<PAGE> 1
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY INTERNATIONAL FUND II
MARKET COMMENTARY
The recovery in world equity markets during the first half of 1999 has been a
welcome relief following a difficult 1998. We believe that, in general, this
recovery has been driven by rising expectations for global economic growth and a
greater willingness by investors to accept risk. As a result, there has been a
marked divergence in performance of major sectors, with cyclicals, small caps
and emerging-market equities outperforming large-cap, defensive growth stocks
and developed markets. Ivy International Fund II has benefited from these
trends, particularly the recovery of emerging stock markets.
Asian equity markets have made a dramatic recovery following two years of
crisis. In our view, falling interest rates, strengthening currencies and
improving current account balances signaled that the economic recession, or in
some cases depression, was ending. Most Asian economies, which we believe hit
bottom in the second quarter of 1999, should report positive growth for the
remainder of the year. The expectation for economic recovery appears to have
been a powerful force behind the rally in Asian share prices, which have
increased by more than 39% since the beginning of the year (as measured by the
Morgan Stanley Capital International Asia Pacific Ex-Japan Index. There is,
however, no guarantee this trend will continue in the future.)
Although in the short run, Asian equities appear to be factoring in a
sizeable rebound in earnings, our research suggests that the next few years
could be positive for markets in the region. We believe that economies will
resume a high-growth standing, and that corporate restructuring will result in
higher profitability. We continue to favor Singapore and Hong Kong as large,
liquid markets with favorable government policies and a corporate environment
that focuses on shareholder value. We believe the outlook for Malaysian equities
is also positive, and that US dollar returns for investors could benefit if the
Malaysian currency, the ringgit, strengthens once it is allowed to float freely.
Nearly 6% of the Fund's assets is invested in Australia and New Zealand.
The stock and currency markets of both these countries suffered during the Asian
economic crisis, yet have not recovered to the same extent as share prices in
the rest of the region. We believe that equities in Australia and New Zealand
are among the most undervalued in the developed world.
Signals from Japan continue to be mixed. A surprisingly strong first
quarter 1999 GDP report was met with skepticism by the market as other
indicators, such as department store sales and new car registrations, continued
to be very weak. It
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appears that much of the recent rally in Japan has been driven by announcements
of corporate restructuring. We believe that there is significant room for
improvement in corporate Japan. According to our research, currently, Japanese
companies are earning returns on equity of 3.0% compared with 14.5% for European
companies and 27.1% for the US. We believe that the corporate sector needs to
restructure, and that the government needs to push forward with banking reform
and initiatives to pump liquidity into the economy. Even if both government and
industrialists are steadfast in their commitment to reform, we believe that
growing government debt, rising funding costs, and increasing unemployment, as
well as structural weaknesses in the Japanese economy, will make the process a
long and painful one. These concerns, combined with our belief that other Asian
markets provide much greater upside potential, underlie our decision to
underweight Japanese equities in the Ivy International Fund II portfolio at this
time.
The bull market in Europe continued during the first half of 1999; however,
higher stock prices were overshadowed by weakness of the euro. Although politics
have played a role, in our view, low interest rates in the eurozone (the 11
nations that have adopted the common European currency, the euro) have been the
primary factor in the currency's decline, with the gap between long-term
interest rates in the US and long-term interest rates in Germany at a 10-year
high. While this has hampered US dollar returns on European equities in the
first half of 1999, we believe a weak euro should prove positive for exporters.
We continue to favor companies that are sensitive to an economic recovery,
including a flat-glass producer, auto manufacturers, and consumer goods
companies. Paper, chemicals and mining companies have all been strong performers
due, we believe, to the expectation of a recovery in commodity prices and global
demand. We believe that these sectors will continue to perform well, as
inventories are low, production cuts have been announced and demand for basic
materials is accelerating around the world.
For the first time in several years, German equities have begun to look
attractive on our valuation measures. Relative to their own history, German
stocks are the cheapest in Europe. We believe this market has lagged behind its
neighbors due to political concerns and stubbornly slow economic growth. We
believe that government spending cuts and tax reform should be powerful stimuli
to economic growth over the next few years. Therefore, we have invested in
companies like a leading home-improvement retailer and a well-known sporting
goods marketer to capture a recovery in the German economy.
We have been watching with interest the sector shift in Europe. It appears
that as market participants have shown increased interest in cyclical stocks,
there has been a corresponding declining interest in companies traditionally
labeled as "growth." According to our research, this has created attractive
opportunities in industries like pharmaceuticals, which normally fall outside
our acceptable valuation metrics. Accordingly, we have taken this opportunity to
build positions in such companies.
Overall, we believe the environment for most international equity markets
is positive. While virtually all financial markets are vulnerable to a US
correction, our research indicates that equities in Europe and Asia (non-Japan)
are trading at reasonable valuations. We believe that currencies in these areas
have the potential to appreciate relative to the dollar and interest rates have
little risk of rising in the coming months. Unlike the US, Europe and Asia are
characterized by excess capacity in both manufacturing and employment. As a
result, we believe cost pressures should be minimal, margins should expand
through corporate-efficiency drives and volumes should improve with stronger
economic activity. We believe these factors should provide a constructive
environment for international equities in the coming months.
IVY MANAGEMENT, INC.
2
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PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 93.26% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 1.68%
- ------------------------------------
SOUTH AFRICA -- 1.68%
Anglo American plc (a)............... 16,126 $ 753,610
Liberty Life Association of Africa
Limited............................ 45,707 585,509
Nampak Limited....................... 200,948 556,124
South African Breweries plc.......... 81,682 709,299
-----------
2,604,542
-----------
ASIA/PACIFIC -- 24.64%
- ------------------------------------
AUSTRALIA -- 3.67%
Australia & New Zealand Banking
Group Ltd.......................... 201,700 1,483,159
Broken Hill Proprietary Company
Limited............................ 108,200 1,253,349
National Australia Bank Ltd.......... 51,600 853,879
Pacific Dunlop Limited............... 717,520 1,035,374
Westpac Banking Corp. Ltd............ 164,000 1,063,840
-----------
5,689,601
-----------
CHINA -- 0.08%
Tsingtao Brewery Co. Ltd. Series
H(a)............................... 592,000 123,610
-----------
HONG KONG -- 3.80%
Cheung Kong Holdings Ltd............. 204,000 1,814,242
HSBC Holdings plc.................... 43,800 1,597,631
Jardine Matheson Holdings Ltd........ 219,600 1,098,000
Jardine Strategic Holdings Ltd....... 378,000 982,800
Swire Pacific Ltd.................... 82,000 405,846
-----------
5,898,519
-----------
JAPAN -- 6.00%
Canon Inc............................ 62,000 1,782,608
Fuji Photo Film ORD.................. 49,000 1,854,157
Matsushita Electric Industrial Co.... 87,000 1,689,165
Sharp Corporation.................... 134,000 1,583,163
Sony Corporation..................... 22,200 2,393,582
-----------
9,302,675
-----------
MALAYSIA(B) -- 3.22%
Arab Malaysian Corporation(a)........ 225,000 104,211
Berjaya Sports Toto Berhad........... 202,000 467,789
Genting Berhad....................... 239,000 911,974
Perusahaan Otomobil Nasional
Berhad(a).......................... 613,000 1,419,579
Sime Darby Berhad.................... 1,410,000 1,847,842
Sime UEP Properties Berhad........... 187,000 240,147
-----------
4,991,542
-----------
NEW ZEALAND -- 2.21%
Fletcher Challenge Building.......... 253,123 368,871
Fletcher Challenge Energy............ 85,488 231,945
Fletcher Challenge Forestry.......... 320,962 180,289
Fletcher Challenge Paper............. 160,540 119,953
Telecom Corporation of New Zealand
Limited............................ 320,000 1,373,553
Tourism Holdings Limited(a).......... 872,827 1,156,321
-----------
3,430,932
-----------
PHILIPPINES -- 0.33%
Benpres Holdings Corporation
Sponsored GDR(a)................... 109,900 515,156
-----------
SINGAPORE -- 5.33%
Clipsal Industries Limited........... 377,000 584,350
DBS Land Ltd......................... 305,000 609,116
Elec & Eltek International Co.
Ltd................................ 183,300 714,870
Fraser & Neave Ltd. ORD.............. 245,000 1,086,511
Overseas Union Bank Ltd.............. 426,800 2,055,698
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Singapore Airlines Ltd. -- Foreign
Registered......................... 236,000 $ 2,245,681
United Overseas Bank Ltd. -- Foreign
Registered......................... 137,000 957,610
-----------
8,253,836
-----------
THAILAND -- 0.00%
Nava Finance Public Company Limited-
Foreign(a)(c)...................... 7,300 --
-----------
EUROPE -- 62.32%
- ------------------------------------
DENMARK -- 1.91%
Den Danske Bank Group................ 13,462 1,460,051
Unidanmark A/S....................... 22,500 1,501,715
-----------
2,961,766
-----------
FINLAND -- 1.03%
Rauma Oyj............................ 72,700 862,195
Stora Enso Oyj -- R Shares........... 58,958 632,338
UPM-Kymmene Oyj...................... 3,096 98,658
-----------
1,593,191
-----------
FRANCE -- 13.65%
Alcatel S.A.......................... 9,600 1,351,379
Banque Nationale de Paris............ 17,900 1,491,549
Compagnie Financiere de Paribas...... 22,225 2,491,406
Compagnie Generale des Etablissements
Michelin Class B................... 30,000 1,227,317
Elf Aquitaine S.A.................... 11,176 1,640,078
Groupe Danone........................ 4,900 1,263,308
Pernod-Ricard........................ 28,100 1,883,618
Peugeot Citroen...................... 9,122 1,439,311
Schneider S.A........................ 18,709 1,050,562
Scor S.A............................. 39,000 1,934,563
Societe Generale..................... 7,800 1,374,706
Societe Generale d'Enterprises
S.A................................ 13,500 654,342
Suez Lyonnaise des Eaux.............. 9,664 1,743,091
Total Fina S.A....................... 25,100 1,617,381
-----------
21,162,611
-----------
GERMANY -- 5.04%
Adidas-Salomon AG.................... 19,600 1,908,101
DaimlerChrysler AG................... 20,467 1,787,767
Deutsche Lufthansa AG................ 13,739 250,077
Hornbach Holding AG Preferred........ 13,591 581,665
Merck KGaA........................... 49,555 1,604,687
Volkswagen AG........................ 26,040 1,680,275
-----------
7,812,572
-----------
IRELAND -- 0.74%
Bank of Ireland...................... 68,626 1,153,147
-----------
ITALY -- 0.83%
Banca Popolare di Milano............. 167,000 1,289,946
-----------
NETHERLANDS -- 7.19%
Akzo Nobel NV........................ 41,002 1,725,196
Fortis (NL) NV....................... 52,910 1,634,210
Hunter Douglas NV.................... 29,500 1,013,070
ING Groep NV......................... 28,800 1,559,283
Koninklijke KPN NV................... 37,895 1,778,142
Koninklijke (Royal) Philips
Electronics NV..................... 21,975 2,167,640
Unilever NV.......................... 18,214 1,270,427
-----------
11,147,968
-----------
NORWAY -- 0.67%
Norsk Hydro A.S. Sponsored ADR....... 27,000 1,032,750
-----------
</TABLE>
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IVY INTERNATIONAL FUND II
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PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
PORTUGAL -- 1.29%
Lusomundo -- SGPS S.A. Preferred
Shares........................... 55,021 $ 560,607
Portugal Telecom S.A. -- Sponsored
ADR.............................. 34,900 1,437,444
------------
1,998,051
------------
SPAIN -- 3.10%
Endesa S.A. -- Sponsored ADR....... 64,900 1,379,125
Repsol S.A. -- Sponsored ADR....... 57,000 1,157,813
Telefonica S.A. -- Sponsored ADR... 15,426 2,269,621
------------
4,806,559
------------
SWEDEN -- 5.02%
AssiDoman AB....................... 51,984 782,663
Boliden Limited -- Swedish
Depository Receipt(a)............ 20,556 47,147
Electrolux AB -- Series "B"........ 95,585 2,001,252
Investor AB........................ 191,765 2,142,816
S.K.F. AB Series "B"............... 70,826 1,307,929
Volvo AB B Free.................... 51,483 1,492,701
------------
7,774,508
------------
SWITZERLAND -- 7.94%
Compagnie Financiere Richemont
AG............................... 1,410 2,711,905
Holderbank Financiere Glaris AG.... 927 1,094,208
Nestle AG Registered............... 998 1,798,158
Novartis AG Registered............. 1,695 2,475,026
SGS Societe Generale de
Surveillance Holding S.A.(a)..... 2,179 2,256,666
Swatch Group, (The) AG............. 2,940 1,978,168
------------
12,314,131
------------
UNITED KINGDOM -- 13.91%
Barclay's Bank ORD................. 51,623 1,504,593
Barclays plc-Sponsored ADR......... 500 59,750
Billiton plc....................... 247,039 861,564
BP Amoco plc....................... 30,000 537,203
British Airways plc................ 243,000 1,671,016
Cadbury Schweppes plc.............. 165,270 1,055,085
Corporate Services Group plc....... 485,000 649,830
Diageo plc......................... 156,463 1,630,242
Gallaher Group plc................. 359,000 2,212,637
Hanson plc Sponsored ADR........... 24,900 1,104,938
Imperial Chemical Industries plc... 126,660 1,251,832
National Westminster Bank plc...... 49,194 1,042,198
Next plc........................... 68,000 826,423
Pilkington plc..................... 1,504,320 2,062,996
PowerGen plc....................... 132,305 1,423,370
Rio Tinto plc...................... 36,912 614,427
Shell Transport & Trading Co.
plc.............................. 220,539 1,653,007
Tate & Lyle plc.................... 223,000 1,400,787
------------
21,561,898
------------
LATIN AMERICA -- 4.62%
- ----------------------------------
ARGENTINA -- 0.69%
Telecom Argentina S.A. Sponsored
ADR.............................. 18,000 481,500
Telefonica de Argentina S.A. --
Sponsored ADR.................... 18,600 583,575
------------
1,065,075
------------
BRAZIL -- 2.89%
Centrais Electricas Brasileiras
S.A. (Electrobras) Preferred..... 24,400,000 491,317
Cia Vale do Rio Doce -- Preferred
A................................ 53,000 1,040,301
Petroleo Brasileiro S.A.
(Petrobras)...................... 4,000,000 620,435
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Telecomunicacoes Brasileiras S.A.
(Telebras) -
Sponsored ADR Preferred Block.... 25,800 $ 2,326,838
------------
4,478,891
------------
CHILE -- 1.04%
A.F.P. Provida S.A.-Sponsored
ADR.............................. 23,900 525,800
Cia de Telecomunicaciones de Chile
S.A. Sponsored ADR............... 18,200 450,450
Empresa Nacional de Electricidad
S.A. -- Sponsored ADR............ 11,239 136,273
Vina Concha y Toro S.A. Sponsored
ADR.............................. 14,000 504,000
------------
1,616,523
------------
TOTAL INVESTMENTS -- 93.26%
(Cost -- $135,958,525)(d)........ 144,580,000
OTHER ASSETS, LESS LIABILITIES --
6.74% ........................... 10,444,156
------------
NET ASSETS -- 100%................. $155,024,156
============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
ORD -- Ordinary
(a) Non-income producing security
(b) Under the Malaysian Government policy,
which went into effect on February 15,
1999, proceeds repatriated from the sale of
Malaysian securities will be subject to a
graduated levy. The levy ranges from zero
to ten percent of proceeds, depending on
the holding period and the time of
repatriation.
(c) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
(d) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation.............. $ 22,251,640
Gross unrealized depreciation.............. (13,630,165)
------------
Net unrealized appreciation............ $ 8,621,475
============
</TABLE>
<TABLE>
<S> <C> <C>
Purchases and sales of securities other than short-term
obligations aggregated $19,898,488 and $29,549,575,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
4
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STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $135,958,525)..... $144,580,000
Cash........................................................ 9,072,563
Receivables
Investments sold.......................................... 247,132
Fund shares sold.......................................... 1,313,370
Dividends and interest.................................... 530,594
Reclaim................................................... 219,142
Manager for expense reimbursement......................... 14,718
Deferred organization expenses.............................. 36,674
Other assets................................................ 24,426
------------
Total assets.............................................. 156,038,619
------------
LIABILITIES
Payables
Fund shares repurchased................................... 493,422
Management fee............................................ 126,620
12b-1 service and distribution fees....................... 119,070
Other payables to related parties......................... 53,555
Accrued expenses............................................ 221,796
------------
Total liabilities......................................... 1,014,463
------------
NET ASSETS.................................................. $155,024,156
============
CLASS A
Net asset value and redemption price per share
($30,003,544/2,841,580 shares outstanding)................ $ 10.56
============
Maximum offering price per share ($10.56 X 100/94.25)*...... $ 11.20
============
CLASS B
Net asset value, offering price and redemption price** per
share ($84,626,921/8,092,823 shares outstanding).......... $ 10.46
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($39,467,136/3,774,100 shares outstanding).......... $ 10.46
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($926,555/87,527 shares outstanding)................ $ 10.59
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $150,488,173
Accumulated net realized loss on investments and foreign
currency transactions................................... (5,005,437)
Undistributed net investment income....................... 1,101,228
Net unrealized appreciation on investments and foreign
currency transactions................................... 8,440,192
------------
NET ASSETS.................................................. $155,024,156
============
</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>
The accompanying notes are an integral part of the financial statements.
5
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IVY INTERNATIONAL FUND II
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STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $291,712 foreign taxes withheld......... $ 2,745,185
Interest.................................................. 90,906
-----------
2,836,091
-----------
EXPENSES
Management fee............................................ $ 732,694
Transfer agent............................................ 215,433
Administrative services fee............................... 73,269
Custodian fees............................................ 59,636
Blue Sky fees............................................. 13,710
Auditing and accounting fees.............................. 11,794
Shareholder reports....................................... 20,992
Amortization of organization expenses..................... 6,614
Fund accounting........................................... 51,301
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 633,182
Legal..................................................... 13,009
Other..................................................... 4,324
-----------
1,839,935
Expenses reimbursed by Manager............................ (107,709)
-----------
Net expenses.......................................... 1,732,226
-----------
NET INVESTMENT INCOME....................................... 1,103,865
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 1,327,676
Net change in unrealized depreciation on investments and
foreign currency transactions,
net of taxes of $175,456................................ 13,101,219
-----------
Net gain on investment transactions................... 14,428,895
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $15,532,760
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 1,103,865 $ 351,883
Net realized gain (loss) on investments and foreign
currency transactions................................... 1,327,676 (6,356,123)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 13,101,219 8,408,731
------------ ------------
Net increase resulting from operations................ 15,532,760 2,404,491
------------ ------------
Class A distributions
Dividends from net investment income...................... -- (201,553)
Distributions from capital gains.......................... -- (50,056)
------------ ------------
Total distributions to Class A shareholders........... -- (251,609)
------------ ------------
Class B distributions
Dividends from net investment income...................... -- (108,829)
Distributions from capital gains.......................... -- (162,528)
------------ ------------
Total distributions to Class B shareholders........... -- (271,357)
------------ ------------
Class C distributions
Dividends from net investment income...................... -- (34,675)
Distributions from capital gains.......................... -- (81,212)
------------ ------------
Total distributions to Class C shareholders........... -- (115,887)
------------ ------------
Advisor Class distributions
Dividends from net investment income...................... -- (6,205)
Distributions from capital gains.......................... -- (1,005)
------------ ------------
Total distributions to Advisor Class shareholders..... -- (7,210)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... 2,117,749 8,457,795
Class B................................................... (4,810,892) 26,171,167
Class C................................................... (5,002,355) 13,054,497
Advisor Class............................................. 337,623 479,551
------------ ------------
Net (decrease) increase resulting from Fund share
transactions......................................... (7,357,875) 48,163,010
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 8,174,885 49,921,438
NET ASSETS
Beginning of period....................................... 146,849,271 96,927,833
------------ ------------
END OF PERIOD............................................. $155,024,156 $146,849,271
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 1,101,228 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
CLASS A
------------------------------------------------
for the six for the period
months ended for the year May 13, 1997
June 30, ended (commencement)
(unaudited) December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.48 $ 8.98 $ 10.01
------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .11(b) .08 -- (b
Net gains or losses on securities (both realized and
unrealized)............................................. .97(b) .52 (1.03)(b)
------------------------------------------------
Total from investment operations.......................... 1.08 .60 (1.03)
------------------------------------------------
Less distributions
Dividends from net investment income...................... -- .08 --
Distributions from capital gains.......................... -- .02 --
------------------------------------------------
Total distributions..................................... -- .10 --
------------------------------------------------
Net asset value, end of period.............................. $ 10.56 $ 9.48 $ 8.98
================================================
Total return (%)............................................ 11.39(c) 6.63(d) (10.29)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $30,004 $24,993 $16,202
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.72(e) 1.74 1.80 (e)
Without expense reimbursement (%)......................... 1.87(e) 1.88 2.11 (e)
Ratio of net investment income to
average net assets (%)(a)................................. 2.15(e) .80 .12 (e)
Portfolio turnover rate (%)................................. 13 16 10
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
for the six for the period
months ended for the year May 13, 1997
June 30, ended (commencement)
(unaudited) December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.42 $ 8.93 $ 10.01
------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .07(b) .01 (.02)(b)
Net gains or losses on securities (both realized and
unrealized)............................................. .97(b) .51 (1.06)(b)
------------------------------------------------
Total from investment operations.......................... 1.04 .52 (1.08)
------------------------------------------------
Less distributions
Dividends from net investment income...................... -- .01 --
Distributions from capital gains.......................... -- .02 --
------------------------------------------------
Total distributions..................................... -- .03 --
------------------------------------------------
Net asset value, end of period.............................. $ 10.46 $ 9.42 $ 8.93
================================================
Total return (%)............................................ 11.04(c) 5.84(d) (10.29)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $84,627 $80,938 $53,652
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.52(e) 2.49 2.63 (e)
Without expense reimbursement (%)......................... 2.67(e) 2.63 2.94 (e)
Ratio of net investment income to
average net assets (%)(a)................................. 1.35(e) .05 (.71)(e)
Portfolio turnover rate (%)................................. 13 16 10
</TABLE>
8
<PAGE> 9
- ----------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------
for the six for the period
months ended for the May 13, 1997
June 30, year ended (commencement)
(unaudited) December 31, to December 31,
-------------------------------------------------
1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C>
$ 9.42 $ 8.93 $ 10.01
-------------------------------------------------
.07(b) .01 (.02)(b)
.97(b) .51 (1.06)(b)
-------------------------------------------------
1.04 .52 (1.08)
-------------------------------------------------
-- .01 --
-- .02 --
-------------------------------------------------
-- .03 --
-------------------------------------------------
10.46 $ 9.42 $ 8.93
=================================================
11.04(c) 5.79(d) (10.79)(c)
$39,467 $40,408 $27,074
2.48(e) 2.52 2.63 (e)
2.63(e) 2.66 2.94 (e)
1.39(e) .03 (.71)(e)
13 16 10
</TABLE>
- ------------------------------------
(a) Net investment income (loss) 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) Total return does not reflect a sales charge.
(e) Annualized.
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------
for the six for the period
months ended February 23, 1998
June 30, (commencement)
(unaudited) to December 31,
------------------------------------
1999 1998
--------------------------------
<S> <C> <C>
$ 9.48 $ 9.63
------------------------------------
.12(b) .11
.99(b) (.13)
------------------------------------
1.11 (.02)
------------------------------------
-- .11
-- .02
------------------------------------
-- .13
------------------------------------
$ 10.59 $ 9.48
====================================
11.71(c) (.15)(c)
$ 927 $ 510
1.40(e) 1.32 (e)
1.55(e) 1.45 (e)
2.47(e) 1.23 (e)
13 16
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 10
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
- --------------------------------------------------------------------------------
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, Class I 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 on which
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, or on the basis of
dealer quotes. 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, 1999,
securities valued by the Valuation Committee have no value 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. 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
$5,002,000 as of December 31, 1998, 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 carryforward expires in
2006.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At June 30,
1999, the interest rate was 4.25%.
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 prior to the
effectiveness of Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities," 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, certain securities sold at a loss and non-deductible organization
expenses. As a result, Net investment income and Net realized loss on
investments and foreign currency transactions for a reporting period may differ
significantly in amount and character from distributions during such
10
<PAGE> 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
period. Accordingly, the Fund may make reclassifications among certain of its
capital accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI 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. For each of the following nine
years, IMI will limit these expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $6,236.
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
$32,020, $406,760 and $194,402, 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 $33,541, $127,664, $53,567 and $661, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 4,863,092 $ 49,119,133 3,061,303 $ 29,570,905
Issued on
reinvestment of
distributions....... -- -- 15,261 144,365
Repurchased.......... (4,658,813) (47,001,384) (2,243,793) (21,257,475)
---------- ------------ ---------- ------------
Net increase......... 204,279 $ 2,117,749 832,771 $ 8,457,795
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 819,319 $ 8,114,968 4,025,742 $ 39,206,826
Issued on
reinvestment of
distributions....... -- -- 10,410 97,963
Repurchased.......... (1,318,272) (12,925,860) (1,449,615) (13,133,622)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (498,953) $ (4,810,892) 2,586,537 $ 26,171,167
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 601,034 $ 6,013,161 2,507,595 $ 24,353,309
Issued on
reinvestment of
distributions....... -- -- 2,941 27,679
Repurchased.......... (1,116,947) (11,015,516) (1,251,137) (11,326,491)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (515,913) $ (5,002,355) 1,259,399 $ 13,054,497
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED FEBRUARY 23, 1998
JUNE 30, 1999 (COMMENCEMENT) TO
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------------
ADVISOR
CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 48,344 $ 482,855 153,684 $ 1,513,323
Issued on
reinvestment
of distributions.... -- -- 442 4,188
Repurchased.......... (14,633) (145,232) (100,310) (1,037,960)
---------- ------------ ---------- ------------
Net increase......... 33,711 $ 337,623 53,816 $ 479,551
========== ============ ========== ============
</TABLE>
11
<PAGE> 12
03IIF2063099
<PAGE> 13
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY INTERNATIONAL FUND
MARKET COMMENTARY
During the first half of 1999, European markets were dominated by the
introduction of the euro. This currency, which is used by 11 countries in Europe
(eurozone), became effective on January 1, 1999 for financial transactions and
an era of a single interest-rate policy for the participating members commenced.
The euro has been weak relative to the US dollar, and investment results in
Europe absorbed the pressure on the currency.
It was anticipated by analysts and investors that the advent of the euro
would bring a period of consolidation in Europe, as countries and companies
devised strategies to compete in this new environment. We have seen these
developments in various industries, from financial services to integrated oil
companies. In the financial services industry, the news has been dominated by
the first hostile takeover offer of note in France by Banque Nationale de Paris
(BNP) to both Societe Generale (SocGen) and Paribas. All three companies were
holdings of Ivy International Fund at June 30, 1999. The French government has
not intervened to stop BNP, which must convince shareholders of the long-term
wisdom of creating the world's largest bank (measured by assets) through their
proposed absorbtion of the other two banks. BNP's offer interrupted a friendly
merger between SocGen and Paribas. This kind of merger, which, in our view, will
inevitably lead to restructuring and potential job losses, signals a
forward-thinking approach by the French government, which is apparently
acknowledging that job creation will follow in a dynamically restructured
economy.
The oil industry in France is also undergoing consolidation as evidenced by
Total Fina (a cross-border combination of Total SA of France and Petrofina of
Belgium) making a hostile bid for Elf Aquitaine, the other large integrated oil
company in France. The combination of those two companies would be the world's
fourth-largest oil company. Again, the French government has indicated that it
will not interfere with the bid. Elf has countered with a "Pac-Man" defense by
offering to take over Total Fina. Since both participants agree on the benefits
of a merger, we can presume that it will take place, one way or the other.
In Italy, Banca Commerciale Italiana was the target of merger activity; one
proposal was undone by a minority shareholder, only to be replaced by a second
plan. We believe the new proposal will prevail, resulting in an all-Italian
merger. Two large banks in Spain have merged, BCH and Santander, with
implications for their subsidiaries in Portugal. Banco Comercial Portugues, a
Portuguese bank, which is represented in the Ivy
<PAGE> 14
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
International Fund's portfolio, has made a hostile takeover offer for a
financial services company whose proposed merger with a Spanish bank has been
denied by the Portuguese authorities. This denial is being appealed to the
European Union. In our view, this is an indication of the degree of complexity,
rancor and opportunity now prevailing in the eurozone.
A company called Eurotunnel has the franchise to own and operate the tunnel
that connects England and France. Due to cost overruns relating to changed
specifications and delays in construction, the company has had to refinance
several times to avoid insolvency. Eurotunnel is now functioning and has
established a pattern of operation that provides an operating profit. The
financial restructurings have enabled the company to show full profits for
certain periods, and it appears that investors have gained more confidence in
the security, which is a combination of a French share and a British share.
Shares of Eurotunnel, which were purchased by Ivy International Fund during
periods of weakness in the stock, are now showing a profit.
Although, in the view of the manager of Ivy International Fund, the
environment in parts of the Far East is still precarious, as the threat of a
devaluation by China of its currency hangs over the region, the Japanese market
has shown some improvement during the first half of 1999. It has moved mainly on
foreign liquidity, not shareholder-beneficial fundamentals such as yield and
price to earnings ratios. The cross-holdings in stocks between companies have
been reduced from a high of 55% to what is believed by analysts to be a current
position in the low forties. According to our research, many Japanese companies
have high depreciation, indicating that cash flow is being spent on capital
projects. Since the high depreciation continues, the shareholder does not
eventually receive the long-term benefit of high capital expenditures. We
believe the cutting of the corporate tax rate in Japan, which reduces the
penalty for reporting corporate earnings, should alleviate this situation over
time.
