.71%...... 501,825
-----------
NET ASSETS -- 100%........................... $29,318,472
===========
ADR -- American Depository Receipt
NV -- Non-voting
(a) Non-income producing security
(b) Foreign security
(c) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 8,407,013
Gross unrealized depreciation.................... (1,159,314)
-----------
Net unrealized appreciation.................. $ 7,247,699
===========
Purchases and sales of securities other than short-term obligations
aggregated $11,713,338 and $12,947,831, respectively, for the
period ended June 30, 1998.
Transactions in written put options during the period ended June
30, 1998 were:
</TABLE>
<TABLE>
<CAPTION>
NUMBER PREMIUMS
OF RECEIVED/
CONTRACTS (PAID)
--------- ----------
<S> <C> <C>
Outstanding at January 1, 1998............. -- $ --
Contracts written...................... 313 327,357
Contracts expired...................... (313) (327,357)
------ ----------
Outstanding at June 30, 1998............... -- $ --
====== ==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 158
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $21,568,948)...... $28,816,647
Receivables
Investments sold.......................................... 696,773
Fund shares sold.......................................... 18,210
Deferred organization expenses.............................. 36,540
Other assets................................................ 9,641
-----------
Total assets.............................................. 29,577,811
-----------
LIABILITIES
Payables
Investments purchased..................................... 84,955
Fund shares repurchased................................... 41,068
Management fee............................................ 22,920
12b-1 service and distribution fees....................... 16,398
Other payables to related parties......................... 10,699
Due to custodian............................................ 72,221
Accrued expenses............................................ 11,078
-----------
Total liabilities......................................... 259,339
-----------
NET ASSETS.................................................. $29,318,472
===========
CLASS A
Net asset value and redemption price per share
($13,068,294/662,488 shares outstanding).................. $ 19.73
===========
Maximum offering price per share ($19.73 x 100/94.25)*...... $ 20.93
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($8,641,149/442,399 shares outstanding)............. $ 19.53
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($7,586,549/387,509 shares outstanding)............. $ 19.58
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($22,480/1,139 shares outstanding).................. $ 19.73
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $22,622,314
Accumulated net realized loss on investments.............. (232,972)
Accumulated net investment loss........................... (318,569)
Net unrealized appreciation on investments................ 7,247,699
-----------
NET ASSETS.................................................. $29,318,472
===========
</TABLE>
<TABLE>
<S> <C>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 159
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 522
Interest.................................................. 49,389
----------
49,911
----------
EXPENSES
Management fee............................................ $143,160
Transfer agent............................................ 29,796
Administrative services fee............................... 14,316
Custodian fees............................................ 6,237
Blue Sky fees............................................. 17,907
Auditing and accounting fees.............................. 11,345
Shareholder reports....................................... 3,179
Amortization of organization expenses..................... 5,955
Fund accounting........................................... 19,226
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 95,100
Legal..................................................... 12,805
Other..................................................... 5,219
----------
Total expenses...................................... 368,480
----------
NET INVESTMENT LOSS......................................... (318,569)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on
Investments............................................. 955,123
Options................................................. (327,357)
Net unrealized appreciation during the period on
investments............................................. 3,081,458
----------
Net gain on investment transactions................. 3,709,224
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $3,390,655
==========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 160
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1998* 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (318,569) $ (530,718)
Net realized gain (loss) on
Investments............................................. 955,123 (847,104)
Options................................................. (327,357) --
Net unrealized appreciation during the period on
investments............................................. 3,081,458 3,158,134
----------- -----------
Net increase resulting from operations.................. 3,390,655 1,780,312
----------- -----------
Distributions in excess of net realized gain
Class A................................................... -- (212)
Class B................................................... -- (165)
Class C................................................... -- (102)
----------- -----------
Total distributions to shareholders..................... -- (479)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (649,362) 2,928,480
Class B................................................... (938,512) 4,780,042
Class C................................................... 408,812 3,740,708
Advisor Class............................................. 22,728 --
----------- -----------
Net (decrease) increase resulting from Fund share
transactions........................................... (1,156,334) 11,449,230
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 2,234,321 13,229,063
NET ASSETS
Beginning of period....................................... 27,084,151 13,855,088
----------- -----------
END OF PERIOD............................................. $29,318,472 $27,084,151
=========== ===========
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 161
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE JULY 22, 1996
CLASS A SIX MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
---------------- ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ---------------- ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 17.47 $ 16.40 $ 10.00
------- ------- -------
Income (loss) from investment operations
Net investment loss....................................... (.17)(f) (.31) (.06)(a)