Singapore and Malaysia have shown improvements, as their markets have
responded to the easing of the economic crisis in the region. In South Africa,
the recovery by metals has stimulated stock prices and stabilized the rand,
South Africa's currency. South America has been volatile, as political and
economic news, such as the devaluation of the Brazilian currency, has buffeted
Argentina and Brazil. The takeover of YPF, the Argentine oil company, by Repsol
of Spain gave a boost to valuations in Argentina.
Going forward, we expect the euro will strengthen relative to the US dollar
from its recent low levels. With approximately 77% of Ivy International Fund
invested in Europe as of June 30, 1999, this would be positive for the Fund. We
also believe that general economic conditions world wide will continue to
improve as companies begin to focus attention on their future earnings
potential.
IVY MANAGEMENT, INC.
2
<PAGE> 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 98.43% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 1.11%
- -------------------------------
SOUTH AFRICA -- 1.11%
Anglo American plc(a)........... 26,900 $ 1,257,109
Anglo American plc Sponsored
ADR(a)........................ 443,250 21,165,188
Gencor Limited.................. 95,280 262,109
Gencor Limited ADR.............. 1,200,000 3,301,200
------------
25,985,606
------------
ASIA -- 14.05%
- -------------------------------
JAPAN -- 7.56%
Bridgestone Corp................ 1,200,000 36,286,676
Canon Inc....................... 1,200,000 34,502,086
Fuji Photo Film ORD............. 850,000 32,163,941
Sharp Corporation............... 3,500,000 41,351,278
Sony Corporation................ 302,000 32,561,343
------------
176,865,324
------------
MALAYSIA (B) -- 2.73%
Malayan Banking Berhad.......... 4,600,000 13,800,000
Sime Darby Berhad............... 21,500,000 28,176,316
Telekom Malaysia Berhad......... 5,875,000 21,953,947
------------
63,930,263
------------
SINGAPORE -- 3.76%
Fraser & Neave Ltd. ORD......... 8,000,000 35,477,906
Oversea-Chinese Banking
Corporation Ltd............... 3,500,000 29,192,913
United Overseas Bank Ltd. --
Foreign Registered............ 3,312,407 23,153,236
------------
87,824,055
------------
AUSTRALIA -- 1.51%
- -------------------------------
News Corp. Ltd. ADR............. 1,000,000 35,312,500
------------
EUROPE -- 77.19%
- -------------------------------
DENMARK -- 1.02%
Novo Nordisk A/S -- Class B..... 220,000 23,768,809
------------
FRANCE -- 16.19%
AXA-UAP......................... 300,000 36,599,843
Banque Nationale de Paris....... 320,032 26,667,235
Compagnie de Saint Gobain....... 130,000 20,713,098
Compagnie Financiere de
Paribas....................... 367,257 41,169,240
Compagnie Generale des
Establissements Michelin Class
B REGD........................ 356,752 14,594,924
Eurotunnel S.A. Units(a)........ 14,846,000 21,893,678
Eurotunnel S.A. Warrants(a)..... 10,000,000 1,650,035
Pechiney S.A. Class A........... 715,700 30,763,232
Rhone Poulenc S.A............... 567,790 25,945,540
Societe Generale................ 147,000 25,907,925
Societe Nationale d'Exploitation
Industrielle des Tabacs et
Allumettes (SEITA)............ 691,570 39,939,020
Suez Lyonnaise des Eaux......... 222,611 40,152,229
Total Fina S.A. -- "B" Shares... 407,995 52,636,303
------------
378,632,302
------------
ITALY -- 5.35%
Assicurazioni Generali.......... 1,392,000 48,233,829
Banca Commericale Italiana...... 7,540,000 55,052,599
San Paolo -- IMI SpA(a)......... 1,595,700 21,721,930
------------
125,008,358
------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
NETHERLANDS -- 4.77%
ABN Amro Holding NV............. 1,502,057 $ 32,529,616
Hunter Douglas NV............... 152,901 5,250,828
ING Groep NV.................... 652,449 35,324,750
Royal Dutch Petroleum ADR....... 640,000 38,560,000
------------
111,665,194
------------
NORWAY -- 1.39%
Bergesen d.y. ASA -- A Shares... 2,202,000 32,447,214
Frontline Warrants.............. 804,393 --
------------
32,447,214
------------
PORTUGAL -- 1.68%
Banco Comercial Portugues, S.A.
Preferred..................... 400,000 39,200,000
------------
SPAIN -- 4.13%
Banco Bilbao Vizcaya REGD....... 900,000 13,003,309
Bankinter, S.A.................. 700,000 28,514,671
Repsol S.A...................... 2,700,000 55,131,801
------------
96,649,781
------------
SWEDEN -- 9.75%
AGA AB Series B Free............ 2,250,000 27,788,413
Autoliv, Inc. Swedish Depository
Receipt....................... 1,600,000 48,742,935
Ericsson LM Telephone Series B
Free.......................... 2,000,000 64,104,487
Svenska Cellulosa AB (SCA) --
Series B...................... 1,200,000 31,052,449
Swedish Match AB................ 9,000,000 32,075,768
Volvo AB B Free................. 837,500 24,282,515
------------
228,046,567
------------
SWITZERLAND -- 13.50%
Compagnie Financiere Michelin... 45,000 19,654,700
Compagnie Financiere Richemont
AG............................ 37,000 71,163,458
Credit Suisse Group REGD........ 77,035 13,329,827
Nestle SA REGD.................. 20,000 36,035,225
Novartis AG REGD................ 18,096 26,423,636
Sairgroup....................... 150,000 31,406,995
Swiss Re REGD................... 20,655 39,327,926
UBS AG -- REGD(a)............... 109,976 32,824,644
Zurich Versicherungsgesellschaft
REGD (Zurich Allied AG)....... 80,000 45,491,094
------------
315,657,505
------------
UNITED KINGDOM -- 19.41%
Allied Zurich plc............... 2,057,244 25,699,457
Barclay's Bank ORD.............. 490,560 14,297,757
BG plc.......................... 6,176,470 37,799,902
Billiton plc.................... 476,400 1,646,074
Billiton plc ADR................ 6,000,000 20,484,000
BP Amoco plc.................... 2,430,808 43,527,915
British American Tobacco plc.... 2,057,244 19,197,576
Cadbury Schweppes plc ADR....... 860,162 22,901,813
Diageo plc...................... 3,497,433 36,440,954
Imperial Tobacco Group.......... 5,500,000 60,080,675
National Westminster Bank plc... 2,025,841 42,918,398
Rio Tinto plc................... 1,670,228 27,802,161
Smithkline Beecham plc ADR...... 500,000 33,031,250
Standard Chartered plc.......... 2,735,000 44,836,277
Whitbread plc................... 1,500,000 23,313,477
------------
453,977,686
------------
</TABLE>
3
<PAGE> 16
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(CONTINUED)JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
SOUTH AMERICA -- 4.57%
- -----------------------------
ARGENTINA -- 1.70%
Telecom de Argentina S.A.
Class B..................... 3,300,000 $ 18,152,305
Telefonica de Argentina S.A.
Class B..................... 7,000,000 21,702,756
--------------
39,855,061
--------------
BRAZIL -- 2.87%
Centrais Electricas
Brasileiras S.A.
(Electrobras) Preferred..... 1,030,000,000 20,740,021
Centrais Geradoras do Sul do
Brazil S.A (Gerasul)
Preferred B................. 600,000,000 490,708
Petroleo Brasileiro S.A.
(Petrobras)................. 187,300,000 29,051,879
Telecomunicacoes de Sao Paulo
S.A. (Telesp) Preferred..... 124,360,350 14,589,789
Telesp Partcipacoes S.A.
Preferred................... 92,900,000 2,122,142
--------------
66,994,539
--------------
TOTAL EQUITY SECURITIES
(Cost -- $1,683,165,895).... 2,301,820,764
--------------
CONVERTIBLE BONDS -- 0.69% PRINCIPAL
- ----------------------------- -------------
Liberty Life International BV
144A REGD, 6.50%, 09/30/04
(Cost -- $17,552,973)....... $ 16,500,000 16,087,500
--------------
COMMERCIAL PAPER -- 0.77%
- -----------------------------
American Express, 5.35%,
07/01/99
(Cost -- $18,105,691)....... 18,103,000 18,105,691
--------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
VALUE
- --------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS -- 99.89%... $2,336,013,955
(Cost -- $1,718,824,559)(c)
OTHER ASSETS, LESS LIABILITIES -- 0.11% 2,618,866
--------------
NET ASSETS -- 100%............ $2,338,632,821
==============
ADR -- American Depository Receipt
ORD -- Ordinary
REGD -- Registered
(a) Non-income producing security
(b) Under the Malaysian Government policy,
which went into effect on February 15,
1999, proceeds repatriated from the sale
of Malaysian securities will be subject
to a graduated levy. The levy ranges from
zero to ten percent of proceeds,
depending on the holding period and the
time of repatriation.
(c) Cost is approximately the same for
Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............ $ 721,952,366
Gross unrealized depreciation............ (104,762,970)
--------------
Net unrealized appreciation.......... $ 617,189,396
==============
Purchases and sales of securities other than short-term
obligations aggregated $40,773,697 and $301,931,517,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
4
<PAGE> 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $1,718,824,559)... $2,336,013,955
Cash........................................................ 99,766
Receivables
Investments sold.......................................... 4,426,874
Fund shares sold.......................................... 7,242,211
Dividends and Interest.................................... 5,876,182
Reclaim................................................... 3,687,451
Other assets................................................ 41,968
--------------
Total assets.............................................. 2,357,388,407
--------------
LIABILITIES
Payables
Fund shares repurchased................................... 12,487,137
Management fee............................................ 1,963,947
12b-1 service and distribution fees....................... 926,064
Other payables to related parties......................... 656,905
Accrued expenses............................................ 2,721,533
--------------
Total liabilities......................................... 18,755,586
--------------
NET ASSETS.................................................. $2,338,632,821
==============
CLASS A
Net asset value and redemption price per share
($1,532,847,487/34,743,347 shares outstanding)............ $ 44.12
==============
Maximum offering price per share ($44.12 x 100/94.25)*...... $ 46.81
==============
CLASS B
Net asset value, offering price and redemption price** per
share ($521,258,947/11,917,511 shares outstanding)........ $ 43.74
==============
CLASS C
Net asset value, offering price and redemption price*** per
share ($140,931,008/3,236,382 shares outstanding)......... $ 43.55
==============
CLASS I
Net asset value, offering price and redemption price per
share ($143,595,379/3,243,927 shares outstanding)......... $ 44.27
==============
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,665,591,443
Undistributed net realized gain on investments and foreign
currency transactions................................... 47,650,570
Undistributed net investment income....................... 10,832,253
Net unrealized appreciation on investments and foreign
currency transactions................................... 614,558,555
--------------
NET ASSETS.................................................. $2,338,632,821
==============
</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>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 18
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $3,739,027 foreign taxes withheld....... $ 32,489,048
Interest.................................................. 1,036,513
------------
33,525,561
------------
EXPENSES
Management fee............................................ $11,915,076
Transfer agent............................................ 3,300,650
Administrative services fee............................... 1,118,582
Custodian fees............................................ 912,085
Blue Sky fees............................................. 43,182
Auditing and accounting fees.............................. 35,706
Shareholder reports....................................... 157,580
Fund accounting........................................... 115,757
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 5,123,806
Legal..................................................... 32,781
Other..................................................... 78,738
------------
Total expenses........................................ 22,837,920
------------
NET INVESTMENT INCOME....................................... 10,687,641
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 61,013,694
Net change in unrealized appreciation on investments and
foreign currency transactions, net of taxes of
$2,141,710.............................................. 90,959,335
------------
Net gain on investment transactions................... 151,973,029
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $162,660,670
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
-------------------------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income....................................... $ 10,687,641 $ 16,050,836
Net realized gain on investments and foreign currency
transactions............................................ 61,013,694 13,086,365
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 90,959,335 133,784,460
-------------- --------------
Net increase resulting from operations................ 162,660,670 162,921,661
-------------- --------------
Class A distributions
Dividends from net investment income...................... -- (13,536,256)
Distributions
From capital gains...................................... -- (8,545,034)
In excess capital gains................................. -- (5,018,512)
-------------- --------------
Total distributions to Class A shareholders........... -- (27,099,802)
-------------- --------------
Class B distributions
From capital gains........................................ -- (2,888,018)
In excess of capital gains................................ -- (1,696,137)
-------------- --------------
Total distributions to Class B shareholders........... -- (4,584,155)
-------------- --------------
Class C distributions
From capital gains........................................ -- (828,687)
In excess of capital gains................................ -- (486,689)
-------------- --------------
Total distributions to Class C shareholders........... -- (1,315,376)
-------------- --------------
Class I distributions
Dividends from net investment income...................... -- (1,959,855)
Distributions
From capital gains...................................... -- (810,329)
In excess of capital gains.............................. -- (475,907)
-------------- --------------
Total distributions to Class I shareholders........... -- (3,246,091)
-------------- --------------
Fund share transactions (Note 4)
Class A................................................... (187,885,881) (174,806,618)
Class B................................................... (56,168,082) (54,146,360)
Class C................................................... (22,832,231) (28,691,544)
Class I................................................... (25,313,087) 34,921,011
-------------- --------------
Net decrease resulting from Fund share transactions... (292,199,281) (222,723,511)
-------------- --------------
TOTAL DECREASE IN NET ASSETS................................ (129,538,611) (96,047,274)
NET ASSETS
Beginning of period....................................... 2,468,171,432 2,564,218,706
-------------- --------------
END OF PERIOD............................................. $2,338,632,821 $2,468,171,432
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 10,832,253 $ 144,612
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 20
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 41.20 $ 39.03 $ 35.89 $ 30.67 $ 27.60 $ 27.71
--------------------------------------------------------------------------------
Income from investment operations
Net investment income (loss).............. .22 .37 .24 .20 .25 .07
Net gains on securities (both realized and
unrealized)............................. 2.70 2.50 3.47 5.85 3.22 1.01
--------------------------------------------------------------------------------
Total from investment operations.......... 2.92 2.87 3.71 6.05 3.47 1.08
--------------------------------------------------------------------------------
Less distributions
Dividends from net investment income...... -- .35 .21 .19 .25 .07
Distributions
From capital gains...................... -- .22 .26 .64 .12 1.11
In excess of capital gains.............. -- .13 .10 -- .03 --
Returns of capital........................ -- -- -- -- -- .01
--------------------------------------------------------------------------------
Total distributions..................... -- .70 .57 .83 .40 1.19
--------------------------------------------------------------------------------
Net asset value, end of period.............. $ 44.12 $ 41.20 $ 39.03 $ 35.89 $ 30.67 $ 27.60
================================================================================
Total return (%)............................ 7.09(a) 7.34(b) 10.38(b) 19.72(b) 12.65(b) 3.92(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $1,532,847 $1,613,797 $1,705,772 $ 989,254 $ 475,989 $ 229,586
Ratio of expenses to
average net assets (%).................... 1.78(c) 1.58 1.59 1.65 1.52 1.58
Ratio of net investment income to
average net assets (%).................... 1.03(c) .83 .68 .76 .97 .30
Portfolio turnover rate (%)................. 2 15 8 14 6 7
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 40.97 $ 38.82 $ 35.73 $ 30.67 $ 27.60 $ 27.71
--------------------------------------------------------------------------------
Income from investment operations
Net investment income (loss).............. .08 -- (.06) (.01) .01 (.10)
Net gains or losses on securities (both
realized and unrealized)................ 2.69 2.50 3.44 5.76 3.20 .91
--------------------------------------------------------------------------------
Total from investment operations.......... 2.77 2.50 3.38 5.75 3.21 .81
--------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income.............. -- -- -- -- .01 --
In excess of net investment income...... -- -- -- .05 -- --
Distributions
From capital gains...................... -- .22 .21 .64 .10 .90
In excess of capital gains.............. -- .13 .08 -- .03 --
Returns of capital........................ -- -- -- -- -- .02
--------------------------------------------------------------------------------
Total distributions..................... -- .35 .29 .69 .14 .92
--------------------------------------------------------------------------------
Net asset value, end of period.............. $ 43.74 $ 40.97 $ 38.82 $ 35.73 $ 30.67 $ 27.60
================================================================================
Total return (%)............................ 6.76(a) 6.43(b) 9.46(b) 18.76(b) 11.62(b) 2.96(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $ 521,259 $ 542,997 $ 568,521 $ 312,161 $ 74,650 $ 30,143
Ratio of expenses to average net assets
(%)....................................... 2.42(c) 2.41 2.42 2.45 2.44 2.50
Ratio of net investment income (loss) to
average net assets (%).................... .40(c) (.01) (.15) (.04) .05 (.62)
Portfolio turnover rate (%)................. 2 15 8 14 6 7
</TABLE>
8
<PAGE> 21
- ------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
--------------------------------------------------------
1999 1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
$ 40.79 $ 38.64 $ 35.58 $ 32.68
--------------------------------------------------------
.09 -- (.05) --
2.67 2.50 3.42 3.74
--------------------------------------------------------
2.76 2.50 3.37 3.74
--------------------------------------------------------
-- -- .01 --
-- -- -- .20
-- .22 .21 .64
-- .13 .09 --
--------------------------------------------------------
-- .35 .31 .84
--------------------------------------------------------
$ 43.55 $ 40.79 $ 38.64 $ 35.58
========================================================
6.77(a) 6.46(b) 9.50(b) 11.45(a)
$140,931 $154,378 $174,880 $44,450
2.40(c) 2.40 2.41 2.44(c)
.41(c) .01 (.14) (.03)(c)
2 15 8 14
</TABLE>
- --------------------------------------------------------------------------------
(a) Total return
represents
aggregate total
return and does
not reflect a
sales charge.
(b) Total return
does not reflect
a sales charge.
(c) Annualized
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------------------------------
for the six for the period
months ended October 6, 1994
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 41.21 $ 39.06 $ 35.89 $ 30.67 $ 27.60 $ 29.06
------------------------------------------------------------------------------
.35 .55 .32 .27 .30 .03
2.71 2.48 3.56 5.88 3.22 (.49)
------------------------------------------------------------------------------
3.06 3.03 3.88 6.15 3.52 (.46)
------------------------------------------------------------------------------
-- .53 .32 .27 .30 .03
-- -- -- .02 -- --
-- .22 .28 .64 .12 .92
-- .13 .11 -- .03 --
-- -- -- -- -- .05
------------------------------------------------------------------------------
-- .88 .71 .93 .45 1.00
------------------------------------------------------------------------------
$ 44.27 $ 41.21 $ 39.06 $ 35.89 $ 30.67 $ 27.60
==============================================================================
7.43(a) 7.75(b) 10.87(b) 20.06(b) 12.85(b) (1.64)(a)
$143,595 $156,999 $115,046 $53,344 $13,020 $ 4,921
1.17(c) 1.18 1.18 1.25 1.35 1.41(c)
1.64(c) 1.23 1.08 1.16 1.14 .47(c)
2 15 8 14 6 7
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 22
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. 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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 and Net realized gain on investments and foreign currency transactions
for a reporting period may differ significantly in amount and character from
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's first $2.5 billion in average net assets and .90% of the Fund's average
net assets in excess of $2.5 billion. Northern Cross Investments Limited is the
subadviser of the Fund. IMI, not the Fund, is obligated to compensate the
subadviser.
10
<PAGE> 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1999, the net amount of underwriting
discounts retained by IMDI was $17,966.
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 $1,773,628, $2,628,521 and $721,657, 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 $2,598,772, $529,213, $133,602 and $39,063, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 3,777,073 $ 160,283,012 9,861,782 $ 405,629,284
Issued on
reinvestment of
distributions....... -- -- 490,806 20,221,191
Repurchased......... (8,202,891) (348,168,893) (14,882,098) (600,657,093)
---------- ------------- ----------- -------------
Net decrease......... (4,425,818) $(187,885,881) (4,529,510) $(174,806,618)
========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 201,762 $ 8,531,269 768,565 $ 31,626,287
Issued on
reinvestment of
distributions....... -- -- 54,506 2,233,625
Repurchased.......... (1,536,324) (64,699,351) (2,215,469) (88,006,272)
---------- ------------- ----------- -------------
Net decrease......... (1,334,562) $ (56,168,082) (1,392,398) $ (54,146,360)
========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 94,267 $ 3,981,724 389,550 $ 15,972,472
Issued on
reinvestment of
distributions....... -- -- 11,181 456,136
Repurchased.......... (642,498) (26,813,955) (1,141,755) (45,120,152)
---------- ------------- ----------- -------------
Net decrease......... (548,231) $ (22,832,231) (741,024) $ (28,691,544)
========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -------------------------------------------------------------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 454,402 $ 19,552,691 1,327,805 $ 53,170,870
Issued on
reinvestment of
distributions....... -- -- 66,618 2,745,340
Repurchased.......... (1,019,930) (44,865,778) (530,519) (20,995,199)
---------- ------------- ----------- -------------
Net (decrease)/
increase............ (565,528) $ (25,313,087) 863,904 $ 34,921,011
========== ============= =========== =============
</TABLE>
Effective April 18, 1997, the Fund suspended the offer of its shares to new
investors. Shares are available for purchase only by existing shareholders of
the Fund. Once a shareholder's account is liquidated, the shareholder may not
invest in the Fund at a later date.
11
<PAGE> 24
03IIFX063099
<PAGE> 25
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY INTERNATIONAL SMALL COMPANIES FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
According to our research, last year's should continue to improve, which would
high level of risk aversion has declined provide a positive impetus for European
in the first half of 1999. This seems to equity markets. And while the euro has
have resulted in many international continued to languish, we believe it is
small-capitalization stocks outperforming close to bottoming out and should be
their larger counterparts. After a stronger by the end of the year. In our
dramatic sell-off in 1998, international view, this would be positive for US
smaller companies have rallied strongly, investors.
which we believe to be the result of
improving sentiment about worldwide Our research indicates that European small
economic growth. Small-cap value stocks, caps hit very low levels by year-end 1998,
in particular, have done well, along with in part due to a preference by investors
emerging markets, commodity and other for liquidity, and in part due to the
cyclical stocks. We believe this stems predominance of cyclical industries in the
from a diminished uncertainty in the European small-cap universe. According to
international environment that has high- Morgan Stanley Capital International, at
lighted the excessive valuation discounts the end of 1998, the valuation spread
of these companies relative to larger-cap between European large- and small-cap
growth stocks. Going forward, we believe issues was at its widest in 20 years. In
that international small caps are likely our view, this created substantial oppor-
to continue to perform well due to tunities for value investors.
accelerating global growth, lower
uncertainty and the exceptional value our For example, portfolio holding Waterford
research indicates they offer investors. Wedgwood, one of the world's leading
manufacturers and distributors of premium
Since its launch in January, the crystal and ceramic tableware, sold off
euro, the new common currency adopted by dramatically last year based on investor
11 European nations, has weakened fears that the Asian economic crisis would
considerably due to concerns about weak erode profits. Despite group profit growth
domestic activity and a slowdown in of 10% in 1998, the share price declined
exports. The currency's weakness was exac- over 50% during the year. We believe the
erbated by continued strength in the US group, which has just completed a major
economy and concern over the political restructuring program and upgraded its
influence on economic policy in some manufacturing facilities, is well placed
European countries. Looking forward, we going forward to capitalize on its brand
believe the European economic background strength in key luxury goods markets
around the world. While we cannot say for
</TABLE>
<PAGE> 26
2
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
certain, we estimate double-digit compound annual profit growth over the next
five years. Despite sound fundamentals, our research indicates that the
company's shares continue to trade at around 12 times estimated 2000 earnings.
Rauma Oyj--a world leader in machinery used in the pulp and paper
industry--is another holding in the portfolio. As a result of a merger in 1999,
we believe the company (now known as Valmet-Rauma Oyj) is poised to benefit from
accelerating global growth and the upturn in the pulp and paper cycle. Despite
leading positions in all the market segments in which the company operates, the
shares continue to trade at 10 times estimated 2000 earnings and offer a yield
of over 5%. We expect the shares to be rerated as pulp and paper capital
expenditures increase. Overall, European smaller companies (about 50% of the Ivy
International Small Companies Fund, excluding UK investments) performed well
during the first half of 1999.
Smaller companies within the UK, which represent 23% of the Ivy
International Small Companies Fund at June 30, 1999, performed well in the first
half of the year. Following four interest rate cuts, the UK market has begun to
broaden out and we believe there is evidence that the UK economy is enjoying a
soft landing.
The Fund's Asian holdings, which represent about 14% of the portfolio, have
performed well. While some of the larger-cap Asian names performed better than
small caps as liquidity has returned to the region, we believe that
opportunities abound in many smaller-cap companies. Universal Robina, the
largest snack food producer and distributor in the Philippines, continues to be
a core holding in the Ivy International Small Companies Fund. It seems a strong
rebound in consumer demand has fueled dramatic earnings growth, which we expect
to continue over the next few years as the recovery strengthens. The stock
continues to trade below seven times estimated 2000 earnings.
Exposure to Latin America and Central and Eastern Europe in the Ivy
International Small Companies Fund continues to be concentrated in high-quality,
small-cap names. We expect that as fundamentals strengthen in these markets,
portfolio holdings, such as Gedeon Richter, a Hungarian pharmaceutical company,
and Tele Centro Oeste Celular, a cellular communications company in Brazil, will
make a strong contribution to performance.
The Fund's holdings reflect its value discipline. While discounts are no
longer as deep as they were at the beginning of 1999, in our view, valuation
gaps continue to be high. Portfolio holdings are concentrated in international
small caps that we believe offer exceptional long-term value, with valuations,
on average, about half those of the broader indices and, in many cases, with
substantially higher growth rates. We believe investors with exposure to
international small caps should be well rewarded and achieve substantial
diversification benefits.
IVY MANAGEMENT, INC.
<PAGE> 27
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 98.83% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
ASIA/PACIFIC -- 14.25%
- -------------------------------
AUSTRALIA -- 0.54%
BRL Hardy Limited............... 3,500 $ 14,841
------------
HONG KONG -- 4.45%
Axa China Region Limited........ 34,000 27,170
Jardine International Motor
Holdings Ltd.................. 48,000 24,747
Orient Overseas International
Ltd.(a)....................... 80,000 29,387
VTech Holdings Limited.......... 13,000 41,302
------------
122,606
------------
MALAYSIA(B) -- 4.23%
Berjaya Sports Toto Berhad...... 20,000 46,316
KFC Holdings (Malaysia)
Berhad........................ 55,000 70,342
------------
116,658
------------
NEW ZEALAND -- 1.69%
Fletcher Challenge Building..... 13,000 18,945
Tourism Holdings Limited(a)..... 20,884 27,667
------------
46,612
------------
PHILIPPINES -- 1.53%
Universal Robina Corporation.... 198,000 42,151
------------
SINGAPORE -- 1.81%
Clipsal Industries Limited...... 12,000 18,600
Elec & Eltek International Co.
Ltd........................... 8,000 31,200
------------
49,800
------------
EUROPE -- 81.24%
- -------------------------------
AUSTRIA -- 1.24%
Mayr-Melnhof Karton AG.......... 750 34,032
------------
CZECH REPUBLIC -- 1.68%
Inzenyrske a Prumyslove Stavby
(IPS)......................... 11,000 46,295
------------
DENMARK -- 1.64%
Jyske Bank A/S.................. 300 28,574
Sydbank A/S..................... 400 16,685
------------
45,259
------------
FINLAND -- 4.91%
Rapala Normark Corp.(a)......... 5,102 36,042
Valmet-Rauma Oyj................ 6,400 75,902
YIT-Yhtyma Oyj.................. 2,500 23,204
------------
135,148
------------
FRANCE -- 8.88%
Assurances Banque Populaire..... 291 28,510
Bongrain S.A.................... 75 28,308
Bull S.A.(a).................... 5,000 43,004
Etam Development S.A............ 1,636 72,379
MGI Coutier..................... 700 21,657
Scor S.A........................ 510 25,298
Union du Credit-Bail Immobilier
(Unibail)..................... 200 25,596
------------
244,752
------------
GERMANY -- 12.39%
BERU AG......................... 1,620 35,418
Dyckerhoff AG................... 115 33,800
Escada AG Preferred............. 200 26,762
Intershop Communications
AG(a)......................... 208 49,980
Merck KGaA...................... 640 20,724
Nemetschek AG(a)................ 400 27,844
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Sixt AG Non Vtg Pref............ 1,000 $ 53,626
Telegate AG(a).................. 1,600 54,780
Wanderer-Werke AG(a)............ 390 38,450
------------
341,384
------------
HUNGARY -- 1.97%
Danubius Hotel & Spa Rt.(a)..... 1,200 21,780
Gedeon Richter Rt............... 250 10,858
Pick Szeged Rt.................. 775 21,756
------------
54,394
------------
IRELAND -- 2.59%
Ryanair Holdings plc(a)......... 6,897 71,482
------------
ITALY -- 1.30%
Banca Popolare di Milano........ 4,650 35,918
------------
NETHERLANDS -- 6.10%
Athlon Groep NV................. 1,577 38,218
Beter Bed Holding NV............ 1,015 29,309
Devote NV(a).................... 3,200 49,336
Samas Groep NV.................. 3,448 51,026
------------
167,889
------------
NORWAY -- 3.10%
Ekornes ASA..................... 4,354 33,462
Tandberg Television ASA(a)...... 5,059 52,053
------------
85,515
------------
PORTUGAL -- 3.65%
Companhia de Seguros Mundial
Confianca S.A.(a)............. 750 29,592
Lusomundo-SGPS S.A.(a).......... 3,110 43,234
SIVA-SGPS S.A................... 2,593 27,677
------------
100,503
------------
SPAIN -- 1.53%
Enaco, S.A.(a).................. 5,000 42,024
------------
SWEDEN -- 3.34%
Esselte AB -- B Shares.......... 2,761 28,579
Finnveden AB.................... 3,400 49,790
Meto AG(a)...................... 2,761 13,672
------------
92,041
------------
SWITZERLAND -- 4.26%
Edipresse S.A................... 63 20,465
Swisslog Holding AG............. 500 60,546
Zehnder Holding AG -- Class B... 70 36,473
------------
117,484
------------
UNITED KINGDOM -- 22.66%
Admiral plc..................... 1,900 27,479
Care U.K. plc................... 5,455 18,960
Corporate Services Group Plc.... 13,275 17,787
Diagonal plc.................... 9,600 51,829
Druid Group plc................. 1,850 30,765
F.I. Group plc.................. 7,400 38,027
Fitness First plc(a) (with 802
Rights(a)).................... 7,225 78,835
Informa Group plc............... 9,000 52,420
Jarvis Hotels plc............... 8,370 18,405
Johnson Service Group plc....... 9,000 41,000
Luminar plc..................... 3,800 56,755
Nycomed Amersham plc............ 2,650 18,851
Parity Group plc................ 750 7,448
</TABLE>
<PAGE> 28
4
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- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
RM plc........................ 4,500 $ 35,467
Taylor Nelson Sofres plc...... 22,000 54,792
Waterford Wedgwood plc........ 72,600 75,530
--------------
624,350
--------------
SOUTH AMERICA -- 3.34%
- -----------------------------
BRAZIL -- 1.84%
Rossi Residencial S.A. GDR.... 7,600 9,263
Tam -- Cia de Invetimentos em
Transportes
Preferred(a)(c)............. 710,000 19,066
Tele Centro Oeste Celular
Part. S.A................... 18,000,000 22,335
--------------
50,664
--------------
CHILE -- 1.50%
A.F.P. Provida S.A.-Sponsored
ADR......................... 800 17,600
Cristalerias de Chile
Sponsored ADR............... 600 9,263
Vina Concha y Toro S.A.