Net realized and unrealized gain on investments........... 2.43(f) 1.38 6.49
------- ------- -------
Total from investment operations........................ 2.26 1.07 6.43
------- ------- -------
Less distributions
From net realized gain.................................... -- -- .03
------- ------- -------
Total distributions..................................... -- -- .03
------- ------- -------
Net asset value, end of period.............................. $ 19.73 $ 17.47 $ 16.40
======= ======= =======
Total return(%)............................................. 12.94(c) 6.53(b) 64.34(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $13,068 $12,159 $ 8,324
Ratio of expenses to average net assets
With expense reimbursement(%)............................. -- -- 2.19(d)
Without expense reimbursement(%).......................... 2.16(d) 2.11 2.90(d)
Ratio of net investment loss to average net assets(%)....... (1.81)(d) (1.91) (2.18)(a)(d)
Portfolio turnover rate(%).................................. 43 54 23
Average commission rate(e).................................. $ .0610 $ .0600 $ .0600
</TABLE>
(See Notes to Financial Statements)
<PAGE> 162
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE JULY 22, 1996
CLASS B MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
---------------- ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ---------------- ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 17.37 $ 16.44 $ 10.00
------- ------- -------
Income (loss) from investment operations
Net investment loss....................................... (.24)(f) (.32) (.06)(a)
Net realized and unrealized gain on investments........... 2.40(f) 1.25 6.52
------- ------- -------
Total from investment operations........................ 2.16 .93 6.46
------- ------- -------
Less distributions
From net realized gain.................................... -- -- .02
------- ------- -------
Total distributions..................................... -- -- .02
------- ------- -------
Net asset value, end of period.............................. $ 19.53 $ 17.37 $ 16.44
======= ======= =======
Total return(%)............................................. 12.44(c) 5.66(b) 64.59(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 8,641 $ 8,577 $ 3,425
Ratio of expenses to average net assets
With expense reimbursement(%)............................. -- -- 2.99(d)
Without expense reimbursement(%).......................... 2.95(d) 2.92 3.70(d)
Ratio of net investment loss to average net assets(%)....... (2.60)(d) (2.72) (2.98)(a)(d)
Portfolio turnover rate(%).................................. 43 54 23
Average commission rate(e).................................. $ .0610 $ .0600 $ .0600
</TABLE>
(See Notes to Financial Statements)
<PAGE> 163
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE JULY 22, 1996
CLASS C MONTHS ENDED YEAR ENDED (COMMENCEMENT)
JUNE 30, DECEMBER 31, TO DECEMBER 31,
------------ ------------ ---------------
1998* 1997 1996
SELECTED PER SHARE DATA ------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 17.40 $ 16.46 $ 10.00
------- ------- -------
Income (loss) from investment operations
Net investment loss....................................... (.23)(f) (.42) (.05)(a)
Net realized and unrealized gain on investments........... 2.41(f) 1.36 6.53
------- ------- -------
Total from investment operations........................ 2.18 .94 6.48
------- ------- -------
Less distributions
From net realized gain.................................... -- -- .02
------- ------- -------
Total distributions..................................... -- -- .02
------- ------- -------
Net asset value, end of period.............................. $ 19.58 $ 17.40 $ 16.46
======= ======= =======
Total return(%)............................................. 12.53(c) 5.71(b) 64.84(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 7,587 $ 6,348 $ 2,106
Ratio of expenses to average net assets
With expense reimbursement(%)............................. -- -- 2.95(d)
Without expense reimbursement(%).......................... 2.86(d) 2.85 3.66(d)
Ratio of net investment loss to average net assets(%)....... (2.51)(d) (2.65) (2.94)(a)(d)
Portfolio turnover rate(%).................................. 43 54 23
Average commission rate(e).................................. $ .0610 $ .0600 $ .0600
</TABLE>
(See Notes to Financial Statements)
<PAGE> 164
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 15, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
--------------
1998*
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $ 20.19
-------
Loss from investment operations
Net investment loss....................................... (.01)(f)
Net realized and unrealized loss on investments........... (.45) (f)
-------
Total from investment operations........................ (.46)
-------
Net asset value, end of period.............................. $ 19.73
=======
Total return(%)............................................. (2.28)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 22
Ratio of expenses to average net assets
Without expense reimbursement(%).......................... 1.96(d)
Ratio of net investment loss to average net assets(%)....... (1.61)(d)
Portfolio turnover rate(%).................................. 43
Average commission rate(e).................................. $ .0610
</TABLE>
- ---------------
<TABLE>
<S> <C>
(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) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
(f) Based on average shares outstanding.
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 165
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Global Science & Technology Fund (the "Fund"), is a diversified series
of shares of Ivy Fund. The shares of beneficial interest are assigned no par
value and an unlimited number of shares of Class A, Class B, Class C, Advisor
Class and Class I are authorized. Ivy Fund was organized as a Massachusetts
business trust under a Declaration of Trust dated December 21, 1983 and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of June 30, 1998, 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 of
1986 (the "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
$373,000 as of December 31, 1997, 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 in
2005.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
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 and non-deductible organization expenses. 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 Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 1.00%
of the Fund's average net assets. Currently, IMI voluntarily limits the Fund's
total operating expenses (excluding taxes, 12b-1 fees, brokerage commissions,
interest, litigation and indemnification expenses, and other extraordinary
expenses) to an annual rate of 1.95% of its average net assets. The voluntary
expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $4,843.
<PAGE> 166
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class and Class I. Class B and Class C shares are also
subject to an ongoing distribution fee at an annual rate of .75% of the average
net assets attributable to Class B and Class C. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$16,008, $43,599, and $35,493 for Class A, Class B and Class C, respectively,
are reflected as 12b-1 service and distribution fees in the Statement of
Operations.
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI,
is the transfer and shareholder servicing agent for the Fund. For those
services, the Fund pays a monthly fee plus certain out-of-pocket expenses. Such
fees and expenses of $13,461, $10,620, $5,706 and $9, for Class A, Class B,
Class C and Advisor Class, 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 Advisor Class
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 79,044 $ 1,451,042 466,094 $ 7,484,210
Issued on reinvestment of
distributions............ -- -- 20 329
Repurchased............... (112,535) (2,100,404) (277,596) (4,556,059)
-------- ------------ ---------- ------------
Net (decrease)/increase... (33,491) $ (649,362) 188,518 $ 2,928,480
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 37,847 $ 703,561 377,437 $ 6,237,513
Issued on reinvestment of
distributions............ -- -- 15 252
Repurchased............... (89,303) (1,642,073) (91,906) (1,457,723)
-------- ------------ ---------- ------------
Net (decrease)/increase... (51,456) $ (938,512) 285,546 $ 4,780,042
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 42,810 $ 795,034 284,174 $ 4,497,638
Issued on reinvestment of
distributions............ -- -- 10 170
Repurchased............... (20,100) (386,222) (47,327) (757,100)
-------- ------------ ---------- ------------
Net increase.............. 22,710 $ 408,812 236,857 $ 3,740,708
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 15, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
-----------------------
ADVISOR CLASS SHARES AMOUNT
------------- -------- ------------
<S> <C> <C> <C> <C>
Sold...................... 1,139 $ 22,728
-------- ------------
Net increase.............. 1,139 $ 22,728
======== ============
</TABLE>
03IVTAX063098
<PAGE> 167
June 30, 1998 IVY FUNDS(R)
IVY
INTERNATIONAL
FUND II
SEMIANNUAL
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
[ART]
Throughout the centuries, the castle keep has been a source of long-range vision
and strategic advantage.
MARKET COMMENTARY
We believe the decision to allocate investments to international markets could
be the single most important decision that investors will make for the next
several years. After years of outperformance of US stocks, we believe that we
are entering a period of international equity outperformance. According to our
research, valuations in foreign equity markets are considerably less than their
US counterparts, and economic conditions, particularly in Europe and Latin
America, have created a very favorable environment for international equities.
Ivy International Fund II provides investors with broad diversification to over
130 companies in 25 countries outside the United States. The Fund's aim is to
maintain exposure to each of the world's major economic zones, and it currently
has 68% of the portfolio invested in Europe, 17% in Asia, and 5% in Latin
America, with the remainder in other areas and cash.
We have been positive about Europe for quite some time, and share prices are
finally reflecting our optimism. Much of the opportunity in Europe arises from
Economic and Monetary Union (EMU), which will be phased in starting with all
wholesale banking activity on January 1, 1999. EMU, which unites most of Europe
under one economic roof, has several benefits: more transparent prices, lower
transaction costs, enhanced competition, and greater certainty for investors and
businesses operating in the Eurozone. The European Commission estimates that
these benefits will amount to a 0.50% increase in GDP, but the benefits to
shareholders could be even greater.
In our view, the most significant implication of EMU should be increasing
industry consolidation, as companies and investors increasingly treat Europe as
a single market.
We have recently increased the Fund's exposure to equities in the United Kingdom
to 16% of the portfolio. According to our research, the UK is perhaps the most
undervalued developed market in the world, trading at 13 times 1999 earnings.
The Fund's Asian representation remains at 19% of total assets. This includes 5%
in Japan, which is focused on multinationals like Sony and Canon that are
trading at similar valuations to their US counterparts.
Other Asian investments include a strong commitment to Australian banks, which,
according to our research, are benefiting from stable interest margins,
headcount reductions and operational efficiencies through investment in
technology.
Value exists in Hong Kong, particularly among blue chips like Chueng Kong. As
stability gradually returns to the region, interest rates in Hong Kong should
fall to more normal levels, providing a more attractive environment for equities
in the future. We remain selectively optimistic about the region, especially
Malaysia, which our research confirms are undervalued situations.
Latin America has not performed well since the year began, and we have used the
weakness to add to positions, particularly in Brazil. We believe that Brazil
offers the most upside potential, as progress on privatization and falling
interest rates improve the fundamental picture.
Although European markets have recently been the star performers among
international equities, we believe improvements in other areas, particularly in
Asia and other developing countries, should extend the cycle of international
outperformance for several years to come. We believe that investors who focus on
what should outperform in the future, and not on what outperformed in the past,
should be well rewarded.
IVY MANAGEMENT, INC.