Sponsored ADR............... 400 14,400
--------------
41,263
--------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES VALUE
<S> <C> <C>
TOTAL INVESTMENTS -- 98.83%
(Cost -- $2,642,489)(d)..... $ 2,723,065
OTHER ASSETS, LESS
LIABILITIES -- 1.17%........ 32,134
--------------
NET ASSETS -- 100%............ $ 2,755,199
==============
(a) Non-income producing security
(b) Under the Malaysian Government policy,
which went into effect on February 15,
1999, proceeds repatriated from the sale
of Malaysian securities will be subject
to a graduated levy. The levy ranges from
zero to ten percent of proceeds,
depending on the holding period and the
time of repatriation.
(c) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
(d) Cost is approximately the same for
Federal income tax purposes
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............ $ 394,283
Gross unrealized depreciation............ (313,707)
--------------
Net unrealized appreciation.......... $ 80,576
==============
Purchases and sales of securities other than short-term
obligations aggregated $2,269,740 and $2,787,764,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 29
5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $2,642,489)....... $2,723,065
Cash........................................................ 5,348
Receivables
Dividends and Interest.................................... 6,046
Manager for expense reimbursement......................... 31,410
Deferred organization expenses.............................. 24,276
Other assets................................................ 18,481
----------
Total assets.............................................. 2,808,626
----------
LIABILITIES
Payables
Fund shares repurchased................................... 14,601
Management fee............................................ 2,254
12b-1 service and distribution fees....................... 1,887
Other payables to related parties......................... 2,874
Accrued expenses............................................ 31,811
----------
Total liabilities......................................... 53,427
----------
NET ASSETS.................................................. $2,755,199
==========
CLASS A
Net asset value and redemption price per share
($882,316/89,671 shares outstanding)...................... $ 9.84
==========
Maximum offering price per share ($9.84 x 100/94.25)*....... $ 10.44
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($982,220/100,616 shares outstanding)............... $ 9.76
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($890,663/90,650 shares outstanding)................ $ 9.83
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $2,925,701
Accumulated net realized loss on investments and foreign
currency transactions................................... (252,595)
Undistributed net investment income....................... 4,594
Net unrealized appreciation on investments and foreign
currency transactions................................... 77,499
----------
NET ASSETS.................................................. $2,755,199
==========
</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%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 30
6
[IVY LEAF LOGO]
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IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $4,388 foreign taxes withheld........... $ 32,834
Interest.................................................. 56
-----------
32,890
-----------
EXPENSES
Management fee............................................ $13,761
Transfer agent............................................ 5,435
Administrative services fee............................... 1,376
Custodian fees............................................ 43,381
Blue Sky fees............................................. 14,340
Auditing and accounting fees.............................. 10,290
Shareholder reports....................................... 3,644
Amortization of organization expenses..................... 4,936
Fund accounting........................................... 10,324
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 10,479
Legal..................................................... 18,891
Other..................................................... 1,325
-----------
142,159
Expenses reimbursed by Manager............................ (101,488)
Fees paid indirectly...................................... (3,358)
-----------
Net expenses............................................ 37,313
-----------
NET INVESTMENT LOSS......................................... (4,423)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (103,737)
Net change in unrealized depreciation on investments and
foreign currency
transactions, net of taxes of $3,036.................... 344,021
-----------
Net gain on investment transactions..................... 240,284
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 235,861
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 31
7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
------------ ------------
1999 1998
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (4,423) $ (4,366)
Net realized loss on investments and foreign currency
transactions............................................ (103,737) (147,128)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 344,021 331,298
------------ ------------
Net increase resulting from operations.................. 235,861 179,804
------------ ------------
Class A distributions
Dividends from net investment income...................... -- (15,583)
Distributions from capital gains.......................... -- (858)
------------ ------------
Total distributions to Class A shareholders............. -- (16,441)
------------ ------------
Class B distributions
Dividends from net investment income...................... -- (9,725)
Distributions from capital gains.......................... -- (962)
------------ ------------
Total distributions to Class B shareholders............. -- (10,687)
------------ ------------
Class C distributions
Dividends from net investment income...................... -- (7,930)
Distributions from capital gains.......................... -- (1,046)
------------ ------------
Total distributions to Class C shareholders............. -- (8,976)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (177,865) (51,932)
Class B................................................... (128,283) (16,818)
Class C................................................... (305,924) (517,473)
------------ ------------
Net decrease resulting from Fund share transactions..... (612,072) (586,223)
------------ ------------
TOTAL DECREASE IN NET ASSETS................................ (376,211) (442,523)
NET ASSETS
Beginning of period....................................... 3,131,410 3,573,933
------------ ------------
END OF PERIOD............................................. $ 2,755,199 $ 3,131,410
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 4,594 $ 9,017
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 32
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------------------------------------------------------------------------------
for the six for the six for the six
months ended for the year months ended months ended
June 30, ended June 30, for the year ended June 30,
(unaudited) December 31, (unaudited) December 31, (unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1999 1998 1997 1999
SELECTED PER SHARE DATA ----------------------------------------------------------------------------------------
Net asset value, beginning of
period............................ $8.95 $8.66 $10.00 $ 8.92 $ 8.63 $ 10.00 $ 8.97
----------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income (loss)
(a)............................. .01(b) .04 (.01) (.03)(b) (.03) (.05) (.03)(b)
Net gains or losses on securities
(both realized and
unrealized)..................... .88(b) .41 (1.24) .87(b) .41 (1.27) .89(b)
----------------------------------------------------------------------------------------
Total from investment
operations...................... .89 .45 (1.25) .84 .38 (1.32) .86
----------------------------------------------------------------------------------------
Less distributions
Dividends in excess of net
investment income............... -- .15 -- -- .08 -- --
Distributions from capital
gains........................... -- .01 .09 -- .01 .05 --
----------------------------------------------------------------------------------------
Total distributions........... -- .16 .09 -- .09 .05 --
----------------------------------------------------------------------------------------
Net asset value, end of period..... $9.84 $8.95 $ 8.66 $ 9.76 $ 8.92 $ 8.63 $ 9.83
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Total return (%)................... 9.94(c) 5.24(d) (12.52)(d) 9.42(c) 4.46(d) (13.19)(d) 9.59(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $ 882 $ 980 $ 992 $ 982 $1,027 $ 1,007 $ 891
Ratio of expenses to average net
assets(e)
With expense reimbursement (%).... 2.45(f) 2.47 2.50 3.22(f) 3.24 3.31 3.16(f)
Without expense reimbursement
(%)............................. 9.83(f) 6.38 4.87 10.60(f) 7.15 5.68 10.53(f)
Ratio of net investment income
(loss) to average net
assets(%)(a)...................... .18(f) .39 (.11) (.59)(f) (.38) (.91) (.52)(f)
Portfolio turnover rate (%)........ 90 18 10 90 18 10 90
<CAPTION>
CLASS C
------------------
for the year ended
December 31,
- ----------------------------------- ------------------
<S> <C> <C>
1998 1997
SELECTED PER SHARE DATA ------------------
Net asset value, beginning of
period............................ $ 8.65 $ 10.00
------------------
Income (loss) from investment
operations
Net investment income (loss)
(a)............................. (.03) (.06)
Net gains or losses on securities
(both realized and
unrealized)..................... .42 (1.25)
------------------
Total from investment
operations...................... .39 (1.31)
------------------
Less distributions
Dividends in excess of net
investment income............... .06 --
Distributions from capital
gains........................... .01 .04
------------------
Total distributions........... .07 .04
------------------
Net asset value, end of period..... $ 8.97 $ 8.65
------------------
------------------
Total return (%)................... 4.55(d) (13.14)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $ 1,125 $ 1,574
Ratio of expenses to average net
assets(e)
With expense reimbursement (%).... 3.16 3.23
Without expense reimbursement
(%)............................. 7.07 5.60
Ratio of net investment income
(loss) to average net
assets(%)(a)...................... (.30) (.83)
Portfolio turnover rate (%)........ 18 10
</TABLE>
(a)Net investment income (loss) 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)Total return does not reflect a sales charge.
(e)Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(f)Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 33
9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, Class I 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 on which
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, or on the basis of
dealer quotes. 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, 1999,
securities valued by the Valuation Committee amounted to $19,066 (0.7% of net
assets) 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. 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 $149,000
as of December 31, 1998 which may be applied against any realized net taxable
gain of each succeeding fiscal year until fully utilized or until the expiration
date, whichever occurs first. The carryforward expires in 2006.
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 prior to the effectiveness
of Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
by the Fund in connection with its organization have been deferred and are being
amortized on a straight-line basis over a five year period.
RECLASSIFICATIONS -- The timing and characterization of certain income and net
capital gain distributions are determined annually in accordance with Federal
tax regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in foreign denominated
securities, passive foreign investment companies and non-deductible organization
expenses. As a result, Net investment loss and Net realized loss on investments
and foreign currency transactions for a reporting period may differ
significantly in
<PAGE> 34
10
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
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 -- From January 1, 1999 through April 15, 1999, the Fund
had 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 from January 1, 1999 through April 15, 1999, custodian
fees were reduced by $3,358 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
Fund's average net assets. Beginning January 29, 1999, Henderson Investment
Management Limited is subadvisor to fifty percent of the portfolio of the Fund.
See note 5. IMI, not the Fund, is obligated to compensate the subadvisor.
Currently, IMI 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. For each of the following nine years, IMI will limit these
expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $110.
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
$1,093, $4,806 and $4,580, 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 $1,767, $2,027 and $1,641, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 955 $ 9,141 26,321 $ 245,402
Issued on
reinvestment of
distributions....... -- -- 1,617 14,226
Repurchased.......... (20,756) (187,006) (33,027) (311,560)
======= ========= ======== =========
Net decrease......... (19,801) $(177,865) (5,089) $ (51,932)
======= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,994 $ 17,918 19,191 $ 172,197
Issued on
reinvestment of
distributions....... -- -- 729 6,395
Repurchased.......... (16,482) (146,201) (21,580) (195,410)
======= ========= ======== =========
Net decrease......... (14,488) $(128,283) (1,660) $ (16,818)
======= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,915 $ 17,870 44,807 $ 433,078
Issued on
reinvestment of
distributions....... -- -- 83 735
Repurchased.......... (36,579) (323,794) (101,503) (951,286)
======= ========= ======== =========
Net decrease......... (34,664) $(305,924) (56,613) $(517,473)
======= ========= ======== =========
</TABLE>
5. SHAREHOLDER VOTE
On January 29, 1999, a special shareholders' meeting was held. The Fund's
shareholders were asked to approve the new Subadvisory Agreement between the
Fund and Henderson Investment Management Limited to act as subadvisor to fifty
percent of the portfolio of the Fund. The shareholders approved as follows:
<TABLE>
<CAPTION>
NUMBER OF VOTES
- ----------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
183,972 3,346 4,974
</TABLE>
<PAGE> 35
11
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 36
03IISC063099
<PAGE> 37
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY GROWTH WITH INCOME FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
The US stock market has continued to We now witness the fear of an overheated
perform well in 1999 and has extended its economy, the fear of inflation and the
multiyear bull market trend. The Dow Jones fear of higher interest rates. Although we
Industrial Average has moved well past believe that any one of these concerns can
10,000, and, in our view, it now appears easily cause the market to correct 10% or
that investors are viewing 10,000 as the more, in our view, experience indicates
floor to the market instead of the that it is best to keep focused on the
ceiling. Moreover, as opposed to the long-term trend of the market, and to view
narrow advances the market experienced in corrections as buying opportunities.
recent years that singularly favored
large-cap growth stocks, our research We believe long-term investors have many
indicates that this year's move has reasons to remain optimistic. We believe
broadened to include other sectors, such that the threat of a significant rise in
as cyclical, small-cap and international inflation is remote. Historically,
securities. monetary growth in the US has presaged low
inflation. We believe the recent rise in
It seems that many of the concerns interest rates is likely to reverse once
expressed by investors early in the year the markets accept and reflect a
have dissipated. According to our low-inflation environment. The economy
research, earnings growth has not slowed. continues to grow, which, we believe
The narrow scope of the market has should support higher corporate profits.
broadened. Weakness in foreign economies Further, we believe that the increasing
has not caused the US economy to slow. need for baby boomers to invest for
Rather, it seems that the strength in the retirement should provide a positive
US economy and US stock market has buoyed influence on stock prices.
overseas economies and markets. In our
view, the fear of deflation has subsided, The Ivy Growth with Income Fund benefited
and the fear of financial-market collapse from rising equity prices during the first
has been replaced by the fear that half of 1999. The Fund invested primarily
financial markets are overvalued. Our in a combination of high-quality, large-
research also indicates that the fear of and mid-cap companies and the number of
overvaluation, which has existed since the securities in the Fund was reduced to
market passed 6,000, approximately 67.
was unfounded.
The Fund continues to be managed in
In 1999, the investment community has accordance with a disciplined investment
expressed new fears.
</TABLE>
<PAGE> 38
2
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
philosophy, the key to which is stock selection. Typically, the Fund is fully
invested at all times, as the Fund manager makes no attempt to time the market.
During the first half of 1999, cash positions within the Fund were held to a
minimum, generally less than 2%.
When selecting companies for the Fund's portfolio, the manager divides the
stock market into nine broad economic sectors, and the weightings within the
Fund approximate the weighting of each sector within the market, as measured by
the S&P 500 Index. Since there is no attempt to time the market or to make
sector bets, the manager focuses entirely on selecting the appropriate
individual securities in which the Fund invests. The manager utilizes an equity
style that is a blend of growth and value stocks. The Fund is invested in
companies that, in the judgment of the manager, have had a proven and consistent
record of earnings profitability, but whose prices do not adequately reflect the
underlying profitability of the companies. The profitability of each company is
compared to the patterns of that company's industry to account for normal
cyclicality.
In addition to earnings profitability, the manager also considers
dividend-paying ability, financial strength, trading liquidity and technical
readings. Normally, the Fund maintains a portfolio with a below-market price to
earnings ratio, and an above-market return on equity. However, individual
companies within the Fund may possess diagnostics that are different from the
overall Fund due to the dominance of the company within its industry or to the
nature of the industry itself.
Overall, we expect that the US equity market will continue to experience
periods of volatility. However, we believe that the long-term outlook for US
stocks remains favorable.
IVY MANAGEMENT, INC.
<PAGE> 39
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS -- 98.98% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 5.73%
COMAIR Holdings, Inc.................... 40,000 $ 832,500
Georgia-Pacific Group................... 22,000 1,042,250
PPG Industries, Inc..................... 25,000 1,476,563
Praxair, Inc............................ 40,000 1,957,500
-----------
5,308,813
-----------
CAPITAL GOODS -- 8.41%
AlliedSignal Inc........................ 15,000 945,000
Briggs & Stratton Corporation........... 29,000 1,674,750
General Electric Company................ 15,000 1,695,000
Honeywell Inc........................... 11,000 1,274,625
Tyco International Ltd.................. 10,000 947,500
United Technologies Corporation......... 17,500 1,254,531
-----------
7,791,406
-----------
CONSUMER CYCLICAL -- 9.07%
American Eagle Outfitters Inc.(a)....... 35,000 1,592,500
Gap, Inc.(The).......................... 22,500 1,133,438
Goodyear Tire & Rubber Co. (The)........ 27,500 1,617,344
Lowe's Companies, Inc................... 17,500 992,031
May Department Stores Company, (The).... 30,000 1,226,250
Tommy Hilfiger Corporation (a).......... 25,000 1,837,500
-----------
8,399,063
-----------
CONSUMER STAPLES -- 9.69%
Anheuser-Busch Companies, Inc........... 20,000 1,418,750
Avon Products, Inc...................... 22,500 1,248,750
Colgate-Palmolive Company............... 12,500 1,234,375
General Mills, Inc...................... 20,000 1,607,500
H.J. Heinz Company...................... 20,000 1,002,500
Proctor & Gamble Company, (The)......... 10,000 892,500
Wm. Wrigley Jr. Company................. 17,500 1,575,000
-----------
8,979,375
-----------
ENERGY -- 6.18%
Atlantic Richfield Company (ARCO)....... 15,000 1,253,438
Chevron Corporation..................... 15,000 1,427,813
Mobil Corporation....................... 15,000 1,485,000
Texaco Inc.............................. 25,000 1,562,500
-----------
5,728,751
-----------
FINANCIAL SERVICES -- 16.31%
A.G. Edwards, Inc....................... 35,000 1,128,750
AMBAC Financial Group, Inc.............. 20,000 1,142,500
Comerica Incorporated................... 15,000 891,563
Fannie Mae.............................. 13,000 888,875
First Tennessee National Corporation.... 35,000 1,340,938
First Virginia Banks, Inc............... 30,000 1,473,750
Freddie Mac............................. 15,000 870,000
Hartford Life, Inc...................... 30,000 1,578,750
Mercantile Bankshares Corporation....... 37,500 1,326,563
Old Kent Financial Corporation.......... 34,125 1,428,984
Paine Webber Group Inc.................. 40,000 1,870,000
Providian Financial Corporation......... 12,500 1,168,750
-----------
15,109,423
-----------
HEALTHCARE -- 10.57%
Abbott Laboratories..................... 30,000 1,365,000
American Home Products Corporation...... 22,500 1,293,750
Ballard Medical Products................ 50,000 1,165,625
Bristol-Myers Squibb Company............ 20,000 1,408,750
Johnson & Johnson....................... 15,000 1,470,000
Merck & Co, Inc......................... 22,000 1,628,000
Schering-Plough Corporation............. 27,500 1,457,500
-----------
9,788,625
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
COMMON STOCKS SHARES VALUE
<S> <C> <C>
TECHNOLOGY -- 22.08%
Adobe Systems Incorporated.............. 25,000 $ 2,053,906
Altera Corporation (a).................. 50,000 1,840,625
American Power Conversion
Corporation(a)........................ 95,000 1,911,875
Cisco Systems, Inc.(a).................. 18,000 1,161,000
Dionex Corporation(a)................... 16,000 648,000
Equifax, Inc............................ 40,000 1,427,500
Intel Corporation....................... 30,000 1,785,000
International Business Machines Corp.... 11,500 1,486,375
LSI Logic Corporation(a)................ 27,500 1,268,437
Microsoft Corporation(a)................ 13,000 1,172,437
Novellus Systems, Inc.(a)............... 26,000 1,774,500
Sun Microsystems, Inc.(a)............... 23,000 1,584,125
Xerox Corporation....................... 14,500 856,405
Xilinx Inc.(a).......................... 26,000 1,488,500
-----------
20,458,685
-----------
UTILITIES -- 10.94%
ALLTEL Corporation...................... 27,500 1,966,250
AT&T Corporation........................ 27,500 1,534,843
Bell Atlantic Corporation............... 20,000 1,307,500
BellSouth Corporation................... 30,000 1,406,250
DPL Inc................................. 70,000 1,286,250
SBC Communications Inc.................. 27,000 1,566,000
OGE Energy Corp......................... 45,000 1,068,750
-----------
10,135,843
-----------
TOTAL INVESTMENTS -- 98.98%
(Cost -- $69,331,792)(b).............. 91,699,984
OTHER ASSETS, LESS
LIABILITIES -- 1.02%.................. 941,239
-----------
NET ASSETS -- 100%...................... $92,641,223
===========
</TABLE>
(a) Non-income producing security
(b) Cost is approximately the same for Federal income tax purposes
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation............... $23,185,481
Gross unrealized depreciation............... (817,289)
-----------
Net unrealized appreciation............. $22,368,192
===========
Purchases and sales of securities other than short-term
obligations aggregated $38,439,139 and $46,831,236,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 40
4
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $69,331,792)...... $91,699,984
Cash........................................................ 1,013,248
Receivables
Fund shares sold.......................................... 4,166
Dividends and interest.................................... 72,415
Other assets................................................ 21,851
-----------
Total assets.............................................. 92,811,664
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 40,985
Management fee............................................ 55,531
12b-1 service and distribution fees....................... 33,819
Other payables to related parties......................... 34,234
Accrued expenses............................................ 5,872
-----------
Total liabilities......................................... 170,441
-----------
NET ASSETS.................................................. $92,641,223
===========
CLASS A
Net asset value and redemption price per share
($67,470,800/4,669,504 shares outstanding)................ $ 14.45
===========
Maximum offering price per share ($14.45 X 100/94.25)*...... $ 15.33
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($24,147,824/1,697,622 shares outstanding).......... $ 14.22
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($647,181/45,859 shares outstanding)................ $ 14.11
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($375,418/25,899 shares outstanding)................ $ 14.50
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $65,214,689
Undistributed net realized gain on investments............ 5,443,383
Accumulated net investment loss........................... (385,041)
Net unrealized appreciation on investments................ 22,368,192
-----------
NET ASSETS.................................................. $92,641,223
===========
</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>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 648,889
Interest.................................................. 25,295
-----------
674,184
-----------
EXPENSES
Management fee............................................ $ 341,895
Transfer agent............................................ 125,548
Administrative services fee............................... 45,586
Custodian fees............................................ 9,854
Blue Sky fees............................................. 14,014
Auditing and accounting fees.............................. 19,186
Shareholder reports....................................... 9,391
Fund accounting........................................... 50,272
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 186,536
Legal..................................................... 15,863
Other..................................................... 316
-----------
Total expenses.............................................. 822,438
-----------
NET INVESTMENT LOSS......................................... (148,254)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investments.......................... 7,627,231
Net change in unrealized appreciation on investments...... (1,450,287)
-----------
Net gain on investment transactions..................... 6,176,944
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 6,028,690
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 41
5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
===========================
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment (loss) income.............................. $ (148,254) $ 76,556
Net realized gain on investments.......................... 7,627,231 3,269,440
Net change in unrealized appreciation on investments...... (1,450,287) 5,444,602
------------ ------------
Net increase resulting from operations................ 6,028,690 8,790,598
------------ ------------
Class A distributions
Dividends
From net investment income................................ -- (44,407)
In excess of net investment income........................ (170,492) --
Distributions from capital gains............................ -- (1,399,111)
------------ ------------
Total distributions to Class A shareholders........... (170,492) (1,443,518)
------------ ------------
Class B distributions
Dividends in excess of net investment income.............. (58,202) --
Distributions from capital gains.......................... -- (492,051)
------------ ------------
Total distributions to Class B shareholders........... (58,202) (492,051)
------------ ------------
Class C distributions
Dividends in excess of net investment income.............. (1,585) --
Distributions from capital gains.......................... -- (31,265)
------------ ------------
Total distributions to Class C shareholders........... (1,585) (31,265)
------------ ------------
Advisor Class distributions
Dividends in excess of net investment income.............. (823) --
Distributions from capital gains.......................... -- (5,709)
------------ ------------
Total distributions to Advisor Class shareholders..... (823) (5,709)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (6,590,717) (5,017,773)
Class B................................................... (1,239,241) 2,325,537
Class C................................................... (30,230) (3,935,114)
Advisor Class............................................. 13,203 331,216
------------ ------------
Net decrease resulting from Fund share transactions... (7,846,985) (6,296,134)
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (2,049,397) 521,921
NET ASSETS
Beginning of period....................................... 94,690,620 94,168,699
------------ ------------
END OF PERIOD............................................. $ 92,641,223 $ 94,690,620
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 42
6
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 13.54 $ 12.59 $ 11.38 $ 10.98 $ 9.08 $ 9.70
---------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment (loss) income........ (.01) .04 .08 .08 .11 .17
Net gains or losses on securities
(both realized and unrealized).... .95 1.19 2.37 2.16 2.13 (.36)
---------------------------------------------------------------------------------------
Total from investment operations.... .94 1.23 2.45 2.24 2.24 (.19)
---------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income........ -- -- .03 .08 .08 .17
In excess of net investment
income.......................... .03 -- -- .03 -- .01
Distributions from capital gains.... -- .28 1.21 1.73 .26 .25
---------------------------------------------------------------------------------------
Total distributions............... .03 .28 1.24 1.84 .34 .43
---------------------------------------------------------------------------------------
Net asset value, end of period........ $ 14.45 $ 13.54 $ 12.59 $ 11.38 $ 10.98 $ 9.08
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Total return (%)...................... 6.99(a) 9.64(b) 21.57(b) 20.46(b) 24.93(b) (2.03)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $ 67,471 $69,733 $69,742 $63,219 $59,054 $26,017
Ratio of expenses to average net
assets (%).......................... 1.61(c) 1.60 1.59 1.81 1.96 1.84
Ratio of net investment income to
average net assets (%).............. (.13)(c) .28 .58 .68 1.06 1.83
Portfolio turnover rate (%)........... 42 108 36 138 81 36
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 13.38 $ 12.54 $ 11.36 $ 10.98 $ 9.08 $ 9.70
---------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment (loss) income........ (.06) (.06) (.02) (.01) .03 .09
Net gains or losses on securities
(both realized and unrealized).... .93 1.18 2.37 2.15 2.13 (.36)
---------------------------------------------------------------------------------------
Total from investment operations.... .87 1.12 2.35 2.14 2.16 (.27)
---------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income........ -- -- .03 -- .01 .09
In excess of net investment
income.......................... .03 -- -- .08 -- .01
Distributions from capital gains.... -- .28 1.14 1.68 .25 .25
---------------------------------------------------------------------------------------
Total distributions............... .03 .28 1.17 1.76 .26 .35
---------------------------------------------------------------------------------------
Net asset value, end of period........ $ 14.22 $ 13.38 $ 12.54 $ 11.36 $ 10.98 $ 9.08
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Total return (%)...................... 6.55(a) 9.01(b) 20.74(b) 19.59(b) 23.94(b) (2.88)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $ 24,148 $23,975 $20,071 $13,473 $ 8,868 $ 5,849
Ratio of expenses to average net
assets (%).......................... 2.35(c) 2.33 2.31 2.55 2.75 2.70
Ratio of net investment income to
average net assets (%).............. (.87)(c) (.45) (.13) (.06) .27 .97
Portfolio turnover rate (%)........... 42 108 36 138 81 36
</TABLE>
<PAGE> 43
7
<TABLE>
<CAPTION>
- -------------------------------------------------------------
CLASS C
- -----------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- -----------------------------------------------------------
1999 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
$ 13.29 $ 12.44 $ 11.37 $ 11.73
- -----------------------------------------------------------
(.07) (.05) (.01) (.08)
.92 1.18 2.35 1.53
- -----------------------------------------------------------
.85 1.13 2.34 1.45
- -----------------------------------------------------------
-- -- -- --
.03 -- -- .08
-- .28 1.27 1.73
- -----------------------------------------------------------
.03 .28 1.27 1.81
- -----------------------------------------------------------
$ 14.11 $ 13.29 $ 12.44 $ 11.37
- -----------------------------------------------------------
- -----------------------------------------------------------
6.44 (a) 9.16(b) 20.70(b) 12.37(a)
$ 647 $ 643 $ 4,356 $ 28
2.48(c) 2.27 2.23 3.02 (c)
(1.00)(c) (.39) (.05) (.53)(c)
42 108 36 138
</TABLE>
(a) Total return represents aggregate total return
and does not reflect a sales charge.
(b) Total return does not reflect a sales charge.
(c) Annualized
<TABLE>
<CAPTION>
- -----------------------------------
ADVISOR CLASS
- -----------------------------------
for the six for the period
months ended April 30, 1998
June 30, (commencement)
(unaudited) to December 31,
-----------------------------------
1999 1998
-------------------------------
<S> <C> <C>
$ 13.58 $ 13.88
-----------------------------------
-- .05
.95 (.07)
-----------------------------------
.95 (.02)
-----------------------------------
-- --
.03 --
-- .28
-----------------------------------
.03 .28
-----------------------------------
$ 14.50 $ 13.58
-----------------------------------
-----------------------------------
7.04(a) (.36)(a)
$ 375 $ 339
1.45(c) 1.20 (c)
.03(c) .68 (c)
42 108
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 44
8
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
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. 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 on which the
security is traded most extensively. If there is no such sale, the security is
valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market, are valued at the average between the current bid and
asked prices in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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
$2,036,000 as of December 31, 1998, 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 in
2002.