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris,
Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
Custodian
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
PricewaterhouseCoopers LLP
Fort Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[LOGO IVY MACKENZIE]
<PAGE> 168
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES -- 92.81% SHARES VALUE
- ----------------------------------------
<S> <C> <C>
AFRICA -- 1.80%
- ----------------------------------------
SOUTH AFRICA -- 1.80%
Anglo American Corporation of South
Africa Ltd. .......................... 19,900 $ 675,719
Liberty Life Association of Africa
Limited............................... 29,000 569,166
Nampak Limited.......................... 100,948 239,943
Rembrandt Group Ltd. ................... 68,484 430,204
South African Breweries Ltd. ........... 40,841 845,940
------------
2,760,972
------------
ASIA/PACIFIC -- 17.29%
- ----------------------------------------
AUSTRALIA -- 3.25%
Australia & New Zealand Banking Group
Ltd. ................................. 201,700 1,391,410
Broken Hill Proprietary Company
Limited............................... 139,200 1,176,619
National Australia Bank Ltd. ........... 51,600 680,602
Pacific Dunlop Limited.................. 457,520 739,460
Westpac Banking Corp. Ltd. ............. 164,000 1,000,332
------------
4,988,423
------------
HONG KONG -- 3.95%
Cheung Kong Holdings Ltd. .............. 408,000 2,006,149
Guangdong Investments................... 1,202,000 269,918
HSBC Holdings........................... 87,600 2,142,355
Jardine Strategic Holdings Ltd. ........ 378,000 718,200
New World Development Company
Ltd. ................................. 164,000 317,478
Peregrine Investments Holdings
Limited(b)(c)......................... 370,000 --
Swire Pacific Ltd. ..................... 82,000 309,541
Tsingtao Brewery Co. Ltd Series H(a).... 592,000 92,445
Wheelock & Company, Ltd. ............... 357,000 210,784
------------
6,066,870
------------
JAPAN -- 4.62%
Canon Inc. ............................. 62,000 1,407,212
Fuji Photo Film ORD..................... 37,000 1,287,675
Matsushita Electric Industrial Co. ..... 87,000 1,397,917
Sharp Corp. ............................ 134,000 1,085,247
Sony Corp. ............................. 22,200 1,911,518
------------
7,089,569
------------
MALAYSIA -- 1.27%
Arab Malaysian Corporation.............. 225,000 48,553
Berjaya Sports Toto Bhd................. 202,000 299,530
Genting Berhad.......................... 239,000 432,188
Perusahaan Otomobil Nasional Berhad..... 502,000 320,748
RHB Capital Berhad...................... 263,000 107,166
RHB Sakura Merchant Bankers Berhad...... 2,050 534
Sime Darby Berhad....................... 910,000 627,511
Sime UEP Properties Berhad.............. 187,000 107,308
------------
1,943,538
------------
NEW ZEALAND -- 1.24%
Fletcher Challenge Building............. 253,123 315,342
Fletcher Challenge Energy............... 85,488 204,128
Fletcher Challenge Forestry............. 320,042 179,420
Fletcher Challenge Paper................ 60,540 67,250
Telecom Corp. of New Zealand Ltd. ...... 170,000 700,662
Tourism Holdings Limited(a)............. 772,827 441,280
------------
1,908,082
------------
PHILIPPINES -- 0.23%
Benpres Holdings Corporation GDR(a)..... 109,900 269,255
Metro Pacific Corporation(a)............ 3,826,410 87,172
------------
356,427
------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------
<S> <C> <C>
SINGAPORE -- 2.64%
Clipsal Industries Ltd. ................ 477,000 $ 426,915
DBS Land Limited........................ 305,000 252,740
Elec & Eltek International Co. Ltd. .... 147,300 497,874
Fraser & Neave Ltd Ordinary............. 285,000 765,856
Jardine Matheson Holdings Ltd. ......... 219,600 592,920
Overseas Union Bank Ltd. ............... 138,000 302,223
Singapore Airlines Ltd. ................ 196,000 916,494
United Overseas Bank Ltd. .............. 93,000 288,994
------------
4,044,016
------------
THAILAND -- 0.09%
Bankok Bank Public Company
Limited -- Foreign Registered......... 91,600 112,605
Krung Thai Bank Public Company
Limited -- Foreign Registered......... 8,300 1,099
Krung Thai Thanakit PLC -- Foreign
Registered(a)......................... 3,600 553
Nava Finance and Securities Public
Company Limited -- Foreign
Registered(c)......................... 7,300 --
Robinson Department Store Public Company
Limited -- Foreign Registered(a)...... 630,800 18,193
SG Asia Credit Company PLC -- Foreign
Registered(a)......................... 67,620 13,428
------------
145,878
------------
EUROPE -- 68.09%
- ----------------------------------------
DENMARK -- 2.77%
BG Bank A/S............................. 18,200 1,127,222
Den Danske Bank......................... 12,200 1,463,571
Unidanmark A/S.......................... 18,400 1,653,508