DISTRIBUTIONS TO SHAREHOLDERS -- From January 1, 1999 to April 30, 1999,
distributions from net investment income were declared daily and paid quarterly
(or at redemption, if earlier). Beginning May 1, 1999, distributions from net
investment income and net realized capital gain, 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 distributions received from pass-through
entities (such as REITs), and certain securities sold at a loss. As a result,
Net investment income and Net realized gain on investments and
<PAGE> 45
9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
foreign currency transactions for a reporting period may differ significantly in
amount and character from distributions during such period. Accordingly, the
Fund may make reclassifications among certain of its capital accounts without
impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .75% of the
Fund's average net assets.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1999, the net amount of underwriting
discount retained by IMDI was $3,277.
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 $67,725, $115,591, and $3,220, 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 $97,043, $26,776, $1,168, and $561, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 832,969 $ 11,165,698 1,086,458 $ 14,042,632
Issued on
reinvestment of
distributions....... 10,892 145,431 91,798 1,211,827
Repurchased.......... (1,323,129) (17,901,846) (1,567,998) (20,272,232)
---------- ------------ ---------- ------------
Net decrease......... (479,268) $ (6,590,717) (389,742) $ (5,017,773)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 224,691 $ 3,047,011 722,497 $ 9,215,272
Issued on
reinvestment of
distributions....... 3,570 47,022 29,845 389,428
Repurchased.......... (322,324) (4,333,274) (561,757) (7,279,163)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (94,063) $ (1,239,241) 190,585 $ 2,325,537
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 37,773 $ 516,570 22,867 $ 288,642
Issued on
reinvestment of
distributions....... 72 945 1,721 23,013
Repurchased.......... (40,407) (547,745) (326,251) (4,246,769)
---------- ------------ ---------- ------------
Net decrease......... (2,562) $ (30,230) (301,663) $ (3,935,114)
========== ============ ========== ============
</TABLE>
<PAGE> 46
10
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED APRIL 30, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
- -------------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 2,979 $ 40,658 29,137 $ 385,406
Issued on
reinvestment of
distributions....... 65 872 417 5,466
Repurchased.......... (2,080) (28,327) (4,619) (59,656)
---------- ------------ ---------- ------------
Net increase......... 964 $ 13,203 24,935 $ 331,216
========== ============ ========== ============
</TABLE>
<PAGE> 47
11
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 48
03IGIF063099
<PAGE> 49
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY GLOBAL NATURAL RESOURCES FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
There appears to be a growing sense by Lumber and oriented-strand board
many analysts that most commodity prices surpassed expectations as construction
and resource stocks have begun a new activity in the US was firm. We believe
positive cycle. This is particularly will see better commodity price we
welcome news in view of the difficult year appreciation in containerboard, pulp and
for commodity-based and resource companies newsprint, and continue to favor these
in 1998. According to our research, the sectors. The Fund sold UPM-Kymmene Oyj,
conditions for positive returns are preferring to own Svenska Cellulosa AB
falling into place, and investors may want (SCA), a Swedish paper company, which,
to consider increasing their commitment to according to our research, represents
this sector, particularly if resource better value at this time. The Fund's
stocks outperform. largest holding, Sino-Forest Corp., a
Canadian company, is performing well
Oil prices have almost doubled in operationally, but the stock has not yet
response to OPEC cuts and the natural responded.
decline in non-OPEC production. We believe
oil prices will stall and may slip if OPEC Copper, nickel and zinc prices
compliance fails. Therefore, during the advanced in response to production cutbacks
rally we have reduced exposure in the Ivy or shortfalls. Freeport- McMoRan Copper &
Global Natural Resources Fund to drillers Gold, Inc. has responded well. The Fund's
even though our research indicates they weighting in Australian-based Pasminco
are trading at a 30% discount to Limited was reduced as the stock rallied,
replacement value. The Ivy Global Natural and we purchased Brazilian-based Cia Vale
Resources Fund established positions in do Rio Doce (CVRD), the world's premier
Superior Energy, which is the leading plug iron ore producer and potential takeout
and abandonment company in the Gulf of candidate. Copper and aluminum inventories
Mexico. The Fund sold YPF S.A., and remain high, and we believe this should
Pacalta Resources Ltd. after their share limit their near- term advance.
prices rose as a result of takeover bids.
In our view, Canadian heavy oil and Uranium prices remain subdued but, in
natural gas prices should be strong; and our view, the long-term supply/demand
therefore we have added companies to the forecasts are very favorable. Merger
Fund that are located in the Canadian activity in steel companies continues
energy sector. throughout the
</TABLE>
<PAGE> 50
2
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
world. We believe it is very encouraging that North American companies remained
profitable throughout the world slowdown. Our research indicates that valuations
are still attractive.
Prices of precious metals were driven lower by the announcement of the sale
of gold reserves by the Bank of England. We are taking advantage of multidecade
low prices to slowly increase positions in the Fund, primarily in three
well-hedged, growing Australian producers, Newcrest Mining Ltd., Delta Gold and
Acacia Resources. We continue to favor the prospects for platinum and palladium
producers, which are seeing demand growth in Asia and reduced supply from
Russia. Anglo American Platinum Corporation (South Africa), the world leader in
platinum production, remains one of the Fund's largest holdings. Gold Fields
Limited was replaced in the Fund by Gencor Ltd., which increases the Fund's
exposure to platinum.
Weakness in both the Canadian and Australian dollars has had a negative
impact on the Fund's portfolio. However, we consider this to be a temporary
setback.
Overall, share prices of commodity-based companies have responded well to
the rally in commodities. We expect further improvement over the balance of the
year. We believe that as prices firm up and higher product demand increases
volumes, corporate profits should show steady improvement and that earnings
disappointments could be replaced by positive surprises. However, we believe it
is important to remember the inherent risk in broad stock market indices when
valuations are historically high. However, in addition to the macroeconomic
factors that are becoming more favorable, the investment merits for individual
companies held within the portfolio continue to suggest that more gains are
likely.
IVY MANAGEMENT, INC.
<PAGE> 51
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
FOREIGN EQUITY SECURITIES -- 98.84% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
DIAMONDS -- 5.04%
Aber Resources, Ltd.(a)............... 42,500 $ 361,813
De Beers Consolidated Mines Ltd....... 2,500 59,687
----------
421,500
----------
ENERGY SERVICES -- 11.00%
Badger Daylighting Inc.(a)............ 30,000 118,577
Ensign Resource Service Group, Inc.... 6,000 120,199
Fred Olsen Energy ASA(a).............. 5,000 37,473
Noble Drilling Corporation(a)......... 5,000 98,437
NQL Drilling Tools Inc. -- Class
A(a)................................ 32,500 153,711
Santa Fe International Corporation.... 2,000 46,000
Shaw Industries Ltd. Class A.......... 10,000 93,578
Smedvig ASA-A Shares.................. 5,000 46,366
Superior Energy Services Inc.(a)...... 30,000 152,812
Transocean Offshore Inc............... 2,000 52,500
----------
919,653
----------
FOOD/AGRICULTURE -- 3.92%
IMC Global Inc........................ 4,500 79,312
Potash Corporation of Saskatchewan,
Inc................................. 2,500 128,628
Saskatchewan Wheat Pool............... 20,000 119,591
----------
327,531
----------
GAS PRODUCERS -- 12.07%
Beau Canada Exploration(a)............ 50,000 76,011
Elk Point Resources, Inc.(a).......... 70,000 170,265
Fletcher Challenge Energy............. 50,000 137,117
Merit Energy Ltd.(a).................. 40,000 162,157
Newport Petroleum Corp.(a)............ 20,000 68,241
Niko Resources Ltd.(a)................ 45,000 167,224
Penn West Petroleum Ltd.(a)........... 12,500 228,033
----------
1,009,048
----------
INDUSTRIAL -- 5.78%
AK Steel Holding Corp................. 3,000 67,500
Cameco Corporation.................... 4,000 83,511
International Uranium Corp.(a)........ 448,500 87,879
IPSCO, Inc............................ 9,000 190,028
USX-U.S. Steel Group.................. 2,000 54,000
----------
482,918
----------
JUNIOR PRECIOUS METALS -- 5.05%
Iamgold Corporation(a)................ 30,000 60,809
Meridian Gold, Inc.(a)................ 30,000 138,847
Orvana Minerals Corporation(a)........ 600,000 129,726
Repadre Capital Corporation(a)........ 62,500 92,902
----------
422,284
----------
METALS & MINERALS -- 6.77%
Cia Vale do Rio Doce -- Sponsored
ADR................................. 12,000 235,560
Inmet Mining Corporation(a)........... 65,000 105,402
M.I.M. Holdings Ltd................... 75,000 53,119
Pasminco Limited...................... 100,000 110,409
Teck Corporation Class B(a)........... 5,000 42,904
Tenke Mining Corp.(a)................. 20,000 18,243
----------
565,637
----------
OIL PRODUCERS -- 9.38%
Cabre Exploration Ltd.(a)............. 18,000 170,265
Canadian Natural Resources Ltd.(a).... 3,000 58,782
Crestar Energy Inc.(a)................ 4,000 47,296
Ranger Oil Limited(a)................. 20,000 96,618
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
FOREIGN EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Talisman Energy Inc.(a)............... 12,500 $ 338,249
Vermilion Resources Ltd.(a)........... 25,000 72,633
----------
783,843
----------
PAPER & FOREST PRODUCTS -- 12.65%
Abitibi-Consolidated Inc.............. 3,000 34,256
Alliance Forest Products, Inc.(a)..... 15,000 183,947
Asia Pulp & Paper Company Ltd. --
Sponsored ADR(a) (with 2,500
Warrants(a))........................ 12,500 126,874
Cascades Inc.......................... 20,000 118,239
Fletcher Challenge Paper.............. 90,000 67,247
Sino-Forest Corp. Class A(a).......... 430,000 435,797
Svenska Cellulosa AB (SCA) -- Series
B................................... 3,500 90,570
----------
1,056,930
----------
PLATINUM GROUP METALS -- 13.61%
Anglo American Platinum Corporation... 17,500 408,331
Gencor Limited........................ 50,000 137,547
Industrias Penoles S.A................ 60,000 173,376
Lonmin plc............................ 22,400 207,877
Platexco Inc.(a)...................... 7,000 14,094
Stillwater Mining Company(a).......... 6,000 196,124
----------
1,137,349
----------
SENIOR PRECIOUS METALS -- 13.57%
Acacia Resources Ltd.................. 150,000 173,755
Ashanti Goldfields Ltd. -- Sponsored
ADR................................. 10,000 69,375
Delta Gold NL......................... 125,000 177,892
Freeport-McMoRan Copper & Gold Class
B................................... 17,000 304,937
Freeport-McMoRan Copper & Gold
Preferred Depository Shares......... 16,500 233,063
Newcrest Mining Ltd.(a)............... 75,000 168,393
Normandy Mining Limited............... 10,000 6,659
----------
1,134,074
----------
TOTAL FOREIGN EQUITY SECURITIES
(Cost -- $9,240,337)................ 8,260,767
----------
FOREIGN BONDS -- 0.65% PRINCIPAL
William Resources, Inc., 8.00%,
01/23/02(b)
(Cost -- $315,198).................. $ 895,000 54,423
----------
TOTAL FOREIGN INVESTMENTS -- 99.49%
(Cost -- $9,555,535).................. 8,315,190
OTHER ASSETS, LESS
LIABILITIES -- 0.51%................ 42,422
----------
NET ASSETS -- 100%.................... $8,357,612
==========
</TABLE>
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Issuer is in default on interest payments
OTHER INFORMATION:
At June 30, 1999, net unrealized depreciation based on cost for financial
statement and Federal income tax purposes is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation.............. $ 1,221,324
Gross unrealized depreciation.............. (2,461,669)
-----------
Net unrealized depreciation............ $(1,240,345)
===========
Purchases and sales of securities other than short-term
obligations aggregated $15,576,056 and $5,235,424,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 52
4
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $9,555,535)....... $ 8,315,190
Receivables
Investments sold.......................................... 276,005
Fund shares sold.......................................... 1,295
Dividends and Interest.................................... 3,476
Manager for expense reimbursement......................... 17,526
Deferred organization expenses.............................. 23,959
Other assets................................................ 15,077
-----------
Total assets.............................................. 8,652,528
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 2,547
Management fee............................................ 6,670
12b-1 service and distribution fees....................... 3,711
Other payables to related parties......................... 6,932
Due to custodian............................................ 249,367
Accrued expenses............................................ 25,689
-----------
Total liabilities......................................... 294,916
-----------
NET ASSETS.................................................. $ 8,357,612
===========
CLASS A
Net asset value and redemption price per share
($5,570,365/675,603 shares outstanding)................... $ 8.25
===========
Maximum offering price per share ($8.25 x 100/94.25)*....... $ 8.75
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($2,519,987/309,850 shares outstanding)............. $ 8.13
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($250,656/31,314 shares outstanding)................ $ 8.00
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($16,604/2,021 shares outstanding).................. $ 8.22
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $18,924,099
Accumulated net realized loss on investments and foreign
currency transactions................................... (9,299,291)
Accumulated net investment loss........................... (26,806)
Net unrealized depreciation on investments and foreign
currency transactions................................... (1,240,390)
-----------
NET ASSETS.................................................. $ 8,357,612
===========
</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%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 53
5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $1,984 foreign taxes withheld........... $ 32,494
Interest.................................................. 26,138
-----------
58,632
EXPENSES
Management fee............................................ $13,538
Advisory fee.............................................. 13,538
Transfer agent............................................ 15,947
Administrative services fee............................... 2,708
Custodian fees............................................ 24,215
Blue Sky fees............................................. 13,604
Auditing and accounting fees.............................. 11,174
Shareholder reports....................................... 2,196
Amortization of organization expenses..................... 4,873
Fund accounting........................................... 11,645
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 14,512
Legal..................................................... 11,782
Other..................................................... 1,134
-----------
144,843
Expenses reimbursed by Manager............................ (85,417)
-----------
Net expenses............................................ 59,426
-----------
NET INVESTMENT LOSS......................................... (794)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (1,153,269)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 2,817,684
-----------
Net gain on investment transaction transactions......... 1,664,415
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 1,663,621
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
-----------------------------
1999 1998
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss....................................... $ (794) $ (2,358)
Net realized loss on investments and foreign currency
transactions............................................ (1,153,269) (1,287,009)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 2,817,684 (122,583)
------------ ------------
Net increase (decrease) resulting from operations....... 1,663,621 (1,411,950)
------------ ------------
Dividends to shareholders in excess of net investment income
Class A................................................... -- (9,832)
Class B................................................... -- (9,330)
Class C................................................... -- (292)
------------ ------------
Total dividends to shareholders......................... -- (19,454)
------------ ------------
Fund share transactions (Note 5)
Class A................................................... 3,132,187 (1,812,081)
Class B................................................... 672,655 (740,027)
Class C................................................... 168,367 (47,826)
Advisor Class............................................. 14,142 --
------------ ------------
Net increase (decrease) resulting from Fund share
transactions........................................... 3,987,351 (2,599,934)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 5,650,972 (4,031,338)
NET ASSETS
Beginning of period....................................... 2,706,640 6,737,978
------------ ------------
END OF PERIOD............................................. $ 8,357,612 $ 2,706,640
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 54
6
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------
for the six
months ended for the
June 30, year ended
(unaudited) December 31,
- ----------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.32 $ 9.01 $10.00
-------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .01(b) .03 (.11)
Net gains or losses on securities (both realized and
unrealized)............................................. 1.92(b) (2.68) .70
-------------------------------------------------
Total from investment operations.......................... 1.93 (2.65) .59
-------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .04 .22
Distributions
From net capital gains.................................. -- -- 1.08
In excess of capital gains.............................. -- -- .28
----------------------------------------------
Total distributions..................................... -- .04 1.58
----------------------------------------------
Net asset value, end of period.............................. $ 8.25 $ 6.32 $ 9.01
-------------------------------------------------
-------------------------------------------------
Total return (%)............................................ 30.54(c) (29.35)(d) 6.95(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $5,570 $ 1,345 $3,907
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.95(e) 2.22 2.10
Without expense reimbursement (%)......................... 5.10(e) 5.75 2.88
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .22(e) .29 (1.10)
Portfolio turnover rate (%)................................. 100 98 199
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
for the six
months ended for the
June 30, year ended
(unaudited) December 31,
- ----------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.27 $ 9.00 $10.00
-------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... (.01)(b) (.04) (.15)
Net gains or losses on securities (both realized and
unrealized)............................................. 1.87(b) (2.65) .68
-------------------------------------------------
Total from investment operations.......................... 1.86 (2.69) .53
-------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .04 .17
Distributions
From net capital gains.................................. -- -- 1.08
In excess of capital gains.............................. -- -- .28
----------------------------------------------
Total distributions..................................... -- .04 1.53
----------------------------------------------
Net asset value, end of period.............................. $ 8.13 $ 6.27 $ 9.00
-------------------------------------------------
-------------------------------------------------
Total return (%)............................................ 29.67(c) (29.82)(d) 6.28(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,530 $ 1,320 $2,706
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.59(e) 2.90 2.86
Without expense reimbursement (%)......................... 5.74(e) 6.43 3.64
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... 42(e) (.39) (1.06)
Portfolio turnover rate (%)................................. 100 98 199
</TABLE>
<PAGE> 55
7
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
CLASS C ADVISOR CLASS
---------------------------------------------------------
for the six for the period
months ended April 8, 1999
June 30, for the year ended (commencement)
(unaudited) December 31, to June 30,
---------------------------------------------------------
1999 1998 1997 1999
---------------------------------------------------------
<S> <C> <C> <C> <C>
$ 6.21 $ 9.00 $ 10.00 $ 7.00
---------------------------------------------------------
(.02)(b) (.14) (.17) .01(b)
1.81(b) (2.61) .68 1.21(b)
---------------------------------------------------------
1.79 (2.75) .51 1.22
---------------------------------------------------------
-- .04 .15 --
-- -- 1.08 --
-- -- .28 --
---------------------------------------------------------
-- .04 1.51 --
---------------------------------------------------------
$ 8.00 $ 6.21 $ 9.00 $ 8.22
---------------------------------------------------------
---------------------------------------------------------
28.82(c) (30.49)(d) 6.08(d) 17.43(c)
$ 251 $ 41 $ 124 $ 17
2.77(e) 3.57 3.08 1.72(e)
5.92(e) 7.10 3.86 4.87(e)
.60(e) (1.06) (2.08) .45(e)
100 98 199 100
</TABLE>
(a) Net investment loss in 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) Total return does not reflect a sales charge.
(e) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 56
8
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. 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
$3,771,000 as of December 31, 1998 which may be applied against any realized net
taxable gain of each succeeding fiscal year until fully utilized or until the
expiration date, whichever occurs first. The carryforward expires in 2006. As of
April 7, 1999, the date of the transfer of net assets described in Note 4, the
Fund had a capital loss carryforward of $7,616,000, which is available to offset
future capital gains of the Fund to the extent provided by the Code.
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
<PAGE> 57
9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 prior to the
effectiveness of Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," 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 loss and Net
realized 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 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. For each of the following nine years,
IMI will limit these expenses to 2.50% of the Fund's average net assets.
Mackenzie Financial Corporation (MFC) in Toronto, Ontario, Canada is the
Investment Adviser of the Fund. For its services, MFC receives a fee monthly at
the annual rate of .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, 1999, the net amount of underwriting
discount retained by IMDI was $211.
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 $4,176,
$9,669 and $667, for Class A, Class B and Class C, respectively, are reflected
as 12b-1 service and distribution fees in the Statement of Operations.
<PAGE> 58
10
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $10,607, $4,844, $471 and $25 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. TRANSFER OF NET ASSETS
At a meeting held on April 7, 1999, the shareholders of the Fund approved an
Agreement and Plan of Reorganization (the "Reorganization") providing for the
transfer into the Fund of all or substantially all of the assets of Ivy Canada
Fund. On April 7, 1999, the date of the consummation of the Reorganization, the
Fund acquired all or substantially all of the assets of Ivy Canada Fund. The
transaction was structured for tax purposes to qualify as a tax-free
reorganization under the Code. Ivy Canada Fund shareholders contributed net
assets having an aggregate value of $4,845,256 (including $2,735,535 of
unrealized depreciation). Upon completion of the merger the combined net assets
were $7,841,856.
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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 66,886 $ 535,787 145,809 $ 1,262,673
Issued on
reinvestment of
distributions....... -- -- 1,494 9,069
Repurchased.......... (158,465) (1,288,784) (368,169) (3,083,823)
Issued on acquisition
of Ivy Canada Fund.. 554,442 3,885,184 -- --
-------- ----------- -------- -----------
Net increase/
(decrease).......... 462,863 $ 3,132,187 (220,866) $(1,812,081)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 33,683 $ 246,031 17,035 $ 138,303
Issued on
reinvestment of
distributions....... -- -- 327 1,810
Repurchased.......... (40,959) (310,191) (107,494) (880,140)
Issued on acquisition
of Ivy Canada Fund.. 106,477 736,815 -- --
-------- ----------- -------- -----------
Net increase/
(decrease).......... 99,201 $ 672,655 (90,132) $ (740,027)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,589 $ 12,154 3,817 $ 31,278
Issued on
reinvestment of
distributions....... -- -- 38 232
Repurchased.......... (7,573) (52,902) (11,016) (79,336)
Issued on acquisition
of Ivy Canada Fund.. 30,640 209,115 -- --
-------- ----------- -------- -----------
Net increase/
(decrease).......... 24,656 $ 168,367 (7,161) $ (47,826)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 8, 1999
(COMMENCEMENT)
TO JUNE 30, 1999
(UNAUDITED)
- ---------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- ---------------------------------------------
<S> <C> <C>
Issued on acquisition
of Ivy Canada Fund.. 2,021 $ 14,142
-------- -----------
Net increase......... 2,021 $ 14,142
======== ===========
</TABLE>
<PAGE> 59
11
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 60
03IGNRF063099
<PAGE> 61
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY GLOBAL FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
The recovery in world equity markets We believe that improving economic and
during the first half of 1999 has been a corporate fundamentals will continue to
welcome relief following a difficult 1998. support
We believe that, in general, this recovery emerging market equities. Although shares
has been driven by rising expectations for of companies in many emerging markets have
global economic growth and a greater been recovering, according to our
willingness by investors to accept risk. research, valuations are still compelling.
As a result, there has been a marked At their peak in early 1997, emerging
divergence in performance of major markets accounted for more than 8% of
sectors, with cyclicals, small-caps, and global stock market capitalization.
emerging market equities outperforming Despite the fact that the shares of many
large-cap, defensive growth stocks and emerging market companies have more than
developed markets. These trends, doubled, today they account for only 5% of
particularly the recovery of emerging global stock market capitalization. Morgan
stock markets, have benefited the Ivy Stanley Capital International calculates
Global Fund. that, assuming emerging market companies
return to historic levels of
Until recently, many investors profitability, stock prices could double
appeared to be questioning the investment from current levels. We believe that
rationale for emerging markets, as these crisis-induced corporate restructuring
markets had not provided good returns over should allow profits to exceed prior
the last five years. However, we believe peaks.
the recent recovery of emerging markets
has proven the skeptics wrong. Throughout Asian equity markets have shown the most
the crisis of the past two years, the Ivy dramatic recovery following two years of
Global Fund has maintained its weighting crisis. Falling interest rates,
in developing economies at approximately strengthening currencies and improving
25% of the Fund's assets, including 21% in current account balances were the initial
Asia and 4% in Latin America. In the past signals that the economic recession, or in
nine months, emerging markets have some cases depression, was ending.
rebounded by 65%, as reflected by the According to our research, most Asian
Morgan Stanley Capital International economies hit bottom in the second quarter
Emerging Markets Free Index. (There is no of 1999 and should report positive growth
guarantee this trend will continue in the in the remainder of the year. We believe
future.) the expectation for economic recovery has
been a powerful force
</TABLE>
<PAGE> 62
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
behind the rally in Asian share prices, which have increased 39% since the
beginning of the year, as measured by the Morgan Stanley Capital International
Asia Ex-Japan Index. (There is, however, no guarantee this trend will continue
in the future.)
Although in the short run, Asian equities are factoring in a sizeable
rebound in earnings, we believe the next few years should be positive for
markets in the region, as economies resume their high-growth standing and as the
benefits of corporate restructuring are reflected in higher profitability. We
continue to favor Singapore and Hong Kong as large, liquid markets with
favorable government policies and a corporate environment that focuses on
shareholder value. We believe the outlook for Malaysian equities is also
positive, and the Ivy Global Fund could benefit from the strengthening of the
ringgit (the Malaysian currency) once it is allowed to float freely.
In our view, much of the recent rally in Japan has been driven by
announcements of corporate restructuring. We believe there is room for
improvement in corporate Japan. Currently, Japanese companies are earning
returns on equity of 3.0%, compared with 14.5% for European companies and 27.1%
for the US. In our view, the corporate sector needs to restructure, and the
government needs to push forward with banking reform and initiatives to pump
liquidity into the economy. These concerns, combined with our belief that other
Asian markets provide much greater upside potential, underlie our decision to
exclude Japanese equities from the Fund at this time.
The bull market in Europe continued during the first half of 1999; however,
higher stock prices were overshadowed by weakness in the euro, the new single
European currency. Although politics have played a role, we believe low interest
rates in the eurozone (the 11 nations that have adopted the common European
currency, the euro) have been the primary factor in the currency's decline, with
the gap between long-term interest rates in the US and long-term interest rates
in Germany at a 10-year high. While this has hampered dollar returns on European
equities in the first half of the year, we believe a weak euro should prove
positive for exporters.
We continue to favor companies that are sensitive to an economic recovery,
including a flat-glass producer, auto manufacturers and consumer goods
companies. Paper, chemicals and mining companies have all performed well on the
expectation of a recovery in commodity prices and global demand. We believe that
these sectors will continue to perform well, as inventories are low, production
cuts have been announced and demand for basic materials is accelerating around
the world.
We have been watching with interest the sector shift in Europe. Market
participants' growing interest in cyclical stocks seems to correspond with a
declining interest in companies traditionally labeled as "growth." In our view,
this has created attractive opportunities in industries like pharmaceuticals,
which normally fall outside our acceptable valuation metrics. Accordingly, we
have taken this opportunity to build positions in companies in such industries.
We believe that any slowdown in economic demand (whether induced by a stock
market correction or a normal turn in the cycle) makes US corporations
particularly vulnerable. In addition, we believe the Federal Reserve's bias
toward neutral to tighter monetary policy, combined with stock market valuations
that our research concludes are at least 60% above 10-year averages, are reasons
to be cautious.
In our view, the environment for most world equity markets is positive.
While virtually all financial markets are vulnerable to a US stock market
correction, we believe equities in Europe and Asia (non-Japan) are trading at
reasonable valuations and that currencies in these areas have the potential to
appreciate relative to the dollar. These factors should, in our view, provide a
constructive environment for equities in the coming months.
IVY MANAGEMENT, INC.
2
<PAGE> 63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 99.14% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 2.37%
- -------------------------------------
SOUTH AFRICA -- 2.37%
Anglo American plc(a)................. 4,090 $ 191,137
Nampak Limited........................ 33,000 91,328
South African Breweries plc........... 24,144 209,658
----------
492,123
----------
ASIA/PACIFIC -- 31.57%
- -------------------------------------
AUSTRALIA -- 0.74%
Pacific Dunlop Limited................ 107,000 154,400
----------
CHINA -- 1.41%
Shenzhen Konka Electronics Group Ltd.
Class B............................. 260,000 293,893
----------
HONG KONG -- 5.82%
Axa China Region Limited.............. 240,000 191,787
Cheung Kong Holdings Ltd.............. 17,000 151,187
Citic Pacific Ltd..................... 70,000 223,300
Hong Kong Telecommunications Ltd. --
Sponsored ADR....................... 3,700 99,669
HSBC Holdings plc..................... 4,439 161,915
Jardine Matheson Holdings Ltd......... 15,600 78,000
Jardine Strategic Holdings Ltd........ 76,187 198,086
New World Development Company Ltd..... 35,401 106,085
----------
1,210,029
----------
MALAYSIA(B) -- 4.77%
KFC Holdings (Malaysia) Berhad........ 58,000 74,179
London & Pacific Insurance Company
Berhad(a)........................... 181,200 207,903
Perusahaan Otomobil Nasional
Berhad(a)........................... 87,000 201,474
Public Bank Berhad -- Foreign
Registered.......................... 166,800 174,701
RHB Capital Berhad.................... 151,000 194,711
RHB Sakura Merchant Bankers Berhad.... 3,000 2,432
Sime Darby Berhad..................... 43,000 56,353
Sime UEP Properties Berhad............ 62,000 79,621
----------
991,374
----------
NEW ZEALAND -- 2.18%
Fletcher Challenge Building........... 21,500 31,332
Fletcher Challenge Forestry........... 2,580 1,449
Fletcher Challenge Paper.............. 43,000 32,129
Tourism Holdings Limited(a)........... 292,242 387,162
----------
452,072
----------
PHILIPPINES -- 2.04%
Bacnotan Cement Corporation(a)........ 145,000 22,865
Belle Corporation Warrants............ 46,200 923
Benpres Holdings Corporation Sponsored
GDR(a).............................. 24,100 112,969
Philippine Long Distance Telephone
Co.................................. 3,800 115,851
SM Prime Holdings, Inc................ 251,000 56,732
Universal Robina Corporation.......... 535,000 113,893
----------
423,233
----------
SINGAPORE -- 6.23%
Clipsal Industries Limited............ 118,000 182,900
DBS Land Ltd.......................... 105,000 209,696
Development Bank of Singapore
Limited -- Foreign Registered....... 15,600 190,594
Elec & Eltek International Co. Ltd.... 34,100 132,990
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Fraser & Neave Ltd. ORD............... 54,200 $ 240,363
Singapore Airlines Ltd. -- Foreign
Registered.......................... 21,000 199,828
United Overseas Bank Ltd. -- Foreign
Registered.......................... 20,000 139,797
----------
1,296,168
----------
SOUTH KOREA -- 6.47%
Hyundai Motor Company Ltd............. 3,052 72,380
Korea Electric Power Corporation...... 5,400 224,405
Pohang Iron & Steel Company Ltd....... 2,000 243,826
Samsung Electronics................... 3,799 416,837
Samsung Electronics Ltd. Sponsored
GDR................................. 270 14,469
Samsung Fire & Marine Insurance....... 531 373,891
----------
1,345,808
----------
THAILAND -- 1.91%
Robinson Department Store Public
Company Limited -- Foreign
Registered(a)....................... 377,000 62,367
SG Asia Credit Public Company
Limited -- Foreign Registered(a).... 336,000 122,376
Siam Cement Public Company Limited
(The) -- Foreign Registered(a)...... 4,100 124,533
Siam Makro Public Company Limited --
Foreign Registered.................. 47,800 87,527
----------
396,803
----------
EUROPE -- 40.51%
- -------------------------------------
AUSTRIA -- 0.88%
Bank Austria AG....................... 3,466 182,294
----------
DENMARK -- 1.41%
Den Danske Bank Group................. 1,786 193,705
Unidanmark A/S........................ 1,500 100,114
----------
293,819
----------
FINLAND -- 0.20%
Stora Enso Oyj -- R Shares............ 3,847 41,260
----------
FRANCE -- 6.73%
Alcatel S.A........................... 7,000 198,625
Compagnie Financiere de Paribas....... 2,339 262,200
Compagnie Generale des Etablissements
Michelin Class B.................... 3,000 122,732
Groupe Danone......................... 600 154,691
Scor S.A.............................. 4,800 238,100
Societe Generale...................... 1,319 232,466
Suez Lyonnaise des Eaux............... 1,054 190,109
----------
1,398,923
----------
GERMANY -- 3.72%
Adidas-Salomon AG..................... 2,400 233,645
DaimlerChrysler AG.................... 2,715 237,152
Hornbach Holding AG Preferred......... 1,337 57,221
Volkswagen AG......................... 3,800 245,201
----------
773,219
----------
IRELAND -- 0.40%
Bank of Ireland....................... 5,000 84,017
----------
ITALY -- 1.02%
Banca Popolare di Milano.............. 27,500 212,416
----------
</TABLE>
3
<PAGE> 64
/IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
NETHERLANDS -- 5.00%
Akzo Nobel NV......................... 4,863 $ 204,615
Fortis (NL) NV........................ 6,100 188,408
Hunter Douglas NV..................... 3,800 130,497
ING Groep NV.......................... 4,022 217,758
Koninklijke (Royal) Philips
Electronics NV...................... 3,013 297,206
----------
1,038,484
----------
NORWAY -- 0.95%
Storebrand ASA(a)..................... 29,200 196,590
----------
PORTUGAL -- 1.46%
Lusomundo -- SGPS S.A. Preferred
Shares.............................. 5,900 60,115
Portugal Telecom S.A. -- Sponsored
ADR................................. 2,977 122,615
Sonae Industria E Investimentos....... 3,550 120,740
----------
303,470
----------
SWEDEN -- 3.64%
AssiDoman AB.......................... 4,680 70,461
Boliden Limited -- Swedish Depository
Receipt(a).......................... 3,790 8,693
Electrolux AB -- Series B............. 12,000 251,243
Investor AB........................... 24,000 268,180
S.K.F. AB Series "B".................. 6,400 118,188
Trelleborg AB "B" Free Shares......... 4,645 40,977
----------
757,742
----------
SWITZERLAND -- 5.36%
Holderbank Financiere Glaris AG....... 103 121,579
Nestle AG Registered.................. 128 230,625
Novartis AG Registered................ 183 267,215
SGS Societe Generale de Surveillance
Holding S.A.(a)..................... 251 259,946
Swatch Group, (The) AG................ 350 235,496
----------
1,114,861
----------
UNITED KINGDOM -- 9.74%
Billiton plc.......................... 32,742 114,190
Boots Company plc..................... 12,000 143,191
British Airways plc................... 31,000 213,175
Cadbury Schweppes plc................. 24,000 153,216
Corporate Services Group plc.......... 125,000 167,482
Gallaher Group plc.................... 41,048 252,992
Imperial Chemical Industries plc...... 21,539 212,879
National Westminster Bank plc ADR..... 900 116,944
Pilkington plc........................ 207,890 285,096
PowerGen plc.......................... 18,831 202,589
Rio Tinto plc Sponsored ADR........... 89 5,985
Tate & Lyle plc....................... 25,000 157,039
----------
2,024,778
----------
NORTH AMERICA -- 20.40%
- -------------------------------------
UNITED STATES -- 20.40%
Abbott Laboratories................... 2,000 91,000
AlliedSignal Inc...................... 900 56,700
ALLTEL Corporation.................... 1,400 100,100
American Home Products Corporation.... 1,500 86,250
Anheuser-Busch Companies, Inc......... 1,200 85,125
Applied Materials, Inc.(a)............ 1,000 73,875
AT&T Corporation...................... 1,800 100,463
Atlantic Richfield Company (ARCO)..... 500 41,781
Avon Products, Inc.................... 1,200 66,600
Bank of America Corporation........... 1,000 73,313
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Bank of New York Company, Inc.,
(The)............................... 1,800 $ 66,038
Bank One Corporation.................. 800 47,650
Bell Atlantic Corporation............. 1,000 65,375
BellSouth Corporation................. 1,500 70,313
Bristol-Myers Squibb Company.......... 1,400 98,613
Chase Manhattan Corporation, (The).... 1,100 95,288
Chevron Corporation................... 900 85,669
Coca-Cola Company (The)............... 700 43,750
Colgate-Palmolive Company............. 800 79,000
Dell Computer Corporation(a).......... 500 18,500
Equifax Inc........................... 1,700 60,669
Fannie Mae............................ 700 47,863
Ford Motor Company.................... 1,500 84,656
Gap, Inc. (The)....................... 1,050 52,894
General Electric Company.............. 900 101,700
General Mills, Inc.................... 1,000 80,375
General Motors Corporation............ 600 39,600
Goodyear Tire & Rubber Co. (The)...... 1,500 88,219
H.J. Heinz Company.................... 1,100 55,138
Honeywell Inc......................... 900 104,288
Intel Corporation..................... 2,100 124,950
International Business Machines
Corp................................ 1,600 206,800
Johnson & Johnson..................... 1,000 98,000
Lowe's Companies, Inc................. 1,000 56,688
May Department Stores Co. (The)....... 1,350 55,181
Mellon Bank Corporation............... 1,700 61,838
Merck & Co, Inc....................... 1,000 74,000
Merrill Lynch & Co., Inc.............. 1,100 87,931
Mobil Corporation..................... 500 49,500
Morgan Stanley Dean Witter & Co....... 1,000 102,500
Novellus Systems, Inc.(a)............. 1,000 68,250
PepsiCo, Inc.......................... 2,000 77,375
PPG Industries, Inc................... 1,000 59,063
Praxair, Inc.......................... 1,500 73,406
Proctor & Gamble Company, (The)....... 700 62,475
Providian Financial Corporation....... 600 56,100
SBC Communications Inc................ 1,300 75,400
Schering-Plough Corporation........... 1,600 84,800
Sun Microsystems, Inc.(a)............. 1,600 110,200
Texaco Inc............................ 600 37,500
Texas Instruments Inc................. 300 43,500
Tommy Hilfiger Corporation(a)......... 700 51,450
Tyco International Ltd................ 600 56,850
United Technologies Corporation....... 1,200 86,025
Wells Fargo Corporation............... 1,100 47,025
Wm. Wrigley Jr. Company............... 600 54,000
Xerox Corporation..................... 2,000 118,125
----------
4,239,737
----------
SOUTH AMERICA -- 4.29%
- -------------------------------------
BRAZIL -- 2.66%
Petroleo Brasileiro S.A.(Petrobras)
Preferred........................... 1,340,000 207,846
Telecomunicacoes Brasileiras S.A.
(Telebras) Sponsored ADR Preferred
Block............................... 3,000 270,563
Uniao de Bancos Brasileiros S.A.
(Unibanco) -- Preferred............. 4,400,000 74,452
----------
552,861
----------
</TABLE>
4
<PAGE> 65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
CHILE -- 1.63%
A.F.P. Provida S.A.-Sponsored ADR.... 7,100 $ 156,200
Cristalerias de Chile-Sponsored
ADR................................ 11,900 183,696
-----------
339,896
-----------
TOTAL INVESTMENTS -- 99.14%
(Cost -- $17,933,902)(c)........... 20,610,270
OTHER ASSETS, LESS LIABILITIES -- 0.86% 179,142
-----------
NET ASSETS -- 100%................... $20,789,412
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
ORD -- Ordinary
(a) Non-income producing security
(b) Under the Malaysian Government policy, which
went into effect on February 15, 1999,
proceeds repatriated from the sale of
Malaysian securities will be subject to a
graduated levy. The levy ranges from zero to
ten percent of proceeds, depending on the
holding period and the time of repatriation.
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 4,666,940
Gross unrealized depreciation............... (1,990,572)
-----------
Net unrealized appreciation............. $ 2,676,368
===========
Purchases and sales of securities other than short-term
obligations aggregated $6,728,717 and $12,296,583
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
5
<PAGE> 66
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $17,933,902)...... $20,610,270
Cash........................................................ 154,258
Receivables
Investments sold........................................... 28,094
Fund shares sold........................................... 3,869
Dividends and Interest..................................... 76,397
Manager for expense reimbursement.......................... 4,414
Other assets................................................ 22,338
-----------
Total assets............................................. 20,899,640
-----------
LIABILITIES
Payables
Fund shares repurchased.................................... 17,054
Management fee............................................. 16,623
12b-1 service and distribution fees........................ 9,491
Other payables to related parties.......................... 10,420
Accrued expenses............................................ 56,640
-----------
Total liabilities........................................ 110,228
-----------
NET ASSETS.................................................. $20,789,412
===========
CLASS A
Net asset value and redemption price per share
($12,811,572/959,619 shares outstanding).................. $ 13.35
===========
Maximum offering price per share ($13.35 x 100/94.25)*...... $ 14.16
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($7,221,118/549,372 shares outstanding)............. $ 13.14
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($359,129/28,074 shares outstanding)................ $ 12.79
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($397,593/29,645 shares outstanding)................ $ 13.41
===========
NET ASSETS CONSIST OF
Capital paid-in............................................ $17,432,720
Undistributed net realized gain on investments and foreign
currency transactions.................................... 645,687
Undistributed net investment income........................ 63,166
Net unrealized appreciation on investments and foreign
currency transactions.................................... 2,647,839
-----------
NET ASSETS.................................................. $20,789,412
===========
</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%.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $34,801 foreign taxes withheld............ $ 319,120
Interest................................................... 1,832
----------
320,952
----------
EXPENSES
Management fee............................................ $104,911
Transfer agent............................................. 32,289
Administrative services fee................................ 10,491
Custodian fees............................................. 41,096
Blue Sky fees.............................................. 13,567
Auditing and accounting fees............................... 12,220
Shareholder reports........................................ 5,825
Fund accounting............................................ 18,549
Trustees' fees............................................. 3,977
12b-1 service and distribution fees........................ 53,208
Legal...................................................... 11,913
Other...................................................... 4,491
----------
312,537
Expenses reimbursed by Manager............................. (54,751)
----------
Net expenses........................................... 257,786
----------
NET INVESTMENT INCOME....................................... 63,166
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................. 1,889,660
Net change in unrealized appreciation on investments and
foreign currency transactions, net of taxes of $28,226... 1,460,764
----------
Net gain on investment transactions.................... 3,350,424
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $3,413,590
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 67
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
---------------------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 63,166 $ (32,877)
Net realized gain (loss) on investments and foreign
currency transactions................................... 1,889,660 (1,235,420)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 1,460,764 3,370,566
------------ ------------
Net increase resulting from operations................ 3,413,590 2,102,269
------------ ------------
Class A distributions
Dividends in excess of net investment income.............. -- (622)
Distributions from capital gains.......................... -- (677,923)
------------ ------------
Total distributions to Class A shareholders......... -- (678,545)
------------ ------------
Class B distributions
Dividends in excess of net investment income.............. -- (328)
Distributions from capital gains.......................... -- (356,809)
------------ ------------
Total distributions to Class B shareholders........... -- (357,137)
------------ ------------
Class C distributions
Dividends in excess of net investment income.............. -- (19)
Distributions from capital gains.......................... -- (20,452)
------------ ------------
Total distributions to Class C shareholders........... -- (20,471)
------------ ------------
Advisor Class distributions
Dividends in excess of net investment income.............. -- (13)
Distributions from capital gains.......................... -- (14,685)
------------ ------------
Total distributions to Advisor Class shareholders..... -- (14,698)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (4,045,015) (5,705,136)
Class B................................................... (1,372,776) (2,919,278)
Class C................................................... (125,979) (351,723)
Advisor Class............................................. 15,597 373,565
------------ ------------
Net decrease resulting from Fund share transactions... (5,528,173) (8,602,572)
------------ ------------
TOTAL DECREASE IN NET ASSETS................................ (2,114,583) (7,571,154)
NET ASSETS
Beginning of period....................................... 22,903,995 30,475,149
------------ ------------
END OF PERIOD............................................. $20,789,412 $ 22,903,995
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 63,166 --
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 68
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
for the six
months ended for the six
June 30, for the year ended months ended
(unaudited) December 31, December 31,
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 11.32 $ 10.93 $ 13.17 $ 11.97 $ 11.23 $ 11.52
-------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)............. .06(a)(b) .02(a) .08 .08 .09(a) --(a)
Net gains or losses on securities (both
realized and unrealized)............... 1.97(b) .91 (1.23) 1.86 1.25 (.10)
-------------------------------------------------------------------------------
Total from investment operations......... 2.03 .93 (1.15) 1.94 1.34 (.10)
-------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............. -- -- .05 .08 .04 --
In excess of net investment income..... -- -- .05 .18 -- --
Distributions
From capital gains..................... -- .54 .99 .48 .49 .09
In excess of capital gains............. -- -- -- -- .07 --
Returns of capital..................... -- -- -- -- -- .10
-------------------------------------------------------------------------------
Total distributions...................... -- .54 1.09 .74 .60 .19
-------------------------------------------------------------------------------
Net asset value, end of period............. $ 13.35 $ 11.32 $ 10.93 $ 13.17 $ 11.97 $ 11.23
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total return (%)........................... 17.93(c) 8.59(d) (8.72)(d) 16.21(d) 12.08(d) (1.00)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 12,812 $14,660 $19,692 $24,152 $21,264 $19,327
Ratio of expenses to average net assets
With expense reimbursement (%)........... 2.17(e) 2.18 -- -- 2.20 2.20(e)
Without expense reimbursement (%)........ 2.69(e) 2.54 2.07 2.18 2.46 2.34(e)
Ratio of net investment income (loss) to
average net assets (%)................... .89(a)(e) .16(a) .58 .58 .71(a) (.06)(a)(e)
Portfolio turnover rate (%)................ 32 17 45 43 53 23
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------
for the six
months ended for the six
June 30, for the year ended months ended
(unaudited) December 31, December 31,
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 11.19 $ 10.90 $ 13.12 $ 11.97 $ 11.23 $ 11.52
-------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)............. --(a)(b) (.09)(a) (.02) (.02) --(a) (.03)(a)
Net gains or losses on securities (both
realized and unrealized)............... 1.95(b) .92 (1.20) 1.85 1.25 (.12)
-------------------------------------------------------------------------------
Total from investment operations......... 1.95 .83 (1.22) 1.83 1.25 (.15)
-------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............. -- -- .05 -- -- --
In excess of net investment income..... -- -- .05 .20 -- --
Distributions
From capital gains..................... -- .54 .90 .48 .45 .08
In excess of capital gains............. -- -- -- -- .06 --
Returns of capital..................... -- -- -- -- -- .06
-------------------------------------------------------------------------------
Total distributions...................... -- .54 1.00 .68 .51 .14
-------------------------------------------------------------------------------
Net asset value, end of period............. $ 13.14 $ 11.19 $ 10.90 $ 13.12 $ 11.97 $ 11.23
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total return (%)........................... 17.43(c) 7.69(d) (9.33)(d) 15.30(d) 11.25(d) (1.37)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 7,221 $ 7,495 $10,056 $ 8,968 $ 4,811 $ 2,956
Ratio of expenses to average net assets
With expense reimbursement (%)........... 3.00(e) 2.97 -- -- 2.95 2.95(e)
Without expense reimbursement (%)........ 3.52(e) 3.33 2.82 2.94 3.21 3.09(e)
Ratio of net investment income (loss) to
average net assets (%)................... .06(a)(e) (.63)(a) (.18) (.17) (.04)(a) (.81)(a)(e)
Portfolio turnover rate (%)................ 32 17 45 43 53 23
</TABLE>
<PAGE> 69
9
- -------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
- -----------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- -----------------------------------------------------------
1999 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10.90 $ 10.67 $ 12.94 $ 13.31
- -----------------------------------------------------------
(.01)(a)(b) (.16)(a) (.02) (.01)
1.90(b) .93 (1.24) .42
- -----------------------------------------------------------
1.89 .77 (1.26) .41
- -----------------------------------------------------------
-- -- .05 --
-- -- .05 .30
-- .54 .91 .48
-- -- -- --
-- -- -- --
- -----------------------------------------------------------
-- .54 1.01 .78
- -----------------------------------------------------------
$ 12.79 $ 10.90 $ 10.67 $ 12.94
- -----------------------------------------------------------
- -----------------------------------------------------------
17.34(c) 7.30(d) (9.72)(d) 3.07(c)
359 $ 428 $ 727 $ 71
3.23(e) 3.30 -- --
3.75(e) 3.66 2.82 3.77(e)
(.18)(a)(e) (.96)(a) (.18) (1.01)(e)
32 17 45 43
</TABLE>
- -----------------------------------
(a) Net investment income (loss) 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) Total return does not reflect a sales charge.
(e) Annualized
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------
for the six for the period
months ended April 30, 1998
June 30, (commencement)
(unaudited) to December 31,
-----------------------------------
1999 1998
-------------------------------
<S> <C> <C>
$ 11.36 $ 13.26
-----------------------------------
.07(a)(b) .05(a)
1.98(b) (1.41)
-----------------------------------
2.05 (1.36)
-----------------------------------
-- --
-- --
-- .54
-- --
-- --
-----------------------------------
-- .54
-----------------------------------
$ 13.41 $ 11.36
-----------------------------------
-----------------------------------
18.05(c) (10.19)(c)
$ 398 $ 321
1.96(e) 1.75(e)
2.48(e) 2.11(e)
1.10(a)(e) .59(a)(e)
32 17
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 70
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. 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 $780,000
as of December 31, 1998 which may be applied against any realized net taxable
gain of each succeeding fiscal year until fully utilized or until the expiration
date, whichever occurs first. The carryforward expires in 2006.
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 loss and Net realized loss on investments and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accordingly, the Fund may
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% on 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 limits the Fund's total
operating expenses (excluding taxes, 12b-1 fees, brokerage commissions,
10
<PAGE> 71
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
interest, litigation and indemnification expenses, and other extraordinary
expenses) to an annual rate of 1.95% of its average net assets. For each of the
following nine years, IMI will limit these expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $1,011.
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 $16,654,
$34,697 and $1,857, 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 $18,186, $12,447, $1,102 and $554, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 27,402 $ 331,397 146,315 $ 1,787,073
Issued on
reinvestment of
distributions....... -- -- 55,920 628,542
Repurchased.......... (363,004) (4,376,412) (708,378) (8,120,751)
======== =========== ======== =========== ===
Net decrease......... (335,602) $(4,045,015) (506,143) $(5,705,136)
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 39,079 $ 427,891 81,549 $ 964,574
Issued on
reinvestment of
distributions....... -- -- 26,955 299,738
Repurchased.......... (159,525) (1,800,667) (361,380) (4,183,590)
-------- ----------- -------- ----------- ---
Net decrease......... (120,446) $(1,372,776) (252,876) $(2,919,278)
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 776 $ 8,978 15,683 $ 182,504
Issued on
reinvestment of
distributions....... -- -- 1,448 15,682
Repurchased.......... (11,995) (134,957) (45,990) (549,909)
-------- ----------- -------- ----------- ---
Net decrease......... (11,219) $ (125,979) (28,859) $ (351,723)
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 2,716 $ 31,492 30,998 $ 403,896
Issued on
reinvestment of
distributions....... -- -- 1,303 14,699
Repurchased.......... (1,308) (15,895) (4,064) (45,030)
-------- ----------- -------- ----------- ---
Net increase......... 1,408 $ 15,597 28,237 $ 373,565
======== =========== ======== =========== ===
</TABLE>
11
<PAGE> 72
03IGLF063099
<PAGE> 73
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY GLOBAL SCIENCE & TECHNOLOGY FUND
MARKET COMMENTARY
The first half of 1999 has seen a continuation of the strong stock market
performance of the last several years, which has been driven by a healthy
economy and low interest rates. Economic growth remains strong, and we believe
it may actually strengthen further throughout the remainder of the year as the
majority of Asian economies continue to recover. We believe this could set the
stage for many companies to deliver solid earnings growth, including those in
the technology sector. Although inflation remains surprisingly low, the Federal
Reserve recently made a preemptive strike against potential inflation by raising
interest rates a quarter of a point. The broader market took this rate increase
in stride and has continued to perform well. Within this environment, however,
technology stocks continued to experience volatility.
One area of concern for technology stocks is the Year 2000 (Y2K) problem.
The Y2K issue forced many companies to increase technology spending over the
last few years to replace noncompliant legacy systems. We believe it is possible
that the strong earnings growth experienced by many technology businesses in the
first half of this year resulted from a continuation of these above-average
outlays. If this is the case, earnings growth for technology businesses could
slow later in 1999 as some experts are predicting that in the fourth quarter of
1999, businesses will freeze all technology investment unrelated to Y2K. This is
especially significant since Information Technology (IT) managers often rush to
spend their budgets by year-end, making the last three months of the year the
strongest quarter for many technology companies. If the normal buying pattern
for technology products is disrupted, volatility in an already volatile sector
of the stock market will most likely increase.
The good news, according to analysts, is that many US companies have either
addressed their Y2K problems or will have addressed them by the end of the third
quarter of 1999. This should allow IT resources to be redirected to technologies
like e-commerce and supply chain management, which have the potential to boost
productivity and sales. This is significant, since spending to correct the Y2K
problem is solely a cost item and has done nothing to improve the financial
performance of firms that have been forced to deal with the millennium bug.
Thus, although there could be a pause in IT spending in the second half of 1999,
we believe that 2000 could turn out to be a big year in terms of technology
investment.
Although technology stocks have generated robust returns so far this year,
there have been a few underperforming sectors, such as
<PAGE> 74
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
personal computers, microprocessors and DRAMs (dynamic random access memory),
the most common form of semiconductor memory. Computers with extremely low price
points--for example, well-equipped computers, which can now be found for less
than $500--are exceedingly popular. In addition, it is now possible to get a
free PC in exchange for agreeing to purchase Internet access for a year or two.
These factors have placed severe pressure on the profitability and sales growth
of PC companies and their component suppliers.
Although companies that manufacture microprocessors and DRAMs have stumbled
as of late, other areas of the semiconductor industry have done quite well. In
particular, companies that manufacture communications semiconductors have
benefited from the popularity of wireless phones and, especially the Internet.
The recent growth of the Internet has been extraordinary, with traffic
doubling every three to four months. The Internet is the fastest-growing mass
communications medium ever, and now has almost 100 million users world wide. We
believe that the opportunities for well-positioned companies are tremendous,
since, according to our research, currently only a small percentage of all
commerce is performed on-line, and the amount of money spent on traditional
media advertising dwarfs what is budgeted for Internet-based advertising. The
Ivy Global Science & Technology Fund is invested in the leading Internet stocks,
such as America Online and Yahoo!, which we believe are positioned for long-term
market dominance. Given the apparent investor enthusiasm for these Internet
leaders, we have also chosen to invest in a number of firms that are supplying
the infrastructure for the Internet. While these companies are less direct
beneficiaries of the Internet growth, according to our research, they tend to
sell for more reasonable valuations and have higher levels of near-term
profitability. These include companies selling communications semiconductors,
e-commerce and network management software, storage-related technologies and
communications equipment.
In addition to the redirection of assets away from Y2K to more productive
uses, we believe that another bright spot for technology companies next year
will be a major new product cycle for Microsoft's Windows operating system. We
believe that businesses and individuals will begin to upgrade to Windows 2000
sometime after the turn of the century, and that this should spur demand for
more powerful PCs that are loaded with extra memory and contain the latest
Pentium III microprocessors. We believe this will be a positive development not
only for PC and semiconductor manufacturers, but also for other component
suppliers, such as disk drive and modem vendors, as well as derivative
beneficiaries, such as software firms.
The Ivy Global Science & Technology Fund focuses on the leaders in the
technology industry, the firms that are gaining market share and delivering
strong earnings growth. Our goal is to see that companies represented in the
Fund's portfolio will generally be number one or two in their niche, since many
technology markets are winner-take-all. Ideally, the Fund will invest in
companies that have set some standard within their industry or offer products
that have high switching costs, which would help lock in customers. Finally, we
look for businesses that have created barriers to entry due to
well-differentiated products or a compelling proprietary technology. By
investing in the leaders of the most dynamic segment of the global economy, we
are optimistic that long-term investors will be rewarded.
IVY MANAGEMENT, INC.
2
<PAGE> 75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS -- 96.79% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BIOTECHNOLOGY -- 1.15%
Alkermes, Inc.(a)....................... 4,600 $ 106,375
Pharmacyclics, Inc.(a).................. 4,200 117,600
US Bioscience, Inc.(a).................. 11,500 112,125
Vertex Pharmaceuticals
Incorporated(a)....................... 5,900 142,338
-----------
478,438
-----------
BUSINESS SERVICES -- 2.55%
Inspire Insurance Solutions, Inc.(a).... 13,650 197,925
NOVA Corporation(a)..................... 12,000 300,000
Profit Recovery Group International,
Inc. (The)(a)......................... 8,600 406,887
Transaction Network Services, Inc.