------------
4,244,301
------------
FINLAND -- 2.45%
Enso OY -- R Shares..................... 123,474 1,334,554
Rauma OY................................ 72,700 1,490,709
UPM -- Kymmene Corp. ................... 34,179 940,681
------------
3,765,944
------------
FRANCE -- 12.84%
Banque Nationale de Paris............... 17,900 1,462,547
Compagnie Financiere de Paribas......... 17,800 1,904,820
Elf Aquitaine S.A. ..................... 10,904 1,532,973
Galeries Lafayette...................... 1,800 1,795,228
Groupe Danone........................... 6,600 1,819,740
Pernod-Ricard........................... 26,100 1,808,774
Peugeot Citroen......................... 12,020 2,584,506
Schneider S.A. ......................... 18,709 1,491,824
Societe Generale........................ 7,800 1,621,659
Societe Generale d'Entreprises
S.A.(a)............................... 13,500 638,378
Suez Lyonnaise des Eaux................. 10,664 1,754,983
Total S.A. ADR.......................... 19,600 1,281,350
------------
19,696,782
------------
GERMANY -- 5.11%
Daimler-Benz AG......................... 11,000 1,078,650
Deutsche Lufthansa AG................... 90,400 2,268,722
Merck KGaA.............................. 44,630 1,995,331
Volkswagen AG........................... 2,604 2,502,967
------------
7,845,670
------------
IRELAND -- 0.92%
Bank of Ireland......................... 68,626 1,411,816
------------
ITALY -- 3.73%
Banco Popolare di Milano................ 167,000 1,329,386
Fiat S.p.A.............................. 453,200 1,983,570
Gucci Group............................. 47,000 2,405,195
------------
5,718,151
------------
</TABLE>
<PAGE> 169
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------
<S> <C> <C>
NETHERLANDS -- 7.85%
ABN Amro Bank........................... 48,685 $ 1,139,210
Akzo Nobel NV........................... 7,401 1,645,215
Fortis Amev NV.......................... 30,645 1,794,209
Hunter Douglas NV....................... 29,500 1,602,455
ING Groep NV............................ 28,800 1,885,812
Philips Electronics NV.................. 28,158 2,367,007
Unilever NV ADR......................... 20,400 1,610,325
------------
12,044,233
------------
NORWAY -- 0.50%
Norsk Hydro Sponsored ADR............... 17,300 763,363
------------
PORTUGAL -- 1.68%
Lusomundo-SGPS S.A. Preferred Share..... 55,021 725,591
Portugal Telecom S.A. ADR............... 34,900 1,847,519
------------
2,573,110
------------
SPAIN -- 3.23%
Endesa S.A. -- Sponsored ADR............ 44,900 970,963
Repsol S.A. -- Sponsored ADR............ 18,800 1,034,000
Telefonica de Espana S.A. ADR........... 21,200 2,948,125
------------
4,953,088
------------
SWEDEN -- 6.55%
AssiDoman AB............................ 46,749 1,359,980
Astra AB "B" Shares..................... 58,868 1,173,677
Electrolux AB........................... 105,000 1,803,774
S.K.F. AB Series "B".................... 87,100 1,583,647
Stora Kopparbergs Bergslags Aktiebolag
(STORA) B Shares...................... 66,673 1,053,399
Trelleborg AB "B" Free Shares........... 80,600 1,061,198
Volvo AB B Shares....................... 67,483 2,009,695
------------
10,045,370
------------
SWITZERLAND -- 5.60%
Holderbank Financiere Glaris AG......... 1,527 1,942,965
Nestle AG Registered.................... 998 2,135,736
SGS Societe Generale de Surveillance
Holding SA............................ 6,500 2,236,930
Swatch Group, The AG.................... 2,940 2,271,661
------------
8,587,292
------------
UNITED KINGDOM -- 14.86%
Barclays PLC............................ 41,506 1,198,765
Barclays PLC ADR........................ 500 57,500
Billiton Plc............................ 647,200 1,312,022
Cadbury Schweppes plc................... 132,635 2,053,678
Corporate Services Group Plc............ 388,000 1,543,997
Corporate Services Group Plc
Rights(a)............................. 97,000 18,612
Diageo plc.............................. 156,463 1,862,653
Gallaher Group Plc...................... 359,000 1,990,149
Hanson PLC ADR.......................... 45,400 1,376,188
Imperial Chemical Industries plc........ 86,660 1,396,761
National Westminster Bank PLC........... 66,662 1,193,450
Next Plc................................ 223,000 1,919,910
Rio Tinto plc........................... 104,200 1,174,409
Safeway plc............................. 262,000 1,722,359
Shell Transport & Trading Co. .......... 228,040 1,601,841
Tate & Lyle PLC......................... 223,000 1,770,149
Waste Management International plc --
Sponsored ADR(a)...................... 56,800 617,700
------------
22,810,143
------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY SECURITIES SHARES VALUE
- ----------------------------------------
<S> <C> <C>
LATIN AMERICA -- 5.23%
- ----------------------------------------
ARGENTINA -- 1.21%
Telecom Argentina S.A.