(a)................................... 5,100 149,175
-----------
1,053,987
-----------
COMPUTER EQUIPMENT & STORAGE -- 6.99%
Dell Computer Corporation(a)............ 9,000 333,000
EMC Corporation(a)...................... 8,600 473,000
Gateway Inc.(a)......................... 2,500 147,500
International Business Machines Corp.... 3,800 491,150
Network Appliance, Inc.(a).............. 13,600 759,900
Sun Microsystems, Inc.(a)............... 10,000 688,750
-----------
2,893,300
-----------
ELECTRONIC COMMERCE -- 2.73%
Pegasus Systems, Inc.(a)................ 11,400 426,787
QRS Corporation(a)...................... 5,000 390,000
Transactions Systems Architects, Inc.... 8,000 312,000
-----------
1,128,787
-----------
ELECTRONIC DESIGN AUTOMATION -- 0.45%
Synopsys, Inc.(a)....................... 3,400 187,637
-----------
ELECTRONIC MANUFACTURING SERVICES --
3.51%
Flextronics International Ltd.(a)....... 8,900 493,950
Jabil Circuit, Inc.(a).................. 5,500 248,188
Sanmina Corporation(a).................. 6,000 455,250
Solectron Corporation................... 3,800 253,412
-----------
1,450,800
-----------
HEALTHCARE INFORMATION SYSTEMS -- 0.84%
First Consulting Group, Inc. (a)........ 17,800 189,125
Superior Consultant Holdings
Corporation(a)........................ 6,400 158,000
-----------
347,125
-----------
INFORMATION SERVICES -- 3.09%
Dendrite International, Inc.(a)......... 14,100 509,363
FactSet Research Systems Inc............ 9,750 552,094
Forrester Research, Inc.(a)............. 3,700 92,500
Meta Group, Inc.(a)..................... 8,100 124,538
-----------
1,278,495
-----------
INTERNET -- 11.49%
Amazon.com, Inc.(a)..................... 1,700 212,713
America Online, Inc.(a)................. 14,100 1,558,050
At Home Corporation -- Series A(a)...... 4,800 258,900
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Broadcast.com Inc.(a)................... 1,900 $ 253,769
BroadVision, Inc.(a).................... 4,200 309,750
CNET, Inc.(a)........................... 5,200 299,650
Ebay Inc.(a)............................ 800 120,800
Exodus Communications, Inc.(a).......... 2,900 347,818
Inktomi Corporation(a).................. 2,100 274,181
Network Solutions Inc.(a)............... 3,800 300,675
RealNetworks, Inc.(a)................... 2,700 185,963
SportsLine USA Inc.(a).................. 3,700 132,738
VeriSign Inc.(a)........................ 2,600 224,250
Yahoo! Inc.(a).......................... 1,600 275,600
-----------
4,754,857
-----------
MISCELLANEOUS TECHNOLOGY -- 1.20%
Gemstar International Group Ltd.(a)..... 7,600 495,900
-----------
NETWORK EQUIPMENT & SOFTWARE -- 6.99%
American Power Conversion
Corporation(a)........................ 26,800 539,350
Cisco Systems, Inc.(a).................. 21,000 1,354,500
Concord Communications, Inc.(a)......... 5,400 243,000
Extreme Networks(a)..................... 500 29,031
Micromuse Inc.(a)....................... 8,000 399,000
Visual Networks, Inc.(a)................ 10,300 329,600
-----------
2,894,481
-----------
OPERATIONAL SUPPORT SYSTEMS -- 0.84%
DSET Corporation(a)..................... 10,300 143,556
International Telecommunication Data
Systems, Inc.(a)...................... 12,750 204,000
-----------
347,556
-----------
PHARMACEUTICALS -- 2.61%
Anesta Corp.(a)......................... 11,500 235,031
Sepracor, Inc.(a)....................... 2,700 219,375
Shire Pharmaceuticals Group plc
ADR(a)(b)............................. 19,300 501,800
SkyePharma plc -- Sponsored ADR(b)...... 16,000 123,000
-----------
1,079,206
-----------
SEMICONDUCTOR EQUIPMENT -- 4.99%
Applied Materials, Inc.(a).............. 6,200 458,025
ASM Lithography Holding NV(a)(b) 4,500 267,188
Etec Systems, Inc.(a)................... 5,400 179,550
KLA-Tencor Corporation(a)............... 5,200 337,350
Novellus Systems, Inc.(a)............... 5,200 354,900
Photronics, Inc.(a)..................... 3,600 88,200
PRI Automation, Inc.(a)................. 4,500 163,125
Teradyne, Inc.(a)....................... 3,000 215,250
-----------
2,063,588
-----------
SEMICONDUCTORS -- 14.13%
Altera Corporation(a)................... 11,200 412,300
Applied Micro Circuits Corporation(a)... 3,200 263,200
Broadcom Corporation(a)................. 1,900 274,669
Conexant Systems, Inc.(a)............... 6,200 359,988
Genesis Microchip Inc.(a)............... 9,000 212,625
hi/fn, inc.(a).......................... 7,300 555,713
Intel Corporation....................... 7,000 416,500
Level One Communications, Inc. (a)...... 4,000 195,750
</TABLE>
3
<PAGE> 76
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Linear Technology Corporation.......... 5,900 $ 396,775
LSI Logic Corporation(a)............... 5,500 253,688
Maker Communications, Inc.(a).......... 600 18,600
Maxim Integrated Products, Inc.(a)..... 6,200 412,300
Micrel, Inc.(a)........................ 3,400 251,600
MMC Networks Inc.(a)................... 11,500 514,625
Rambus Inc.(a)......................... 2,900 267,343
Texas Instruments Inc.................. 5,500 797,500
Xilinx Inc.(a)......................... 4,300 246,175
-----------
5,849,351
-----------
SOFTWARE -- 11.45%
Actuate Software Corporation(a)........ 10,200 270,300
Best Software, Inc.(a)................. 8,600 138,675
BMC Software Inc.(a)................... 4,500 243,000
Citrix Systems, Inc.(a)................ 12,200 689,300
Great Plains Software, Inc.(a)......... 3,200 151,000
Legato Systems, Inc.(a)................ 7,800 450,450
Microsoft Corporation(a)............... 15,400 1,388,888
New Era of Networks, Inc.(a)........... 5,500 241,656
Peregrine Systems, Inc.(a)............. 5,600 143,850
USinternetworking, Inc.(a)............. 5,400 226,800
Veritas Software Corp.(a).............. 1,775 168,514
Verity, Inc.(a)........................ 6,100 330,544
Visio Corporation(a)................... 7,700 293,081
-----------
4,736,058
-----------
SYSTEM INTEGRATORS -- 3.18%
4Front Technologies, Inc.(a)........... 25,000 246,875
International Integration
Incorporated(a)...................... 4,400 99,000
International Network Services(a)...... 10,200 411,825
Technisource, Inc.(a).................. 10,800 56,025
Whittman-Hart, Inc.(a)................. 15,800 501,650
-----------
1,315,375
-----------
TELECOMMUNICATION EQUIPMENT -- 12.09%
Carrier Access Corporation(a).......... 4,700 205,919
Comverse Technology, Inc.(a)........... 9,000 679,500
E-Tek Dynamics, Inc.(a)................ 4,900 233,055
Gilat Satellite Networks Ltd.(a)(b).... 5,000 262,500
Lucent Technologies Inc................ 11,870 800,483
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Nokia Oyj. Sponsored ADR............... 6,100 $ 558,531
Nortel Networks Corporation(b)......... 3,900 338,569
Pairgain Technologies Inc.(a).......... 17,400 200,100
SDL, Inc.(a)........................... 6,600 337,012
Tellabs, Inc.(a)....................... 12,400 837,775
Uniphase Corporation(a)................ 3,300 547,800
-----------
5,001,244
-----------
TELECOMMUNICATION SERVICES -- 5.84%
Global Crossing Ltd.(a)................ 5,977 254,770
MCI WorldCom, Inc.(a).................. 8,000 690,000
Metromedia Fiber Network, Inc.(a)...... 8,900 319,844
Nextel Communications, Inc.(a)......... 10,700 537,006
Qwest Communications International
Inc.(a).............................. 6,400 211,600
WinStar Communications, Inc.(a)........ 8,300 404,625
-----------
2,417,845
-----------
TELESERVICES -- 0.67%
Sykes Enterprises, Inc.(a)............. 8,300 277,012
-----------
TOTAL INVESTMENTS -- 96.79%
(Cost -- $21,787,462)(c)............. 40,051,042
OTHER ASSETS, LESS
LIABILITIES -- 3.21%................. 1,329,121
-----------
NET ASSETS -- 100%..................... $41,380,163
===========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Foreign security
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $18,634,866
Gross unrealized depreciation............... (371,286)
-----------
Net unrealized appreciation............. $18,263,580
===========
Purchases and sales of securities other than short-term
obligations aggregated $12,681,833 and $14,898,815,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
4
<PAGE> 77
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $21,787,462)...... $40,051,042
Cash........................................................ 1,550,208
Receivable from fund shares sold............................ 19,229
Deferred organization expenses.............................. 24,532
Other assets................................................ 13,802
-----------
Total assets.............................................. 41,658,813
-----------
LIABILITIES
Payables
Investments purchased..................................... 128,130
Fund shares repurchased................................... 71,039
Management fee............................................ 31,238
12b-1 service and distribution fees....................... 24,023
Other payables to related parties......................... 13,135
Accrued expenses............................................ 11,085
-----------
Total liabilities......................................... 278,650
-----------
NET ASSETS.................................................. $41,380,163
===========
CLASS A
Net asset value and redemption price per share
($16,625,918/572,211 shares outstanding).................. $ 29.06
===========
Maximum offering price per share ($29.06 x 100/94.25)*...... $ 30.83
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($15,386,997/539,008 shares outstanding)............ $ 28.55
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($9,334,948/325,931 shares outstanding)............. $ 28.64
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($32,300/1,112 shares outstanding).................. $ 29.05
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $20,646,562
Undistributed net realized gain on investments............ 2,881,343
Accumulated net investment loss........................... (411,322)
Net unrealized appreciation on investments................ 18,263,580
-----------
NET ASSETS.................................................. $41,380,163
===========
</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%.
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 78
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 3,961
Interest.................................................. 26,493
-----------
30,454
-----------
EXPENSES
Management fee............................................ $181,468
Transfer agent............................................ 39,439
Administrative services fee............................... 18,147
Custodian fees............................................ 6,035
Blue Sky fees............................................. 13,070
Auditing and accounting fees.............................. 11,057
Shareholder reports....................................... 5,729
Amortization of organization expenses..................... 5,955
Fund accounting........................................... 19,977
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 123,442
Legal..................................................... 12,037
Other..................................................... 1,443
-----------
Total expenses.......................................... 441,776
-----------
NET INVESTMENT LOSS......................................... (411,322)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 3,625,303
Net change in unrealized appreciation on investments...... 4,581,835
-----------
Net gain on investment transactions..................... 8,207,138
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 7,795,816
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 79
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (411,322) $ (640,698)
Net realized gain (loss) on:
Investments............................................. 3,625,303 327,469
Written options......................................... -- (210,691)
Net change in unrealized appreciation on investments...... 4,581,835 9,515,504
----------- -----------
Net increase resulting from operations.................. 7,795,816 8,991,584
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (4,597,768) 1,495,065
Class B................................................... 2,521,572 (964,996)
Class C................................................... (880,352) (87,574)
Advisor Class............................................. 10,146 12,519
----------- -----------
Net (decrease) increase resulting from Fund share
transactions........................................... (2,946,402) 455,014
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 4,849,414 9,446,598
NET ASSETS
Beginning of period....................................... 36,530,749 27,084,151
----------- -----------
END OF PERIOD............................................. $41,380,163 $36,530,749
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 80
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------
for the six for the period
months ended July 22, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 23.63 $ 17.47 $ 16.40 $10.00
--------------------------------------------------------------
Income from investment operations
Net investment loss....................................... (.23)(a) (.36)(a) (.31)(a) (.06)(b)
Net gains on securities (both realized and unrealized).... 5.66(a) 6.52(a) 1.38(a) 6.49
--------------------------------------------------------------
Total from investment operations.......................... 5.43 6.16 1.07 6.43
--------------------------------------------------------------
Less distributions
Distributions from capital gains.......................... -- -- -- .03
--------------------------------------------------------------
Total distributions..................................... -- -- -- .03
--------------------------------------------------------------
Net asset value, end of period.............................. $ 29.06 $ 23.63 $ 17.47 $16.40
==============================================================
Total return (%)............................................ 22.98(c) 35.26(d) 6.53(d) 64.34 (c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $16,626 $17,888 $12,159 $8,324
Ratio of expenses to average net assets
With expense reimbursement (%)............................ -- -- -- 2.19 (e)
Without expense reimbursement (%)......................... 2.01(e) 2.16 2.11 2.90 (e)
Ratio of net investment loss to average net assets (%)...... (1.84)(e) (1.88) (1.91) (2.18)(b)(e)
Portfolio turnover rate (%)................................. 35 73 54 23
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B
--------------------------------------------------------------
for the six for the period
months ended July 22, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 23.31 $ 17.37 $ 16.44 $10.00
--------------------------------------------------------------
Income from investment operations
Net investment loss....................................... (.32)(a) (.50)(a) (.32)(a) (.06)(b)
Net gains on securities (both realized and unrealized).... 5.56(a) 6.44(a) 1.25(a) 6.52
--------------------------------------------------------------
Total from investment operations.......................... 5.24 5.94 .93 6.46
--------------------------------------------------------------
Less distributions
Distributions from capital gains.......................... -- -- -- .02
--------------------------------------------------------------
Total distributions..................................... -- -- -- .02
--------------------------------------------------------------
Net asset value, end of period.............................. $ 28.55 $ 23.31 $ 17.37 $16.44
==============================================================
Total return (%)............................................ 22.48(c) 34.20(d) 5.66(d) 64.59 (c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $15,387 $10,197 $ 8,577 $3,425
Ratio of expenses to average net assets
With expense reimbursement (%)............................ -- -- -- 2.99 (e)
Without expense reimbursement (%)......................... 2.77(e) 2.95 2.92 3.70 (e)
Ratio of net investment loss to average net assets (%)...... (2.61)(e) (2.67) (2.72) (2.98)(b)(e)
Portfolio turnover rate (%)................................. 35 73 54 23
</TABLE>
8
<PAGE> 81
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
- -------------------------------------------------------------------
for the six for the period
months ended July 22, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- -------------------------------------------------------------------
1999 1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 23.38 $ 17.40 $ 16.46 $ 10.00
- -------------------------------------------------------------------
(.31)(a) (.48)(a) (.42)(a) (.05)(b)
5.57 (a) 6.46(a) 1.36(a) 6.53
- -------------------------------------------------------------------
5.26 5.98 .94 6.48
- -------------------------------------------------------------------
-- -- -- .02
- -------------------------------------------------------------------
-- -- -- .02
- -------------------------------------------------------------------
$ 28.64 $ 23.38 $ 17.40 $ 16.46
===================================================================
22.50 (c) 34.37(d) 5.71(d) 64.84 (c)
$ 9,335 $ 8,431 $ 6,348 $ 2,106
-- -- -- 2.95 (e)
2.71 (e) 2.84 2.85 3.66 (e)
(2.54)(e) (2.56) (2.65) (2.94)(b)(e)
35 73 54 23
</TABLE>
- --------------------------------------
(a) Based on average shares outstanding
(b) Net investment loss is net of expenses
reimbursed by Manager.
(c) Total return represents aggregate total
return and does not reflect
a sales charge.
(d) Total return does not reflect a sales
charge.
(e) Annualized
<TABLE>
<CAPTION>
ADVISOR CLASS
- ---------------------------------------
for the six for the period
months ended April 15, 1998
June 30, (commencement)
(unaudited) to December 31,
- ---------------------------------------
1999 1998
- ---------------------------------------
<S> <C> <C>
$ 23.62 $ 20.19
- ---------------------------------------
(.21)(a) (.20)(a)
5.64 (a) 3.63 (a)
- ---------------------------------------
5.43 3.43
- ---------------------------------------
-- --
- ---------------------------------------
-- --
- ---------------------------------------
$ 29.05 $ 23.62
- ---------------------------------------
- ---------------------------------------
22.99 (c) 16.99 (c)
$ 32 $ 15
-- --
1.87 (e) 2.18 (e)
(1.70)(e) (1.91)(e)
35 73
</TABLE>
The accompanying notes are an integral part of the
financial statements.
9
<PAGE> 82
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
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, Class I 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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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 invest in option contracts for the purpose of increasing
or decreasing their exposure to changing security prices, interest rates,
currency exchange rates, commodity prices, or other factors that affect the
value of the Fund's securities. An option is a right to buy or sell a particular
security at a specified price within a limited period of time. The buyer of the
option, in return for a premium paid to the seller, has the right to buy, in the
case of a call option, or sell, in the case of a put option, the underlying
security of the contract. An option on a stock index gives the purchaser the
right to receive from the seller cash equal to the difference between the
closing price of the index and the exercise price of the option.
When the Fund writes or purchases an option, an amount equal to the premium
received or paid by the Fund is recorded as a liability or an asset and is
subsequently adjusted to the current market value of the option written or
purchased. Premiums received or paid from writing or purchasing options which
expire unexercised are treated by the Fund on the expiration date as realized
gains or losses. The difference between the premium and the amount paid or
received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the cost of the purchase
or proceeds of the sale in determining whether the Fund has realized a gain or
loss on the transaction. For options on indices, cash settlement by the Fund is
required if the option is exercised. The Fund, as writer of an option, has no
control over whether the underlying securities may be sold (call) or purchased
(put) and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option. Exchange traded written
call options are valued daily at the last sale price or, in the absence of a
sale, at the calculated mean of the bid and asked prices, subject to certain
reasonability criteria on the spread between the bid and asked prices.
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 $744,000
as of December 31, 1998, 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 $373,000 in 2005
and $371,000 in 2006.
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 prior to the
effectiveness of Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities," in connection with its organization have been deferred and are
being amortized on a straight-line basis over a five year period.
10
<PAGE> 83
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 loss and Net
realized gain on investments for a reporting period may differ significantly in
amount and character from distributions during such period. Accordingly, the
Fund may make reclassifications among certain of its capital accounts without
impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI 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. For each of the following nine
years, IMI will limit these expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $4,349.
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
$19,285, $62,296, and $41,861 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 $17,257, $14,793, $7,333 and $56, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 108,387 $ 2,739,588 320,126 $ 6,486,249
Repurchased.......... (293,008) (7,337,356) (259,273) (4,991,184)
-------- ----------- -------- -----------
Net (decrease)/
increase............ (184,621) $(4,597,768) 60,853 $ 1,495,065
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 164,636 $ 4,103,340 88,408 $ 1,667,703
Repurchased.......... (63,073) (1,581,768) (144,818) (2,632,699)
-------- ----------- -------- -----------
Net increase/
(decrease).......... 101,563 $ 2,521,572 (56,410) $ (964,996)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 20,901 $ 507,294 56,748 $ 1,055,472
Repurchased.......... (55,627) (1,387,646) (60,890) (1,143,046)
-------- ----------- -------- -----------
Net decrease......... (34,726) $ (880,352) (4,142) $ (87,574)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED APRIL 15, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
- -----------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,111 $ 27,167 1,642 $ 32,780
Repurchased.......... (629) (17,021) (1,012) (20,261)
-------- ----------- -------- -----------
Net increase......... 482 $ 10,146 630 $ 12,519
======== =========== ======== ===========
</TABLE>
11
<PAGE> 84
03IGST063099
<PAGE> 85
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza.
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY PAN-EUROPE FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
While European markets have performed Within this low-rate, acceler-
quite well since the beginning of the ating-growth environment, cyclical stocks
year, US dollar returns on investments in have performed particularly well. In
these markets have been somewhat disap- January of 1999, the valuation gap between
pointing due to depreciation of the euro, European growth and cyclical stocks was at
the new common currency adopted by 11 the widest point it had been for the last
European nations. Since its launch in five years. Since then, cyclical stocks
January, the euro has weakened and other value sectors have substantially
considerably due to concerns about weak outperformed European growth stocks. (The
domestic activity and a slowdown in Morgan Stanley Capital International
exports. However, we are now seeing signs (MSCI) European Value Index has
that growth in countries participating in outperformed the broader MSCI Europe Index
the Economic and Monetary Union (EMU), by 13 percentage points year to date.
also known as the eurozone, has passed its There is no guarantee, however, this trend
low point, and we expect the economic will continue.) Despite this
environment to improve in the second half outperformance, European cyclical stocks
of 1999. In our view, a recovery in continue to trade well below their 10-year
European economic growth is being driven historical price to earnings ratios.
by lower interest rates, a weaker euro,
stronger consumer demand and a more robust In addition to the cyclical recovery
global backdrop. We believe that despite gaining momentum in Europe, structural
accelerating growth, inflation is expected changes are accelerating throughout the
to remain subdued, and interest rates are eurozone. European merger and acquisition
likely to remain stable through the activity has continued to outpace
remainder of the year. In our view, the expectations. With $588 billion of deal
widening US dollar/euro yield spread is activity recorded in the first five months
likely to keep the euro relatively weak of 1999 alone, we believe this year's
versus the dollar; however, growing activity could outstrip last year's record
confidence in European recovery has of $873 billion. Morgan Stanley estimates
reduced the risk of further weakening of that as much as $1 trillion in merger and
the euro. We expect improving economic acquisition activity will take place in
prospects and a weak euro to boost 2000. This consolidation, accompanied by
corporate earnings and provide support to improving economies of scale, disposal of
equity markets. noncore assets and cost cutting, appears
to be continuing to fuel corporate
restructuring
</TABLE>
<PAGE> 86
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
efforts across Europe. We expect these trends to make a significant contribution
to corporate earnings growth over the next three to five years.
So far this year, the Ivy Pan-Europe Fund has benefited from the apparent
shift in market leadership from growth to value. The Fund's value orientation is
reflected in its positioning. Its overweight positions in consumer cyclicals and
industrial stocks have contributed to strong performance in the first half of
the year. While we believe that there is considerable opportunity for further
outperformance by this group, we have started to trim some of these positions to
lock in the gains of the first half of 1999.
Meanwhile, in our view, some European growth sectors are starting to offer
good long-term value after the period of significant underperformance this year.
As these sectors have come under pressure, we have been selectively adding to
the Fund's holdings.
The value orientation of the Ivy Pan-Europe Fund and its overweight
positions in consumer cyclicals and industrials have led to overweight positions
in Scandinavia, where consumer cyclicals, capital goods and basic industries
account for a greater part of the market capitalization relative to continental
European indices. (For example, these industries account for 60% of the market
capitalization in Sweden in contrast to Switzerland or Italy, where the weight
of these sectors is nearer to 10%.)
In the eurozone, we continue to favor the French market. In our view,
attractive valuations, signs of economic recovery and the potential for outsized
gains from corporate restructuring make this one of the most attractive European
markets. Our research confirms that Germany has lagged behind other major
European equity markets this year. While the Fund has long been underweight the
German market, recent improvements in business survey indicators are leading us
to a more optimistic view of the German economy. We expect domestic recovery in
the UK, which is more advanced in the economic cycle than its continental
counterparts, to underpin corporate profitability as economic growth
accelerates. Looking at the UK, we believe that continued low inflation and the
current interest-rate differential of almost 200 basis points with the eurozone
implies significant upside potential for the UK market.
Overall, we continue to be positive on prospects for European equities. We
expect European equities to perform well on the back of a strong profit
recovery, driven by improving economic prospects in Europe and ongoing
restructuring across the region.
IVY MANAGEMENT, INC.
2
<PAGE> 87
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 100.42% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AUSTRIA -- 0.26%
Bank Austria AG....................... 266 $ 13,990
----------
BELGIUM -- 1.01%
Solvay S.A............................ 815 54,085
----------
CZECH REPUBLIC -- 1.84%
Czech Power Company (The)(a).......... 44,000 90,211
SPT Telekom a.s.(a)................... 500 8,088
----------
98,299
----------
DENMARK -- 4.00%
Jyske Bank A/S........................ 687 65,435
Sydbank A/S........................... 1,186 49,473
Unidanmark A/S........................ 1,480 98,779
----------
213,687
----------
FINLAND -- 4.99%
Pohjola Insurance Group B............. 1,203 61,721
Stora Enso Oyj -- R Shares............ 10,443 112,004
UPM-Kymmene Oyj....................... 2,908 92,667
----------
266,392
----------
FRANCE -- 15.73%
Alcatel S.A........................... 500 70,384
Assurances Banque Populaire........... 595 58,293
Banque Nationale de Paris............. 1,189 99,076
Bongrain S.A.......................... 173 65,298
Bouygues S.A. (with 522 Rights)....... 522 139,361
Bull S.A.(a).......................... 6,500 55,905
Eurotunnel S.A. Warrants.............. 9,200 1,518
Groupe Danone......................... 347 89,463
Scor S.A.............................. 2,248 111,510
Societe Generale...................... 682 120,199
Usinor S.A............................ 1,948 29,029
----------
840,036
----------
GERMANY -- 8.23%
Adidas-Salomon AG..................... 600 58,411
BMW AG................................ 32 22,242
DaimlerChrysler AG.................... 1,708 149,192
Dyckerhoff AG......................... 225 66,130
Dyckerhoff AG Preferred............... 75 22,314
Merck KGaA............................ 1,879 60,846
WEBS -- Germany....................... 2,780 60,639
----------
439,774
----------
GREECE -- 0.54%
Hellenic Telecommunications
Organization S.A. ADR............... 2,600 28,763
----------
HUNGARY -- 1.25%
BorsodChem Rt. Sponsored GDR 144A(a).. 41 1,011
Magyar Tavkozlesi Rt.................. 12,200 66,026
----------
67,037
----------
ITALY -- 2.44%
Fiat S.p.A(a)......................... 21,610 68,417
WEBS -- Italy......................... 2,520 61,898
----------
130,315
----------
NETHERLANDS -- 8.58%
AKZO Nobel NV......................... 1,822 76,662
Fortis (NL) NV........................ 1,140 35,211
Hagemeyer NV.......................... 1,558 50,933
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
ING Groep NV.......................... 664 $ 35,950
Koninklijke KPN NV.................... 1,400 65,692
Koninklijke (Royal) Philips
Electronics N.V..................... 1,966 193,929
----------
458,377
----------
NORWAY -- 2.32%
Bergesen d.y. ASA -- B Shares......... 2,820 39,942
Smedvig ASA -- A Shares............... 9,050 83,922
----------
123,864
----------
PORTUGAL -- 1.17%
Portugal Telecom S.A.(a) (with 530
Rights(a)).......................... 530 21,567
Portugal Telecom S.A. -- Sponsored
ADR................................. 1,000 41,188
----------
62,755
----------
RUSSIA -- 0.02%
LUKoil Holding Co. -- Sponsored ADR... 30 1,226
----------
SPAIN -- 1.85%
Telefonica S.A........................ 392 18,883
Telefonica S.A. -- Sponsored ADR...... 543 79,836
----------
98,719
----------
SWEDEN -- 6.82%
ABB AB -- B Shares.................... 7,187 95,103
AssiDoman AB.......................... 1,326 19,964
Electrolux AB -- Series B............. 5,065 106,045
S.K.F. AB Series "B".................. 3,116 57,543
Volvo AB B Free....................... 2,954 85,648
----------
364,303
----------
SWITZERLAND -- 11.32%
Compagnie Financiere Richemont AG..... 43 82,703
Edipresse S.A......................... 91 29,561
Holderbank Financiere Glaris AG....... 46 54,297
Jelmoli Holding AG Bearer............. 34 31,494
Nestle AG Registered.................. 58 104,502
Novartis AG Registered................ 70 102,213
Pargesa Holding AG -- B Shares........ 18 27,326
SGS Societe Generale de Surveillance
Holding S.A.(a)..................... 45 46,604
Sulzer AG Registered.................. 119 72,337
Swatch Group, (The) AG................ 80 53,828
----------
604,865
----------
UNITED KINGDOM -- 28.05%
Astrazeneca Group plc................. 789 30,718
Barclay's Bank Ordinary............... 3,789 110,433
Bass plc.............................. 5,700 82,886
British Airways plc................... 8,000 55,013
British Steel plc..................... 32,775 84,340
Cadbury Schweppes plc................. 10,480 66,904
Corporate Services Group plc.......... 37,950 50,848
Diageo plc............................ 8,250 85,960
Gallaher Group Plc.................... 21,890 134,915
Hanson plc............................ 13,050 114,373
Hazelwood Foods plc................... 13,660 28,100
HSBC Holdings plc..................... 2,380 84,411
Imperial Chemical Industries plc...... 7,232 71,477
Jarvis Hotels plc..................... 14,468 31,814
Marks & Spencer plc................... 8,600 50,022
Next plc.............................. 4,840 58,822
PowerGen plc.......................... 5,300 57,019
</TABLE>
3
<PAGE> 88
/IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Shell Transport & Trading Co. plc...... 11,422 85,611
Standard Chartered plc................. 4,270 70,000
Tate & Lyle plc........................ 14,300 89,826
Waterford Wedgwood plc................. 52,744 54,873
-----------
1,498,365
-----------
TOTAL INVESTMENTS -- 100.42%
(Cost -- $5,507,628)(b).............. 5,364,852
LIABILITIES, IN EXCESS OF OTHER
ASSETS -- (.42%)..................... (22,388)
-----------
NET ASSETS -- 100%..................... $ 5,342,464
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
WEBS -- World Equity Benchmark Series
(a) Non-income producing security
(b) Cost is approximately the same for
Federal income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 503,730
Gross unrealized depreciation............... (646,506)
-----------
Net unrealized depreciation............. $ (142,776)
===========
Purchases and sales of securities other than short-term
obligations aggregated $1,180,502 and $2,074,760,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE> 89
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $5,507,628)....... $ 5,364,852
Receivables
Fund shares sold.......................................... 7,831
Dividends and Interest.................................... 30,051
Manager for expense reimbursement......................... 8,497
Deferred organization expenses.............................. 39,460
Other assets................................................ 16,653
-----------
Total assets.............................................. 5,467,344
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 41,186
Management fee............................................ 4,602
12b-1 service and distribution fees....................... 3,777
Other payables to related parties......................... 3,571
Due to custodian............................................ 53,320
Accrued expenses............................................ 18,424
-----------
Total liabilities......................................... 124,880
-----------
NET ASSETS.................................................. $ 5,342,464
===========
CLASS A
Net asset value and redemption price per share
($1,818,571/150,212 shares outstanding)................... $ 12.11
===========
Maximum offering price per share ($12.11 x 100/94.25)*...... $ 12.85
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($2,943,328/246,196 shares outstanding)............. $ 11.96
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($497,480/41,630 shares outstanding)................ $ 11.95
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($83,085/6,848 shares outstanding).................. $ 12.13
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 5,389,316
Undistributed net realized gain on investments and foreign
currency transactions................................... 65,000
Undistributed net investment income....................... 31,707
Net unrealized depreciation on investments and foreign
currency transactions................................... (143,559)
-----------
NET ASSETS.................................................. $ 5,342,464
===========
</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%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 90
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $12,109 foreign taxes withheld.......... $ 114,978
Interest.................................................. 60
-----------
115,038
-----------
EXPENSES
Management fee............................................ $30,559
Transfer agent............................................ 8,714
Administrative services fee............................... 3,056
Custodian fees............................................ 15,226
Blue Sky fees............................................. 12,453
Auditing and accounting fees.............................. 9,234
Shareholder reports....................................... 3,197
Amortization of organization expenses..................... 6,927
Fund accounting........................................... 10,112
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 23,200
Legal..................................................... 13,339
Other..................................................... 400
-----------
140,394
Expenses reimbursed by Manager............................ (50,952)
Fees paid indirectly...................................... (6,652)
-----------
Net expenses............................................ 82,790
-----------
NET INVESTMENT INCOME....................................... 32,248
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 63,790
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 289,214
-----------
Net gain on investment transactions..................... 353,004
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 385,252
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 91
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
------------ ------------
1999 1998
------------ ------------
<S> <C> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 32,248 $ (25,551)
Net realized gain on investments and foreign currency
transactions............................................ 63,790 5,714
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 289,214 (416,183)
------------ ------------
Net increase (decrease) resulting from operations....... 385,252 (436,020)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (159,889) 1,378,851
Class B................................................... (875,834) 3,813,765
Class C................................................... (411,976) 921,918
Advisor Class............................................. 11,723 69,443
------------ ------------
Net (decrease) increase resulting from Fund share
transactions........................................... (1,435,976) 6,183,977
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (1,050,724) 5,747,957
NET ASSETS
Beginning of period....................................... 6,393,188 645,231
------------ ------------
END OF PERIOD............................................. $ 5,342,464 $ 6,393,188
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 31,707 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 92
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------------------------------------------
for the six for the period for the six for the period
months ended for the year May 13, 1997 months ended for the year May 13, 1997
June 30, ended (commencement) June 30, ended (commencement)
(unaudited) December 31, to December 31, (unaudited) December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
SELECTED PER SHARE DATA --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $11.27 $10.56 $10.02 $11.17 $10.54 $10.02
-------------------------------------------------------------------------------------------
Income from investment
operations
Net investment loss(a)..... .10(b) (.01)(b) (.02) .05(b) (.01)(b) (.03)
Net gains or losses on
securities (both realized
and unrealized).......... .74(b) .72(b) .58 .74(b) .64(b) .56
-------------------------------------------------------------------------------------------
Total from investment
operations............... .84 .71 .56 .79 .63 .53
-------------------------------------------------------------------------------------------
Less distributions
Distributions from capital
gains.................... -- -- .02 -- -- .01
-------------------------------------------------------------------------------------------
Total distributions...... -- -- .02 -- -- .01
-------------------------------------------------------------------------------------------
Net asset value, end of
period..................... $12.11 $11.27 $10.56 $11.96 $11.17 $10.54
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Total return (%)............. 7.45(c) 6.72(d) 5.54(c) 7.07(c) 5.98(d) 5.26 (c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................. $1,819 $1,862 $ 575 $2,943 $3,604 $ 70
Ratio of expenses to average
net assets(e)
With expense reimbursement
(%)...................... 2.43(f) 2.49 2.20(f) 3.14(f) 3.27 3.29 (f)
Without expense
reimbursement (%)........ 4.10(f) 5.86 28.41(f) 4.81(f) 6.64 29.50 (f)
Ratio of net investment loss
to average net assets
(%)(a)..................... 1.55(f) (.12) (.48)(f) .83(f) (.90) (1.58)(f)
Portfolio turnover rate
(%)........................ 49 25 5 49 25 5
</TABLE>
<PAGE> 93
9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C ADVISOR CLASS
- ----------------------------------------------------------------------------------------
for the six for the period for the six for the period
months ended January 29, 1998 months ended March 23, 1998
June 30, (commencement) June 30, (commencement)
(unaudited) to December 31, (unaudited) to December 31,
- ----------------------------------------------------------------------------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11.17 $10.91 $11.28 $12.31
- ----------------------------------------------------------------------------------------
.05(b) (.02)(b) .11(b) (.01)(b)
.73(b) .28(b) .74(b) (1.02)(b)
- ----------------------------------------------------------------------------------------
.78 .26 .85 (1.03)
- ----------------------------------------------------------------------------------------
-- -- -- --
- ----------------------------------------------------------------------------------------
-- -- -- --
- ----------------------------------------------------------------------------------------
$11.95 $11.17 $12.13 $11.28
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
6.98(c) 2.38(c) 7.54(c) (8.37)(c)
$ 497 $ 863 $ 83 $ 65
3.20(f) 3.26(f) 2.29(f) 2.41(f)
4.87(f) 6.63(f) 3.96(f) 5.78(f)
.78(f) (.89)(f) 1.69(f) (.04)(f)
49 25 49 25
</TABLE>
(a) Net investment loss 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) Total return does not reflect a sales charge.
(e) Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(f) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 94
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
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 on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked prices in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends are recorded on the ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. 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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 prior to the
effectiveness of Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities," 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 loss and Net
realized gain 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 -- From January 1, 1999 though April 15, 1999, the Fund had
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 from January 1, 1999 through April 15, 1999, custody fees were reduced by
$6,652 under this arrangement.
10
<PAGE> 95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI 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. For each of the following
nine years, IMI will limit these expenses to 2.50% 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. At June 30, 1999 MIMI owned
8.4% of the Fund's shares outstanding.
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, 1999, the net amount of underwriting
discount retained by IMDI was $634.
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 $2,321,
$17,067 and $3,812, 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 $2,794, $4,520, $1,237 and $163, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
---------------------- --------------------------
- --------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 41,699 $ 490,025 252,535 $ 3,085,553
Repurchased.......... (56,709) (649,914) (141,799) (1,706,702)
-------- ----------- -------- ----------- ---
Net (decrease)/
increase............ (15,010) $ (159,889) 110,736 $ 1,378,851
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
---------------------- --------------------------
- --------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 47,983 $ 554,613 445,347 $ 5,372,927
Repurchased.......... (124,517) (1,430,447) (129,254) (1,559,162)
-------- ----------- -------- ----------- ---
Net (decrease)/
increase............ (76,534) $ (875,834) 316,093 $ 3,813,765
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED JANUARY 29, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
---------------------- --------------------------
- --------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 9,336 $ 107,729 162,521 $ 1,904,211
Repurchased.......... (44,970) (519,705) (85,257) (982,293)
-------- ----------- -------- ----------- ---
Net (decrease)/
increase............ (35,634) $ (411,976) 77,264 $ 921,918
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED MARCH 23, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
---------------------- --------------------------
- --------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 1,978 $ 22,808 5,765 $ 69,889
Repurchased.......... (854) (11,085) (41) (446)
-------- ----------- -------- ----------- ---
Net increase......... 1,124 $ 11,723 5,724 $ 69,443
======== =========== ======== =========== ===
</TABLE>
11
<PAGE> 96
03IPEF063099
<PAGE> 97
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY CHINA REGION FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
In the first half of 1999, stock markets picked up sharply. Since Hong Kong is a
in the China region have continued the service-oriented economy, we believe a
rally that began in September 1998. In our return to profitability for the retail,
view, the recovery in the region's equity hotel and airline sectors should
markets has been fueled by expectations contribute greatly to an overall economic
that the worst of the Asian economic recovery. In addition, our research
crisis is over, and we believe that indicates that property prices have
economies in the region are set for rebounded from the lows of last year. In
recovery. our view, the recovery in real estate
We believe that declining interest prices, along with rising share prices,
rates were the initial signal that the are part of a "virtuous" cycle of wealth
crisis was ending, and have been a creation that has historically been very
significant force behind the favorable for Hong Kong's economy and
liquidity-driven rally we have seen thus stock market.
far. According to our research, As of June 30, 1999, the Ivy China Region
interest-rate-sensitive stocks, such as Fund had approximately 58% of its assets
banks, property developers and utili- invested in Hong Kong equities, excluding
ties, which account for more than half of H- shares and Red Chips. During the first
the market capitalization in Hong Kong, half of 1999, some of the Fund's
have been direct beneficiaries of a more best-performing investments were in Hong
favorable interest-rate environment. Share Kong banks. Although HSBC Holdings
prices in these sectors have risen as continues to be one of the Fund's largest
interest rates have fallen in the past holdings, second-tier banks like Dao Heng
several months. In addition, international Bank and Wing Hang Bank have also
investors, who fled this market during the performed very well. The Fund has held
crisis, have started to return, providing positions in these banks since last
further liquidity to drive share prices autumn, when our research indicated they
higher. were trading at 60% of book value. As
In our opinion, many equity markets interest rates declined, and public
throughout the China region are poised for confidence with regard to asset quality
a recovery, and the most recent economic began to return, these stocks made
reports support this view. In Hong Kong, positive contributions to the Fund's
first-quarter GDP, while still negative, overall performance.
showed improvement over the fourth quarter Until the second quarter of 1999, Chinese
of 1998. Retail sales have started to equities had lagged behind the rally in
recover, and tourism in Hong Kong has the rest of the
</TABLE>
<PAGE> 98
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
region. Concerns over China's currency policy and economic prospects held back
mainland China's B-shares, as well as Red Chips and H-shares, which trade in
Hong Kong. In May, events began to change and many B-shares in Shanghai and
Shenzhen doubled in price within a 60-day period. To a large extent, the bull
market in China's shares has been driven by government policy. A reduction in
stamp taxes, which effectively lowers trading costs, combined with a 0.75% cut
in interest rates, created a powerful retail-investor-led rally in Chinese
equities. The Chinese government appears to be trying to create a US-style
wealth effect in the hopes of reviving consumer spending on the mainland. For
now, these moves seem to have only succeeded in driving share prices higher.
While Chinese-share markets remain particularly vulnerable to changes in policy,
we believe that valuations are still compelling at 10 times 1999 earnings.
Looking ahead, we believe government policies aimed at stimulating the economy
could lead to 7.0% GDP growth in 1999. In our view, China's commitment to
maintaining the value of its currency (the renminbi), its determination to
deepen economic reforms and prospects for entering the World Trade Organization
(WTO) are all positive for China's long-term growth potential.
Taiwan, which accounted for 7% of the Ivy China Region Fund's portfolio as
of June 30, 1999, has also performed well on the back of stronger-than-expected
exports. Taiwan's electronics industry is one of the most competitive in the
world, combining low-cost production with high-tech content. This sector is
showing strong growth thanks to a global recovery in the demand for personal
computers. The Fund is invested in a variety of Taiwanese electronics companies,
ranging from a world-class chip manufacturer to a leading notebook personal
computer company.
Even though most of the markets in the China region are rebounding from
their lows, according to our research they are still well below the peaks
reached in 1996 and 1997. For example, the Hong Kong market is still almost 20%
below its peak in July 1997. Chinese stocks listed in Hong Kong (H-shares) are
more than 60% lower than their peak level seen in the summer of 1997. While
these markets may look somewhat expensive on current earnings (with an average
price to earnings ratio of 19 for 1999), in our view earnings are currently
depressed and, in most cases, we expect them to rebound in 2000 and beyond.
We believe the Asian economic crisis of 1997-1998 served as a wake-up call
for many companies in the region. According to our research, companies are
actively looking at each area of their operations with an eye toward lowering
costs, increasing margins, efficiently utilizing resources and improving
shareholder returns. As a result, we believe that corporate restructuring could
not only allow companies to exceed precrisis profitability levels over the next
few years, but also could create stronger companies that will be able to better
withstand an economic contraction when the next cycle turns. As investment funds
have returned to the region's markets, they appear to have acted like a rising
tide, lifting all boats. In our view, successful investments during the second
leg of the recovery should rely much more on stock selection. We believe that
Ivy Management's disciplined approach, which focuses on uncovering undervalued
companies, large or small cap, should allow the Ivy China Region Fund to build
on its five-year history of solid outperformance within its peer group.
IVY MANAGEMENT, INC.
2
<PAGE> 99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
EQUITY SECURITIES -- 86.04% SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
CHINA -- 12.29%
Anhui Expressway Co. Ltd................ 1,246,000 $ 170,231
Hainan Airlines Co., Ltd................ 350,000 165,200
Huaneng Power International, Inc........ 200,000 83,778
Inner Mongolia Erdos Cashmere Products
Co. Ltd. Class B....................... 681,000 193,404
Qingling Motors Company -- H Shares..... 1,900,000 460,392
Shanghai Dazhong Taxi Company -- Class
B(a)................................... 639,000 434,520
Shanghai Diesel Engine Co. Ltd. -- Class
B...................................... 648,000 172,368
Shanghai Narcissus Electric Appliances
Industrial Company Ltd. -- Class
B(a)................................... 467,500 52,360
Shanghai Posts & Telecommunications
Equipment Co. Ltd. -- Class B(a)....... 510,900 275,886
Shanghai Shangling Electric Appliances
Co. Ltd. -- Class B(a)................. 312,000 230,568
Shanghai Worldbest Co., Ltd............. 432,000 116,640
Shenzhen Konka Electronics Group Ltd.
Class B................................ 260,000 293,893
Zhejiang Southeast Electric Power Co.,
Ltd -- Class B......................... 289,393 127,912
Zhenhai Refining and Chemical Company
Ltd.................................... 200,000 60,578
-----------
2,837,730
-----------
HONG KONG -- 57.95%
Asia Satellite Telecommunications
Holdings Ltd........................... 4,000 92,250
Asia Satellite Telecommunications
Holdings Ltd. American Depository
Receipt................................ 100,000 235,222
Axa China Region Limited................ 662,000 529,012
Cathay Pacific Airways.................. 230,000 352,769
CDL Hotels International Ltd............ 440,000 184,311
Cheung Kong Holdings Ltd................ 100,000 889,334
Cheung Kong Infrastructure Holdings..... 111,000 229,622
China Hong Kong Photo Products Holdings,
Ltd.................................... 940,000 150,233
China Resources Enterprise Limited...... 44,000 77,694
China Southern Airlines Company
Limited(a)............................. 1,900,000 484,881
Citic Pacific Ltd....................... 150,000 478,501
CLP Holdings Ltd........................ 30,000 145,774
Cosco Pacific Limited................... 326,000 271,015
Dao Heng Bank Group Ltd................. 66,000 296,032
First Tractor Company Limited -- H
Shares................................. 1,362,000 403,758
Founder Hong Kong Ltd.(a)............... 417,600 158,781
Giordano International Ltd.............. 404,000 286,391
Gold Peak Industries (Holdings)
Limited................................ 983,000 210,319
Guangdong Kelon Electrical Holdings Co.
Ltd. -- H. Shares...................... 266,000 310,275
Guangdong Tannery Ltd.(a)............... 39,950 1,673
Hang Seng Bank.......................... 20,900 233,685
Hong Kong & China Gas Company Ltd....... 171,072 248,055
Hong Kong Electric Holdings Ltd......... 120,000 386,667
Hong Kong Land Holdings Ltd............. 289,000 468,180
Hong Kong Telecommunications Ltd........ 124,000 322,042
HSBC Holdings plc....................... 25,200 919,185
Jardine International Motor Holdings
Ltd.................................... 524,000 270,151
Jardine Strategic Holdings Ltd.......... 190,250 494,650
Johnson Electric Holdings Ltd........... 84,800 349,753
Lamex Holdings Ltd.(a).................. 780,000 17,091
Li & Fung Ltd........................... 215,800 517,345
New World Development Company Ltd....... 196,535 588,951
New World Infrastructure Ltd.(a)........ 200,133 376,606
Orient Overseas International Ltd.(a)... 1,092,000 401,128
Shanghai Industrial Holdings Limited.... 43,000 102,531
Siu-Fung Ceramics Holdings, Ltd(a)...... 1,110,327 3,435
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
- -----------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Sun Hung Kai Properties Ltd............. 44,800 $ 408,527
Swire Pacific Ltd....................... 39,500 195,499
Tingyi (Cayman Island) Holding Co.(a)... 1,494,000 132,867
Union Bank of Hong Kong Ltd............. 86,833 67,151
VTech Holdings Limited.................. 108,000 343,128
Wharf Holdings Ltd...................... 69,000 215,219
Wing Hang Bank Limited.................. 131,000 421,267
Yue Yuen Industrial Holdings............ 47,200 108,896
-----------
13,379,856
-----------
MALAYSIA -- 0.11%
Leader Universal Holdings -- Class
A(a)(b)................................ 61,666 25,802
-----------
SINGAPORE -- 3.18%
Clipsal Industries Limited.............. 114,816 177,965
Elec & Eltek International Co. Ltd...... 142,500 555,750
-----------
733,715
-----------
SOUTH KOREA -- 5.38%
Hyundai Motor Co, Ltd.(a)............... 11,215 265,971
Pohang Iron & Steel Company Ltd......... 2,000 243,826
Samsung Electronics Co., Ltd............ 3,564 391,052
Samsung Electronics Co., Ltd. 144 A
Sponsored GDR.......................... 430 23,043
Samsung Electronics Co., Ltd. 144 A
Sponsored GDR, Registered S, N/V....... 640 17,120
Shinhan Bank............................ 26,840 301,452
-----------
1,242,464
-----------
TAIWAN -- 7.13%
Acer Incorporation...................... 144,687 367,328
Compal Electronics...................... 76,000 298,833
Far Eastern Department Stores Ltd....... 254,495 146,556
Hon Hai Precision Industries............ 35,000 316,419
Taiwan Semiconductor Manufacturing
Company................................ 135,300 517,340
-----------
1,646,476
-----------
TOTAL INVESTMENTS -- 86.04%
(Cost -- $16,705,278)(c)............... 19,866,043
OTHER ASSETS, LESS
LIABILITIES -- 13.96%.................. 3,224,468
-----------
NET ASSETS -- 100%...................... $23,090,511
===========
</TABLE>
<TABLE>
<S> <C> <C>
GDR -- Global Depository Receipt
N/V -- Non voting security
(a) Non-income producing
(b) Under the Malysian Government policy, which
went into effect on February 15, 1999, proceeds
repatriated from the sale of Malysian
securities will be subject to a graduated levy.
The levy ranges from zero to ten percent of
proceeds, depending on the holding period and
the time of repatriation.
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost for
financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation................... $ 5,328,210
Gross unrealized depreciation................... (2,167,445)
-----------
Net unrealized appreciation................. $ 3,160,765
===========
</TABLE>
Purchases and sales of securities other than short-term obligations aggregated
$3,377,899 and $4,726,998, respectively, for the period ended June 30, 1999.
The accompanying notes are an integral
part of the financial statements.
3
<PAGE> 100
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $16,705,278)...... $19,866,043
Cash........................................................ 3,528,598
Receivables
Fund shares sold.......................................... 301,105
Dividends and Interest.................................... 44,461
Manager for expense reimbursement......................... 6,216
Other assets................................................ 14,576
-----------
Total assets.............................................. 23,760,999
-----------
LIABILITIES
Payables
Investments purchased..................................... 306,384
Fund shares repurchased................................... 302,297
Management fee............................................ 16,962
12b-1 service and distribution fees....................... 10,277
Other payables to related parties......................... 12,682
Accrued expenses............................................ 21,886
-----------
Total liabilities......................................... 670,488
-----------
NET ASSETS.................................................. $23,090,511
===========
CLASS A
Net asset value and redemption price per share
($14,039,398/1,594,109 shares outstanding)................ $ 8.81
===========
Maximum offering price per share ($8.81 x 100/94.25)*....... $ 9.35
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($8,192,714/944,289 shares outstanding)............. $ 8.68
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($844,404/97,024 shares outstanding)................ $ 8.70
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($13,995/1,601 shares outstanding).................. $ 8.74
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $27,987,612
Accumulated net realized loss on investments and foreign
currency transactions................................... (8,166,193)
Undistributed net investment income....................... 105,052
Net unrealized appreciation on investments and foreign
currency transactions................................... 3,164,040
-----------
NET ASSETS.................................................. $23,090,511
===========
</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%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 101
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $1,017 foreign taxes withheld........... $ 281,297
Interest.................................................. 38,660
----------
319,957
----------
EXPENSES
Management fee............................................ $87,275
Transfer agent............................................ 49,056
Administrative services fee............................... 8,728
Custodian fees............................................ 28,602
Blue Sky fees............................................. 6,059
Auditing and accounting fees.............................. 9,877
Shareholder reports....................................... 6,658
Fund accounting........................................... 17,814
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 47,821
Legal..................................................... 11,879
Other..................................................... 814
----------
278,560
Expenses reimbursed by Manager............................ (60,391)
----------
Net expenses............................................ 218,169
----------
NET INVESTMENT INCOME....................................... 101,788
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (473,403)
Net change in unrealized depreciation on investments and
foreign currency transactions, net of taxes of $673..... 6,920,913
----------
Net gain on investment transactions..................... 6,447,510
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $6,549,298
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 101,788 $ 242,809
Net realized loss on investments and foreign currency
transactions............................................ (473,403) (5,197,689)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 6,920,913 1,012,350
------------- ------------
Net increase (decrease) resulting from operations....... 6,549,298 (3,942,530)
------------- ------------
Dividends to shareholders from net investment income
Class A................................................... -- (124,272)
Class B................................................... -- (44,037)
Class C................................................... -- (2,395)
Advisor Class............................................. -- (121)
------------- ------------
Total dividends to shareholders......................... -- (170,825)
------------- ------------
Fund share transactions (Note 5)
Class A................................................... 952,370 (616,533)
Class B................................................... (146,819) (87,455)
Class C................................................... (118,744) (382,691)
Advisor Class............................................. -- 12,424
------------- ------------
Net increase (decrease) resulting from Fund share
transactions........................................... 686,807 (1,074,255)
------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 7,236,105 (5,187,610)
NET ASSETS
Beginning of period....................................... 15,854,406 21,042,016
------------- ------------
END OF PERIOD............................................. $ 23,090,511 $ 15,854,406
============= ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 105,052 $ 3,264
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 102
6
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- -----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 6.30 $ 8.04 $ 10.30 $ 8.58 $ 8.61 $ 11.55
-----------------------------------------------------------------------------------------
Income (loss) from
investment operations
Net investment income
(loss)(a)................ .05(b) .13 .02(b) .03 .14 .05
Net gains or losses on
securities (both realized
and unrealized).......... 2.46(b) (1.78) (2.28)(b) 1.74 (.01) (2.91)
-----------------------------------------------------------------------------------------
Total from investment
operations............... 2.51 (1.65) (2.26) 1.77 .13 (2.86)
-----------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment
income................. -- .09 -- .03 .14 .05
In excess of net
investment income...... -- -- -- .02 -- .03
Distributions in excess of
capital gains............ -- -- -- -- .02 --
-----------------------------------------------------------------------------------------
Total distributions...... -- .09 -- .05 .16 .08
-----------------------------------------------------------------------------------------
Net asset value, end of
period..................... $ 8.81 $ 6.30 $ 8.04 $ 10.30 $ 8.58 $ 8.61
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Total return (%)............. 39.84(c) (20.56)(d) (21.94)(d) 20.50(d) 1.59(d) (24.88)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................. $ 14,039 $ 9,061 $ 12,020 $ 15,290 $ 12,855 $ 13,180
Ratio of expenses to average
net
assets(e)
With expense reimbursement
(%)...................... 2.19(f) 2.30 2.44 2.20 2.20 2.20
Without expense
reimbursement (%)........ 2.88(f) 2.86 2.51 2.48 2.73 2.76
Ratio of net investment
income to average net
assets (%)(a).............. 1.47(f) 1.60 .28 .32 1.61 .55
Portfolio turnover rate
(%)........................ 22 56 20 22 25 4
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- -----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 6.24 $ 7.96 $ 10.28 $ 8.58 $ 8.61 $ 11.55
-----------------------------------------------------------------------------------------
Income (loss) from
investment operations
Net investment income
(loss)(a)................ .02(b) .05 (.04)(b) (.04)(b) .08 (.02)(b)
Net gains or losses on
securities (both realized
and unrealized).......... 2.42(b) (1.73) (2.28)(b) 1.74(b) (.02) (2.92)(b)
-----------------------------------------------------------------------------------------
Total from investment
operations............... 2.44 (1.68) (2.32) 1.70 .06 (2.94)
-----------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment
income................. -- .04 -- -- .08 --
In excess of net
investment income...... -- -- -- -- -- --
Distributions in excess of
capital gains............ -- -- -- -- .01 --
-----------------------------------------------------------------------------------------
Total distributions...... -- .04 -- -- .09 --
-----------------------------------------------------------------------------------------
Net asset value, end of
period..................... $ 8.68 $ 6.24 $ 7.96 $ 10.28 $ 8.58 $ 8.61
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Total return (%)............. 39.10(c) (21.04)(d) (22.57)(d) 19.67(d) .83(d) (25.45)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................. $ 5,193 $ 6,080 $ 7,893 $ 8,995 $ 6,905 $ 7,336
Ratio of expenses to average
net
assets (e)
With expense reimbursement
(%)...................... 2.97(f) 3.08 3.17 2.95 2.95 2.95
Without expense
reimbursement (%)........ 3.66(f) 3.64 3.24 3.23 3.48 3.51
Ratio of net investment
income to average net
assets (%)(a).............. .70(f) .82 (.45) (.43) .86 (.20)
Portfolio turnover rate
(%)........................ 22 56 20 22 25 4
</TABLE>
<PAGE> 103
7
- -------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
- -----------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- -----------------------------------------------------------
1999 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
$ 6.25 $ 7.94 $ 10.24 $ 9.44
- -----------------------------------------------------------
.02(b) .08 (.03)(b) --
2.43(b) (1.75) (2.27)(b) .89
- -----------------------------------------------------------
2.45 (1.67) (2.30) .89
- -----------------------------------------------------------
-- .02 -- --
-- -- -- .09
-- -- -- --
- -----------------------------------------------------------
-- .02 -- .09
- -----------------------------------------------------------
$ 8.70 $ 6.25 $ 7.94 $ 10.24
- -----------------------------------------------------------
- -----------------------------------------------------------
39.20(c) (21.02)(d) (22.46)(d) 9.39(c)
$ 844 $ 704 $ 1,129 $ 449
2.99(f) 2.98 3.05 2.71(f)
3.68(f) 3.54 3.12 2.99(f)
.67(f) .92 (.33) (.19)(f)
22 56 20 22
</TABLE>
- ------------------------------------
(a) Net investment income (loss) 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) Total return does not reflect a sales charge.
(e) Beginning in 1995, total expenses include fees
paid indirectly, if any, through an expense
offset arrangement.
(f) Annualized
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------
for the six for the period
months ended February 10, 1998
June 30, (commencement)
(unaudited) to December 31,
------------------------------------
1999 1998
--------------------------------
<S> <C> <C>
$ 6.27 $ 7.89
------------------------------------
.03(b) .08
2.44(b) (1.62)
------------------------------------
2.47 (1.54)
------------------------------------
-- .08
-- --
-- --
------------------------------------
-- .08
------------------------------------
$ 8.74 $ 6.27
------------------------------------
------------------------------------
39.39(c) (19.56)(c)
$ 14 $ 10
2.65(f) 2.92(f)
3.39(f) 3.48(f)
1.02(f) .98(f)
22 56
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 104
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At June 30,
1999, the interest rate was 4.25%.
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
$6,154,000 as of December 31, 1998, 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, $416,000 in 2005, and
$4,238,000 in 2006.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
net realized capital gains, if any, are declared in December.
8
<PAGE> 105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 and Net realized loss on investments and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accordingly, the Fund may
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI 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. For each of the following nine
years, IMI will limit these expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $1,974.
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
$13,134, $31,043 and $3,644, 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 $28,972, $17,823, $2,194 and $67, for Class A, Class B, Class C and
Advisor Class respectively, are reflected as Transfer agent in the Statement of
Operations.
9
<PAGE> 106
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 2,139,020 $ 13,593,725 2,287,353 $ 14,147,859
Issued on
reinvestment of
distributions....... -- -- 17,535 109,945
Repurchased.......... (1,982,205) (12,641,355) (2,363,014) (14,874,337)
---------- ------------ ---------- ------------ ---
Net increase/
(decrease).......... 156,815 $ 952,370 (58,126) $ (616,533)
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 97,538 $ 676,629 665,157 $ 4,445,368
Issued on
reinvestment of
distributions....... -- -- 5,669 35,150
Repurchased.......... (128,276) (823,448) (687,061) (4,567,973)
---------- ------------ ---------- ------------ ---
Net decrease......... (30,738) $ (146,819) (16,235) $ (87,455)
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 44,492 $ 292,441 275,555 $ 1,869,126
Issued on
reinvestment of
distributions....... -- -- 245 1,523
Repurchased.......... (60,123) (411,185) (305,285) (2,253,340)
---------- ------------ ---------- ------------ ---
Net decrease......... (15,631) $ (118,744) (29,485) $ (382,691)
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED FEBRUARY 10, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. -- $ -- 82,048 $ 621,435
Issued on
reinvestment of
distributions....... -- -- 19 121
Repurchased.......... -- -- (80,466) (609,132)
---------- ------------ ---------- ------------ ---
Net increase......... -- $ -- 1,601 $ 12,424
========== ============ ========== ============ ===
</TABLE>
10
<PAGE> 107
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
11
<PAGE> 108
03ICRF063099
<PAGE> 109
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY US EMERGING GROWTH FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
During the last 12 months, we have had to advent of the free PC will help to drive
contend with a domestic political crisis even further the reach of the Internet,
and a worldwide financial crisis, both of which is already having a profound impact
which were extremely serious; and yet in on the economy.
our view the overall investment environ-
ment appears even more favorable today Practically every CEO now has "avoid
than it did at midyear 1998. According to being Amazoned" at the top of his or her
our research, US economic growth remains priority list. Retailing and financial
healthy; and with recovery clearly under services are two of the most obvious
way in Asia, visibility is good. Corporate sectors where e-commerce has created big
earnings are generally robust. Although a opportunities for young companies,
tight labor market has prompted the allowing them to emerge as daunting new
Federal Reserve and investors alike to be competitors for the established players.
wary of inflationary pressure, actual The incumbents have had little choice
evidence of inflation is practically other than to step up their own technology
nonexistent. Against this kind of efforts in response to this new challenge.
backdrop, it is no wonder that most of the We see this as an important driver for
US stock averages are at or near their continued growth in the technology sector,
all-time highs. and an area for significant representation
in the portfolio of the Ivy US Emerging
For US emerging growth investors, one Growth Fund, as well.
of the more interesting events of the last
few months is the advent of the free Free PCs, like so many developments in
personal computer. America Online's technology, would not be possible without
CompuServe unit now offers a $400 voucher ongoing declines in the cost of computing
to subscribers who sign up for a three- power. This phenomenon--often referred to
year commitment. This voucher can be as Moore's Law, after Gordon Moore, the
redeemed at Circuit City for a low-end PC, cofounder of Intel--is the result of the
or applied to the purchase of a more semiconductor industry cramming more and
expensive unit. Thus, Internet service more transistors onto a single silicon
providers are following the same pattern chip. Continuing shrinkage in chip
that evolved in the cellular phone busi- geometries has allowed the industry to
ness, where a piece of hardware that was double the amount of computing power-per-
initially quite expensive was eventually unit cost approximately every 18 months. A
given away in return for a service similar phenomenon is now taking place in
commitment. No doubt, the the data
</TABLE>
<PAGE> 110
2
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
communications area, where the cost of transmitting a single bit of data is
dropping sharply, and helping to spur the growth of worldwide broadband
networks. In our view, these powerful broad-based trends should continue to make
technology a very fertile area for emerging growth investors.