Sponsored ADR......................... 18,000 $ 536,625
Telefonica De Argentina S.A. ........... 18,600 603,337
YPF S.A. Sponsored ADR.................. 24,000 721,500
------------
1,861,462
------------
BRAZIL -- 3.10%
Centrais Electricas Brasileiras S.A.
Preferred (Electrobras)(a)............ 18,400,000 556,801
Centrais Geradoras do Sul do Brasil S.A.
Preferred(a).......................... 18,400,000 26,567
Companhia Vale do Rio Doce
Preferred............................. 53,000 1,076,857
Petroleo Brasileiro S.A. Preferred
(Petrobras)........................... 4,000,000 740,096
Telecomunicacoes Brasileiras S.A. ADR
(Telebras)............................ 21,600 2,358,450
------------
4,758,771
------------
CHILE -- 0.92%
A.F.P Provida S.A. Sponsored ADR........ 23,900 398,831
Cia de Telecomunicaciones de Chile S.A.
Sponsored ADR......................... 18,200 369,687
Empresa Nacional de Electricidad
S.A. ................................. 16,900 240,825
Vina Concha y Toro S.A. ADR............. 14,000 399,000
------------
1,408,343
------------
NORTH AMERICA -- 0.40%
- ----------------------------------------
CANADA -- 0.40%
Inco Limited............................ 45,000 613,548
------------
TOTAL INVESTMENTS -- 92.81%
(Cost -- $143,840,718)(d)............. 142,405,162
OTHER ASSETS, LESS
LIABILITIES -- 7.19%.................. 11,034,608
------------
NET ASSETS -- 100%...................... $153,439,770
============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
NV -- Non-voting
ORD -- Ordinary
(a) Non-income producing security
(b) Peregrine Investments Holdings Limited has filed for liquidation
under the laws of Hong Kong.
(c) Securities valued in good faith by the Valuation Committee of
the Board of Trustees. The cost of these securities aggregated
$706,321. See Note 1 to the Financial Statements.
(d) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.................... $ 19,889,132
Gross unrealized depreciation.................... (21,324,688)
------------
Net unrealized depreciation.................. $ (1,435,556)
============
Purchases and sales of securities other than short-term obligations
aggregated $44,941,317 and $5,958,670, respectively, for the period
ended June 30, 1998.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 170
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $143,840,718)..... $142,405,162
Cash........................................................ 11,582,923
Receivables
Fund shares sold.......................................... 776,440
Dividends and interest.................................... 535,114
Manager for expense reimbursement......................... 28,159
Deferred organization expenses.............................. 50,011
Other assets................................................ 16,743
------------
Total assets.............................................. 155,394,552
------------
LIABILITIES
Payables
Investments purchased..................................... 1,454,482
Fund shares repurchased................................... 175,003
Management fee............................................ 125,238
12b-1 service and distribution fees....................... 115,286
Other payables to related parties......................... 46,573
Accrued expenses............................................ 38,200
------------
Total liabilities......................................... 1,954,782
------------
NET ASSETS.................................................. $153,439,770
============
CLASS A
Net asset value and redemption price per share
($27,485,213/2,731,617 shares outstanding)................ $ 10.06
============
Maximum offering price per share ($10.06 x 100/94.25)*...... $ 10.67
============
CLASS B
Net asset value, offering price and redemption price** per
share ($82,702,696/8,292,093 shares outstanding).......... $ 9.97
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($42,908,388/4,303,116 shares outstanding).......... $ 9.97
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($343,473/34,036 shares outstanding)................ $ 10.09
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $154,945,692
Accumulated net realized loss on investments and foreign
currency transactions................................... (790,038)
Undistributed net investment income....................... 716,213
Net unrealized depreciation on investments and foreign
currency transactions................................... (1,432,097)
------------
NET ASSETS.................................................. $153,439,770
============
</TABLE>
<TABLE>
<S> <C>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
</TABLE>
(See Notes to Financial Statements)
<PAGE> 171
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $224,249 foreign taxes withheld......... $ 2,052,291
Interest.................................................. 185,277
-----------
2,237,568
-----------
EXPENSES
Management fee............................................ $643,425
Transfer agent............................................ 134,637
Administrative services fee............................... 64,190
Custodian fees............................................ 58,167
Blue Sky fees............................................. 17,698
Auditing and accounting fees.............................. 13,830
Shareholder reports....................................... 8,128
Amortization of organization expenses..................... 6,614
Fund accounting........................................... 50,434
Trustees' fees............................................ 4,235
12b-1 service and distribution fees....................... 556,214
Legal..................................................... 12,127
Other..................................................... 36,865
-----------
1,606,564
Expenses reimbursed by manager.............................. (85,209)
-----------
Net expenses.............................................. 1,521,355
-----------
NET INVESTMENT INCOME....................................... 716,213
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (1,084,837)
Net unrealized appreciation during the period on
investments and foreign currency transactions........... 11,637,661
-----------
Net gain on investment transactions................. 10,552,824
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $11,269,037
===========
</TABLE>
(See Notes to Financial Statements)
<PAGE> 172
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 13, 1997
MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1998* 1997
------------ ---------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 716,213 $ (219,499)
Net realized (loss) gain on investments and foreign
currency transactions................................... (1,084,837) 507,375
Net unrealized appreciation (depreciation) during the
period on investments and
foreign currency transactions........................... 11,637,661 (13,069,758)
------------ ------------
Net increase (decrease) resulting from operations... 11,269,037 (12,781,882)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... 9,268,019 18,898,090
Class B................................................... 22,933,090 60,033,750
Class C................................................... 12,754,732 30,777,875
Advisor Class............................................. 287,059 --
------------ ------------
Net increase resulting from Fund share transactions..... 45,242,900 109,709,715
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 56,511,937 96,927,833
NET ASSETS
Beginning of period....................................... 96,927,833 --
------------ ------------
END OF PERIOD............................................. $153,439,770 $ 96,927,833
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 716,213 $ --
============ ============
</TABLE>
*Unaudited
(See Notes to Financial Statements)
<PAGE> 173
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 13, 1997
CLASS A MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1998* 1997
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.98 $ 10.01
------- -------
Income (loss) from investment operations
Net investment income(a)(b)............................... .10 --
Net realized and unrealized gain (loss) on investment
transactions(b)......................................... .98 (1.03)
------- -------
Total from investment operations........................ 1.08 (1.03)
------- -------
Net asset value, end of period.............................. $ 10.06 $ 8.98
======= =======
Total return(%)(c).......................................... 12.03 (10.29)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $27,485 $16,202
Ratio of expenses to average net assets
With expense reimbursement(%)(d).......................... 1.74 1.80
Without expense reimbursement(%)(d)....................... 1.87 2.11
Ratio of net investment income to average net
assets(%)(a)(d)........................................... 1.74 .12
Portfolio turnover rate(%).................................. 5 10
Average commission rate(e).................................. $ .0140 $ .0250
</TABLE>
(See Notes to Financial Statements)
<PAGE> 174
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 13, 1997
CLASS B MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1998* 1997
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.93 $ 10.01
------- -------
Income (loss) from investment operations
Net investment income (loss)(a)(b)........................ .06 (.02)
Net realized and unrealized gain (loss) on investment
transactions(b)......................................... .98 (1.06)
------- -------
Total from investment operations........................ 1.04 (1.08)
------- -------
Net asset value, end of period.............................. $ 9.97 $ 8.93
======= =======
Total return(%)(c).......................................... 11.65 (10.79)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $82,703 $53,652
Ratio of expenses to average net assets
With expense reimbursement(%)(d).......................... 2.49 2.63
Without expense reimbursement(%)(d)....................... 2.62 2.94
Ratio of net investment income (loss) to average net
assets(%)(a)(d)........................................... .99 (.71)
Portfolio turnover rate(%).................................. 5 10
Average commission rate(e).................................. $ .0140 $ .0250
</TABLE>
(See Notes to Financial Statements)
<PAGE> 175
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 13, 1997
CLASS C MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
1998* 1997
SELECTED PER SHARE DATA ------------ ---------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.93 $ 10.01
------- -------
Income (loss) from investment operations
Net investment income (loss)(a)(b)........................ .06 (.02)
Net realized and unrealized gain (loss) on investment
transactions(b)......................................... .98 (1.06)
------- -------
Total from investment operations........................ 1.04 (1.08)
------- -------
Net asset value, end of period.............................. $ 9.97 $ 8.93
======= =======
Total return(%)(c).......................................... 11.65 (10.79)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $42,908 $27,074
Ratio of expenses to average net assets
With expense reimbursement(%)(d).......................... 2.52 2.63
Without expense reimbursement(%)(d)....................... 2.65 2.94
Ratio of net investment income (loss) to average net
assets(%)(a)(d)........................................... .96 (.71)
Portfolio turnover rate(%).................................. 5 10
Average commission rate(e).................................. $ .0140 $ .0250
</TABLE>
(See Notes to Financial Statements)
<PAGE> 176
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 23, 1998
ADVISOR CLASS (COMMENCEMENT)
TO JUNE 30,
-----------------
1998*
SELECTED PER SHARE DATA -----------------
<S> <C>
Net asset value, beginning of period........................ $ 9.63
-------
Income from investment operations
Net investment income(a)(b)............................... .05
Net realized and unrealized gain on investment
transactions(b)......................................... .41
-------
Total from investment operations........................ .46
-------
Net asset value, end of period.............................. $ 10.09
=======
Total return(%)(c).......................................... 4.78
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 343
Ratio of expenses to average net assets
With expense reimbursement(%)(d).......................... 1.26
Without expense reimbursement(%)(d)....................... 1.39
Ratio of net investment income to average net
assets(%)(a)(d)........................................... 2.22
Portfolio turnover rate(%).................................. 5
Average commission rate(e).................................. $ .0140
</TABLE>
<TABLE>
<S> <C>
(a) Net investment income is net of expenses reimbursed by
manager.
(b) Based on average shares outstanding
(c) Total return represents aggregate total return and does not
reflect a sales charge.
(d) Annualized
(e) This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission rate structures may
differ.
*Unaudited
</TABLE>
(See Notes to Financial Statements)
<PAGE> 177
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Fund II (the "Fund"), is a diversified series of shares
of Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C, Advisor Class and Class
I are authorized. Ivy Fund was organized as a Massachusetts business trust under
a Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock
exchange, or The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the
last quoted sale price reported as of the close of regular trading on the
exchange the security is traded most extensively. If there is no such sale, the
security is valued at the calculated mean between the last bid and asked price
on the exchange. Securities not traded on an exchange or Nasdaq, but traded in
another over-the-counter market are valued at the average between the current
bid and asked price in such markets. Short-term obligations and commercial paper
are valued at amortized cost, which approximates market. Debt securities (other
than short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of June 30, 1998 such securities were
determined to have no value by the Valuation Committee and have been noted as
such in the Portfolio of Investments.
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 of
1986 (the "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.
CASH AND CASH EQUIVALENTS -- The Fund classifies as cash amounts on deposit
with the Fund's custodian. These amounts earn interest at variable interest
rates. At June 30, 1998 the interest rate was 5.25%.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net realized capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For tax reporting purposes, section 988 of the 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.
FORWARD FOREIGN CURRENCY CONTRACTS -- Forward foreign currency contracts
may be entered into for purposes of hedging specific securities denominated in
foreign currencies. Forward contracts are marked to market daily, and the change
in market value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. The Fund could be exposed to risk if the
counter parties are unable to meet the terms of the contracts.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in
connection with its organization have been deferred and are being amortized on a
straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and
net capital gain distributions are determined annually in accordance with
Federal tax regulations which may differ from generally accepted accounting
principles. These differences primarily relate to foreign denominated securities
and non-deductible organization expenses. 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
<PAGE> 178
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Advisor of the
Fund. For its services, IMI receives a fee monthly at the annual rate of 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 1.50% of its average net assets. The voluntary
expense limitation may be terminated or revised at any time.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly
owned subsidiary, provides certain administrative, accounting and pricing
services for the Fund. For those services, the Fund pays MIMI fees plus certain
out-of-pocket expenses. Such fees and expenses are reflected as Administrative
services fee and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, is the underwriter and distributor of the Fund's shares, and as such,
purchases shares from the Fund at net asset value to settle orders from
investment dealers. For the six months ended June 30, 1998, the net amount of
underwriting discount retained by IMDI was $22,959.
Under Service and Distribution Plans, the Fund reimburses IMDI for service
fee payments made to brokers at an annual rate of .25% of its average net
assets, excluding Advisor Class and Class I. Class B and Class C shares are also
subject to an ongoing distribution fee at an annual rate of .75% of the average
net assets attributable to Class B and Class C. IMDI may use such distribution
fee for purposes of advertising and marketing shares of the Fund. Such fees of
$28,560, $348,682 and $178,972, 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 $22,351, $70,653, $41,534 and $99, for Class A, Class B,
Class C and Advisor Class, 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, Advisor Class and
Class I were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold..................... 1,985,946 $ 19,496,625 3,012,394 $ 30,130,174
Repurchased.............. (1,058,859) (10,228,606) (1,207,864) (11,232,084)
---------- ------------ ---------- ------------
Net increase............. 927,087 $ 9,268,019 1,804,530 $ 18,898,090
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 2,736,109 $ 27,281,279 6,385,899 $ 63,560,068
Repurchased............... (449,255) (4,348,189) (380,660) (3,526,318)
-------- ------------ ---------- ------------
Net increase.............. 2,286,854 $ 22,933,090 6,005,239 $ 60,033,750
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... 1,571,789 $ 15,691,610 3,698,302 $ 36,867,171
Repurchased............... (299,287) (2,936,878) (667,688) (6,089,296)
-------- ------------ ---------- ------------
Net increase.............. 1,272,502 $ 12,754,732 3,030,614 $ 30,777,875
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBUARY 23, 1998
(COMMENCEMENT)
TO JUNE 30, 1998
-----------------------
ADVISOR CLASS SHARES AMOUNT
------------- -------- ------------
<S> <C> <C>
Sold...................... 122,718 $ 1,222,985
Repurchased............... (88,682) (935,926)
-------- ------------
Net increase.............. 34,036 $ 287,059
======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- -------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold...................... -- $ -- 1 $ 10
Repurchased............... -- -- (1) (10)
-------- ------------ ---------- ------------
Net change................ -- $ -- -- $ --
======== ============ ========== ============
</TABLE>
03IIF2063098