However, our search for investment candidates to be included in the
portfolio of the Ivy US Emerging Growth Fund also extends to other sectors of
the economy--consumer, business services and healthcare--all of which, in our
opinion, provide the opportunity for small companies to ride the wave of change.
In healthcare, for instance, laser surgery for vision correction appears to have
been receiving enthusiastic consumer acceptance, largely due to favorable
word-of-mouth. This has been a catalyst for strong growth for both equipment
suppliers and service providers. And in the area of business services, it seems
more and more companies have made the decision to focus on their core
competencies and outsource nonstrategic business functions. This has opened up a
myriad of new opportunities for small service companies.
We believe that the very favorable business conditions that exist today,
combined with the many fine small-growth companies from which to choose, make
this an exciting time to be an emerging growth investor. However, for most of
the last three years, valuation has been the missing ingredient. Since mid-1996,
the relative price to earnings ratios of small-cap growth stocks have followed a
downward trend, as investors have been willing to pay up for liquidity. As a
result, according to our research, growth is relatively cheap in the small-cap
sector of the market. We are hopeful that relative valuations in this sector
will eventually revert to a more favorable level; but even if they do not,
strong earnings growth by itself should be enough to fuel respectable returns
for patient investors.
IVY MANAGEMENT, INC.
<PAGE> 111
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
COMMON STOCKS -- 95.69% SHARES VALUE
- -------------------------------------------------------------
<S> <C> <C>
CONSUMER -- 11.51%
EDUCATIONAL SERVICES -- 2.05%
Advantage Learning Systems, Inc.(a)... 26,100 $ 577,463
Apollo Group, Inc. -- Class A(a)...... 38,300 1,017,344
CBT Group plc -- Spon ADR(a)(b)....... 49,400 815,100
------------
2,409,907
------------
ENTERTAINMENT -- 4.86%
Action Performance Companies,
Inc.(a)............................. 32,200 1,062,600
Dave & Buster's, Inc.(a).............. 40,150 1,164,350
International Speedway Corp. -- Class
A................................... 11,900 565,250
Premier Parks, Inc.(a)................ 53,200 1,955,100
Speedway Motorsports, Inc.(a)......... 24,300 955,293
------------
5,702,593
------------
MISCELLANEOUS CONSUMER -- 1.42%
Blyth Industries, Inc.(a)............. 9,700 333,438
Cutter & Buck, Inc.(a)................ 40,050 675,844
Horizon Organic Holding Corp.(a)...... 44,600 652,275
------------
1,661,557
------------
RESTAURANTS -- 0.33%
Cheesecake Factory (The)(a)........... 12,500 381,250
------------
SPECIALTY RETAIL -- 2.85%
Abercrombie & Fitch Co................ 19,800 950,400
Dollar Tree Stores, Inc.(a)........... 32,275 1,420,100
Guitar Center, Inc.(a)................ 50,100 522,919
Hibbet Sporting Goods, Inc.(a)........ 20,600 453,200
------------
3,346,619
------------
HEALTHCARE -- 13.43%
ASSISTED LIVING -- 0.60%
Sunrise Assisted Living, Inc.(a)...... 20,100 700,987
------------
BIOTECHNOLOGY -- 1.78%
Alkermes, Inc.(a)..................... 21,600 499,500
Pharmacyclics, Inc.(a)................ 18,300 512,400
US Bioscience, Inc.(a)................ 56,000 546,000
Vertex Pharmaceuticals
Incorporated(a)..................... 22,000 530,750
------------
2,088,650
------------
HEALTHCARE INFORMATION
SYSTEMS -- 3.22%
Eclipsys Corporation(a)............... 35,200 842,600
First Consulting Group, Inc.(a)....... 72,800 773,500
MedQuist Inc.(a)...................... 35,700 1,561,875
Superior Consultant Holdings
Corporation(a)...................... 24,400 602,375
------------
3,780,350
------------
HEALTHCARE SERVICES -- 1.22%
Health Management Associates,
Inc.(a)............................. 27,625 310,781
Renal Care Group, Inc.(a)............. 43,200 1,117,800
------------
1,428,581
------------
MEDICAL DEVICES &
INSTRUMENTS -- 1.13%
MiniMed Inc.(a)....................... 10,200 784,763
VISX, Incorporated(a)................. 6,800 538,475
------------
1,323,238
------------
PHARMACEUTICALS -- 5.48%
Algos Pharmaceutical Corporation(a)... 25,000 551,563
Anesta Corp.(a)....................... 44,800 915,600
ChiRex Inc.(a)........................ 44,300 1,423,138
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------
<S> <C> <C>
EPIX Medical, Inc.(a)................. 37,500 206,250
Medicis Pharmaceutical Corporation --
Class A(a).......................... 49,400 $ 1,253,525
Sepracor, Inc.(a)..................... 8,300 674,375
Shire Pharmaceuticals Group plc
ADR(a).............................. 54,000 1,404,000
------------
6,428,451
------------
SERVICES -- 23.55%
BROADCAST MEDIA -- 1.48%
Metro Networks, Inc.(a)............... 32,400 1,729,350
------------
BUSINESS SERVICES -- 8.59%
Abacus Direct Corporation(a).......... 15,900 1,454,850
Corporate Executive Board Company
(The)(a)............................ 5,300 188,481
CSG Systems International, Inc.(a).... 22,900 599,694
Inspire Insurance Solutions,
Inc.(a)............................. 42,750 619,875
Labor Ready, Inc.(a).................. 16,000 520,000
Metzler Group, Inc. (The)(a).......... 21,080 582,335
NOVA Corporation(a)................... 48,307 1,207,675
ProBusiness Services, Inc.(a)......... 22,800 817,950
Profit Recovery Group International,
Inc. (The)(a)....................... 38,600 1,826,263
TMP Worldwide Inc.(a)................. 16,200 1,028,700
Transaction Network Services,
Inc.(a)............................. 41,800 1,222,650
------------
10,068,473
------------
CONSUMER FINANCE -- 0.68%
Litchfield Financial Corp............. 47,327 801,600
------------
FINANCIAL SERVICES -- 2.44%
Federal Agricultural Mortgage Corp.
Class C............................. 9,350 641,644
Knight/Trimark Group, Inc.(a)......... 19,500 1,176,094
Willis Lease Finance Corporation(a)... 64,100 1,045,630
------------
2,863,368
------------
INFORMATION SERVICES -- 4.61%
Dendrite International, Inc.(a)....... 41,500 1,499,188
FactSet Research Systems Inc.......... 30,150 1,707,244
Forrester Research, Inc.(a)........... 13,600 340,000
Lason Holdings, Inc.(a)............... 24,600 1,220,775
Meta Group, Inc.(a)................... 41,900 644,212
------------
5,411,419
------------
SOCIAL SERVICES -- 1.34%
Cornell Corrections, Inc.(a).......... 53,100 872,831
Maximus, Inc.(a)...................... 24,300 698,625
------------
1,571,456
------------
TELECOMMUNICATION SERVICES -- 3.20%
Global Crossing Ltd.(a)............... 17,521 746,833
Metromedia Fiber Network, Inc.(a)..... 19,000 682,813
Rhythms Netconnections Inc.(a)........ 4,600 268,525
Viatel, Inc.(a)....................... 15,300 858,712
WinStar Communications, Inc.(a)....... 24,600 1,199,250
------------
3,756,133
------------
TELESERVICES -- 1.21%
Sykes Enterprises, Inc.(a)............ 42,500 1,418,437
------------
TECHNOLOGY -- 47.20%
COMPUTER EQUIPMENT & STORAGE -- 1.60%
Network Appliance, Inc.(a)............ 33,600 1,877,400
------------
</TABLE>
<PAGE> 112
4
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
COMMON STOCKS -- 95.69% SHARES VALUE
- -------------------------------------------------------------
<S> <C> <C>
ELECTRONIC COMMERCE -- 3.31%
Pegasus Systems, Inc.(a).............. 38,100 $ 1,426,369
QRS Corporation(a).................... 17,000 1,326,000
Transactions Systems Architects,
Inc................................. 28,900 1,127,100
------------
3,879,469
------------
ELECTRONIC DESIGN AUTOMATION -- 0.59%
Synopsys, Inc.(a)..................... 12,500 689,844
------------
ELECTRONIC MANUFACTURING SERVICES --
2.66%
Flextronics International Ltd.(a)..... 27,100 1,504,050
Jabil Circuit, Inc.(a)................ 11,600 523,450
Sanmina Corporation(a)................ 14,400 1,092,600
------------
3,120,100
------------
INTERNET -- 9.68%
At Home Corporation -- Series A(a).... 11,600 625,675
Broadcast.com Inc.(a)................. 4,500 601,031
Cais Internet, Inc.(a)................ 700 12,862
CNET, Inc.(a)......................... 10,500 605,063
Comps.com, Inc.(a).................... 17,300 127,588
Critical Path, Inc.(a)................ 3,000 165,938
DoubleClick Inc.(a)................... 8,200 752,350
EarthWeb Inc.(a)...................... 19,100 711,475
Exodus Communications, Inc.(a)........ 16,200 1,942,988
F5 Networks, Inc.(a).................. 28,000 1,148,000
Inktomi Corporation(a)................ 7,300 953,106
MarketWatch.com, Inc.(a).............. 8,800 518,100
nFront, Inc.(a)....................... 35,000 531,563
Pilot Network Services, Inc.(a)....... 67,700 664,306
Priceline.com Inc.(a)................. 2,800 323,575
Verisign Inc.(a)...................... 10,200 879,750
WebTrends Corporation(a).............. 17,200 793,350
------------
11,356,720
------------
MISCELLANEOUS TECHNOLOGY -- 2.48%
Gemstar International Group Ltd.(a)... 30,800 2,009,700
Molecular Devices Corporation(a)...... 23,800 892,500
------------
2,902,200
------------
NETWORK EQUIPMENT & SOFTWARE -- 3.63%
American Power Conversion
Corporation(a)...................... 69,400 1,396,675
Concord Communications, Inc.(a)....... 15,100 679,500
Micromuse Inc.(a)..................... 25,100 1,251,863
Visual Networks, Inc.(a).............. 29,000 928,000
------------
4,256,038
------------
OPERATIONAL SUPPORT SYSTEMS -- 1.09%
DSET Corporation(a)................... 43,700 609,069
International Telecommunication Data
Systems, Inc.(a).................... 42,000 672,000
------------
1,281,069
------------
SEMICONDUCTOR EQUIPMENT -- 3.58%
ASM Lithography Holding NV(a)(b)...... 17,000 1,009,375
Etec Systems.(a)...................... 14,400 478,800
Novellus Systems, Inc.(a)............. 11,600 791,700
Photronics, Inc.(a)................... 14,400 352,800
PRI Automation, Inc.(a)............... 15,300 554,625
Speedfam-IPEC, Inc.(a)................ 26,900 432,080
Teradyne, Inc.(a)..................... 8,100 581,175
------------
4,200,555
------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------------
<S> <C> <C>
SEMICONDUCTORS -- 4.59%
Altera Corporation(a)................. 28,600 $ 1,052,838
Artisan Components, Inc.(a)........... 11,100 129,038
Genesis Microchip Inc.(a)............. 29,600 699,300
Maxim Integrated Products, Inc.(a).... 17,000 1,130,500
MMC Networks Inc.(a).................. 35,300 1,579,675
Rambus Inc.(a)........................ 8,600 792,813
------------
5,384,164
------------
SOFTWARE -- 7.35%
Actuate Software Corporation(a)....... 35,400 938,100
Best Software, Inc.(a)................ 27,100 436,988
Citrix Systems, Inc.(a)............... 31,200 1,762,800
Great Plains Software, Inc.(a)........ 9,500 448,281
Legato Systems, Inc.(a)............... 17,800 1,027,950
New Era of Networks, Inc.(a).......... 12,300 540,431
Peregrine Systems, Inc.(a)............ 17,600 452,100
SalesLogix Corporation(a)............. 40,000 595,000
Veritas Software Corp.(a)............. 5,250 498,421
Verity, Inc.(a)....................... 17,300 937,443
Visio Corporation(a).................. 25,900 985,818
------------
8,623,332
------------
SYSTEM INTEGRATORS -- 2.58%
International Network Services(a)..... 29,850 1,205,194
Technisource, Inc.(a)................. 44,200 229,287
Whittman-Hart, Inc.(a)................ 50,100 1,590,675
------------
3,025,156
------------
TELECOMMUNICATION EQUIPMENT -- 4.06%
Carrier Access Corporation(a)......... 11,700 512,606
Comverse Technology, Inc.(a).......... 23,250 1,755,375
E-Tek Dynamics, Inc.(a)............... 12,800 608,800
Pairgain Technologies Inc.(a)......... 51,600 593,400
Uniphase Corporation(a)............... 7,800 1,294,800
------------
4,764,981
------------
TOTAL INVESTMENTS -- 95.69%
(Cost -- $70,978,865)(c)............ 112,233,447
OTHER ASSETS, LESS
LIABILITIES -- 4.31%................ 5,060,643
------------
NET ASSETS -- 100%.................... $117,294,090
============
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Foreign security
(c) Cost is approximately the same for Federal
income tax purposes
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............. $ 44,381,610
Gross unrealized depreciation............. (3,127,028)
------------
Net unrealized appreciation........... $ 41,254,582
============
Purchases and sales of securities other than short-term
obligations aggregated $44,951,545 and $62,210,232,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 113
5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $70,978,865)...... $112,233,447
Cash........................................................ 6,650,985
Receivables
Investments sold.......................................... 254,888
Fund shares sold.......................................... 446,196
Other assets................................................ 21,035
------------
Total assets.............................................. 119,606,551
------------
LIABILITIES
Payables
Investments purchased..................................... 1,109,119
Fund shares repurchased................................... 1,005,937
Management fee............................................ 76,203
12b-1 service and distribution fees....................... 63,472
Other payables to related parties......................... 43,489
Accrued expenses............................................ 14,241
------------
Total liabilities......................................... 2,312,461
------------
NET ASSETS.................................................. $117,294,090
============
CLASS A
Net asset value and redemption price per share
($54,662,816/1,621,477 shares outstanding)................ $ 33.71
============
Maximum offering price per share ($33.71 X 100/94.25)*...... $ 35.77
============
CLASS B
Net asset value, offering price and redemption price** per
share ($51,431,050/1,565,724 shares outstanding).......... $ 32.85
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($10,346,559/315,170 shares outstanding)............ $ 32.83
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($853,665/25,184 shares outstanding)................ $ 33.90
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 71,243,837
Undistributed net realized gain on investments............ 5,897,362
Accumulated net investment loss........................... (1,101,691)
Net unrealized appreciation on investments................ 41,254,582
------------
NET ASSETS.................................................. $117,294,090
============
</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>
The accompanying notes are an integral part of the financial statements.
<PAGE> 114
6
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 4,542
Interest.................................................. 70,951
-----------
75,493
-----------
EXPENSES
Management fee............................................ $479,991
Transfer agent............................................ 160,358
Administrative services fee............................... 56,470
Custodian fees............................................ 10,611
Blue Sky fees............................................. 16,034
Auditing and accounting fees.............................. 13,596
Shareholder reports....................................... 13,233
Fund accounting........................................... 50,355
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 357,922
Legal..................................................... 11,785
Other..................................................... 2,852
--------
Total expenses........................................ 1,177,184
-----------
NET INVESTMENT LOSS......................................... (1,101,691)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investments.......................... 8,443,824
Net change in unrealized appreciation on investments...... (4,121,943)
-----------
Net gain on investment transactions................... 4,321,881
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 3,220,190
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 115
7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $(1,101,691) $ (2,134,695)
Net realized gain (loss) on
Investments............................................. 8,443,824 1,164,559
Written options......................................... -- (986,707)
Net change in unrealized appreciation on investments...... (4,121,943) 21,048,849
------------ ------------
Net increase resulting from operations................ 3,220,190 19,092,006
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (9,778,309) (11,973,287)
Class B................................................... (2,928,323) (2,537,070)
Class C................................................... 391,734 (1,154,772)
Advisor Class............................................. 83,718 695,130
------------ ------------
Net decrease resulting from Fund share transactions... (12,231,180) (14,969,999)
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (9,010,990) 4,122,007
NET ASSETS
Beginning of period....................................... 126,305,080 122,183,073
------------ ------------
END OF PERIOD............................................. $117,294,090 $126,305,080
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 116
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[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 32.65 $ 27.67 $ 26.54 $ 24.12 $ 18.38 $ 17.93
------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment loss................... (.28)(a) (.44)(a) (.41)(a) (.35) (.24) (.24)(b)
Net gains or losses on securities
(both realized and unrealized)...... 1.34(a) 5.42(a) 1.54(a) 4.84 7.90 .82
------------------------------------------------------------------------------------
Total from investment operations...... 1.06 4.98 1.13 4.49 7.66 .58
------------------------------------------------------------------------------------
Less distributions
Distributions from capital gains...... -- -- 2.07 1.92 --
Returns of capital.................... -- -- -- -- -- .13
------------------------------------------------------------------------------------
Total distributions................... -- -- -- 2.07 1.92 .13
------------------------------------------------------------------------------------
Net asset value, end of period.......... $ 33.71 $ 32.65 $ 27.67 $ 26.54 $ 24.12 $ 18.38
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Total return (%)........................ 3.25(c) 18.00(d) 4.26(d) 18.52(d) 42.07(d) 3.29(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $54,663 $ 62,961 $ 64,910 $ 55,944 $ 39,456 $ 21,493
Ratio of expenses to average net assets
With expense reimbursement (%)........ -- -- -- -- -- 2.20
Without expense reimbursement (%)..... 1.71(e) 1.70 1.67 1.76 1.95 2.22
Ratio of net investment loss to average
net assets (%)........................ (1.58)(e) (1.48) (1.37) (1.31) (1.39) (1.72)(b)
Portfolio turnover rate (%)............. 40 67 65 68 86 67
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 31.93 $ 27.26 $ 26.33 $ 24.12 $ 18.38 $ 17.93
--------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment loss................... (.40)(a) (.65)(a) (.33)(a) (.40) (.35) (.29)(a)(b)
Net gains or losses on securities
(both realized and unrealized)...... 1.32(a) 5.32(a) 1.26(a) 4.68 7.85 .74 (a)
--------------------------------------------------------------------------------------
Total from investment operations...... .92 4.67 .93 4.28 7.50 .45
--------------------------------------------------------------------------------------
Less distributions
Distributions from capital gains...... -- -- -- 2.07 1.76 --
Returns of capital.................... -- -- -- -- -- --
--------------------------------------------------------------------------------------
Total distributions................... -- -- -- 2.07 1.76 --
--------------------------------------------------------------------------------------
Net asset value, end of period.......... $ 32.85 $ 31.93 $ 27.26 $ 26.33 $ 24.12 $ 18.38
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Total return (%)........................ 2.88(c) 17.13(d) 3.53(d) 17.65(d) 41.03(d) 2.51(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $51,431 $ 52,940 $ 47,789 $ 35,321 $ 13,985 $ 5,015
Ratio of expenses to average net assets
With expense reimbursement (%)........ -- -- -- -- -- 2.95
Without expense reimbursement (%)..... 2.45(e) 2.45 2.43 2.52 2.70 2.97
Ratio of net investment loss to average
net assets (%)........................ (2.31)(e) (2.23) (2.13) (2.07) (2.14) (2.47)(b)
Portfolio turnover rate (%)............. 40 67 65 68 86 67
</TABLE>
<PAGE> 117
9
<TABLE>
<CAPTION>
- -----------------------------------------------------------
CLASS C
- -----------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- -----------------------------------------------------------
1999 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
$ 31.91 $ 27.23 $ 26.29 $ 29.69
- -----------------------------------------------------------
(.39)(a) (.63)(a) (.34)(a) (.14)
1.31 (a) 5.31(a) 1.28(a) (1.19)
- -----------------------------------------------------------
.92 4.68 .94 (1.33)
- -----------------------------------------------------------
-- -- -- 2.07
-- -- -- --
- -----------------------------------------------------------
-- -- -- 2.07
- -----------------------------------------------------------
$ 32.83 $ 31.91 $ 27.23 $ 26.29
- -----------------------------------------------------------
- -----------------------------------------------------------
2.88 (c) 17.19(d) 3.58(d) (4.48)(c)
$10,347 $ 9,664 $ 9,484 $ 4,018
2.40(e) 2.40 2.39 2.52 (e)
(2.27)(e) (2.18) (2.09) (2.07)(e)
40 67 65 68
</TABLE>
(a) Based on average shares outstanding
(b) Net investment income (loss) is net of expenses
reimbursed by Manager.
(c) Total return represents aggregate total return
and does not reflect a sales charge.
(d) Total return does not reflect a sales charge.
(e) Annualized
<TABLE>
<CAPTION>
------------------------------------
ADVISOR CLASS
------------------------------------
for the six for the period
months ended February 18, 1998
June 30, (commencement)
(unaudited) to December 31,
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
$ 32.79 $ 28.82
------------------------------------
(.23)(a) (.23)(a)
1.34 (a) 4.20 (a)
------------------------------------
1.11 3.97
------------------------------------
-- --
-- --
------------------------------------
-- --
------------------------------------
$ 33.90 $ 32.79
------------------------------------
------------------------------------
3.39 (c) 13.78 (c)
$ 854 $ 740
1.46 (e) 1.22 (e)
(1.32)(e) (1.00)(e)
40 67
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 118
10
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may invest in option contracts for the purpose of increasing
or decreasing its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect the value of the
Fund's securities. An option is a right to buy or sell a particular security at
a specified price within a limited period of time. The buyer of the option, in
return for a premium paid to the seller, has the right to buy, in the case of a
call option, or sell, in the case of a put option, the underlying security of
the contract. An option on a stock index gives the purchaser the right to
receive from the seller cash equal to the difference between the closing price
of the index and the exercise price of the option.
When the Fund writes or purchases an option, an amount equal to the premium
received or paid by the Fund is recorded as a liability or an asset and is
subsequently adjusted to the current market value of the option written or
purchased. Premiums received or paid from writing or purchasing options which
expire unexercised are treated by the Fund on the expiration date as realized
gains or losses. The difference between the premium and the amount paid or
received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the cost of the purchase
or proceeds of the sale in determining whether the Fund has realized a gain or
loss on the transaction. For options on indices, cash settlement by the Fund is
required if the option is exercised. The Fund, as writer of an option, has no
control over whether the underlying securities may be sold (call) or purchased
(put) and as a result bears the market risk of an unfavorable change in the
price of the securities underlying the written option. Exchange traded written
options are valued daily at the last sale price or, in the absence of a sale, at
the calculated mean of the bid and asked prices, subject to certain
reasonability criteria on the spread between the bid and asked prices.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At June 30,
1999, the interest rate was 4.25%.
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
$2,546,000 as of December 31, 1998, 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
$1,852,000 in 2005 and $694,000 in 2006.
<PAGE> 119
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 investment income and Net realized gain (loss) on investments and
foreign currency transactions for a reporting period may differ significantly in
amount and character from distributions during such period. Accordingly, the
Fund may make reclassifications among certain of its capital accounts without
impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. ("IMI") is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .85% of the
Fund's average net assets.
Mackenzie Investment Management Inc. ("MIMI"), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the six months ended June 30, 1999, the net amount of underwriting
discount retained by IMDI was $14,348.
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 $67,667,
$242,715 and $47,540, 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 $79,852, $68,223, $11,193 and $1,090 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 284,224 $ 8,918,742 539,705 $ 15,118,932
Repurchased.......... (590,882) (18,697,051) (957,217) (27,092,219)
-------- ------------ -------- ------------
Net decrease......... (306,658) $ (9,778,309) (417,512) $(11,973,287)
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 154,206 $ 4,675,505 362,359 $ 10,063,144
Repurchased.......... (246,255) (7,603,828) (457,766) (12,600,214)
-------- ------------ -------- ------------
Net decrease......... (92,049) $ (2,928,323) (95,407) $ (2,537,070)
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 58,575 $ 1,818,283 141,705 $ 4,043,709
Repurchased.......... (46,259) (1,426,549) (187,175) (5,198,481)
-------- ------------ -------- ------------
Net increase /
(decrease).......... 12,316 $ 391,734 (45,470) $ (1,154,772)
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 7,637 $ 236,733 30,299 $ 897,744
Repurchased.......... (5,014) (153,015) (7,738) (202,614)
-------- ------------ -------- ------------
Net increase......... 2,623 $ 83,718 22,561 $ 695,130
======== ============ ======== ============
</TABLE>
11
<PAGE> 120
03IEGF063099
<PAGE> 121
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY DEVELOPING NATIONS FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
As sentiment about worldwide economic declined across the region, are likely to
growth appears to have improved since the drive a rebound in earnings this year and
beginning of the year, emerging markets in 2000. Equity markets in the region have
have benefited. We believe that when last already priced in much of the recovery,
year's economic doomsday predictions with a number of them having doubled from
failed to materialize, the prevailing the lows reached in the third quarter of
level of risk aversion among global 1998. However, our research indicates that
investors was replaced with "risk seeking" they continue to trade at 20% to 30% below
behavior. Emerging markets have rallied, precrisis levels in US dollar terms. We
along with commodities and other cyclical continue to find value in the region,
stocks. In our view, global growth particularly in some of the mid- to
expectations bode well for these asset smaller-cap names, which have lagged in
classes. We believe the decline in the predominantly large-cap rally.
volatility in many emerging markets that
has been seen since Brazil devalued its In addition to economic recovery, we
currency, the real, at the end of expect corporate restructuring to be an
January--essentially the final phase of important driver for Asian markets over
the recent global emerging market the next couple of years. The crisis
crisis--is even more positive for revealed many of the excesses of the
investors with exposure to these markets. "go-go" high-growth years, and corporate
With this decline, we expect to see a management across the region seems to have
return to a more typical relationship taken note. While in the past Asian
between risk and reward, in which higher companies often pursued "growth for
risk assets enjoy higher returns. growth's sake," there now appears to be a
newfound focus on profitable growth. We
We believe the worst is over for the believe that improved corporate governance
economies impacted by the Asian economic may generate significantly higher return
crisis. Our research indicates that on equity, as companies restructure and
currencies have stabilized and, in many improve operating efficiency.
cases, interest rates have returned to
precrisis levels. International investors In our view, the Ivy Developing Nations
who fled the region during the crisis have Fund is well positioned to benefit from
returned as economies across the region this sort of environment. At June 30,
have bottomed out. We believe the 1999, the Fund's largest regional
resumption of economic growth and falling weighting was in Asia, which, at about 42%
costs, as interest rates and nominal wage of total assets, has made a positive
rates have
</TABLE>
<PAGE> 122
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
contribution to performance. Within Asia, the largest country position continues
to be in Hong Kong, which we view as the best way to benefit from the growth
story of the China region. As of June 30, 1999, the Fund's combined China region
exposure represented almost 10% of the Fund's assets. The Ivy Developing Nations
Fund has also benefited from its significant position in Malaysia (9% of total
assets). The Malaysian market has performed exceptionally well since March, as
capital controls imposed at the height of the Asian economic crisis have been
liberalized, and the market has been readmitted to international benchmarks.
Aggressive interest-rate cuts have helped support the rally.
At midyear, 30% of the Fund was invested in Latin America. Since the
beginning of 1999, the fundamentals governing regional economies and equity
markets have improved significantly, with Brazil demonstrating the most dramatic
turnaround. The much-feared devaluation of its currency, the real, actually
served as a catalyst to drive stock prices higher. And, while the Brazilian
economy still faces considerable challenges, we believe its market offers
exceptional value and the most upside potential of any in the region. We expect
most Latin American economies to hit bottom in the second half of 1999, and
anticipate a pickup in economic growth in 2000.
The portfolio of the Ivy Developing Nations Fund continues to be
underweighted in Central and Eastern Europe, although we have taken advantage of
market weakness during the first half of the year to add to positions in the
region. The Hungarian market, long considered at the forefront of market
liberalization and economic reform relative to its Central and Eastern European
neighbors, has experienced pressure as a result of deteriorating current account
and fiscal deficits. While we recognize these concerns, we believe the market
has been overpenalized and that long-term growth prospects remain intact. In the
Czech Republic, it appears that currency weakness since the beginning of the
year may have been what was needed to stimulate exports. The rate of contraction
in retail sales and industrial production seems to have halted, and we believe a
recovery may be in sight. In our view, while domestic demand currently remains
subdued, substantial long-term capital inflows attest to the economy's promise.
We have used market weakness to purchase Czech stocks that our research
indicates to be undervalued. In our view, prospects for the Polish market
continue to be strong, although we believe this is largely discounted in equity
prices.
Overall, we remain positive on prospects for emerging markets. After a
hiatus of two or three years caused by extreme risk aversion among international
investors, interest seems to be returning to the asset class. We believe that
global growth and liquidity should continue to provide a supportive backdrop.
And, perhaps most importantly, in our view current valuations indicate
opportunity.
IVY MANAGEMENT, INC.
2
<PAGE> 123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 89.60% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 3.53%
- -----------------------------------
SOUTH AFRICA -- 3.53%
Anglo American plc(a)............... 3,000 $ 140,198
Liberty Life Association of Africa
Limited........................... 10,500 134,506
Nampak Limited...................... 70,300 194,555
South African Breweries plc......... 17,900 153,494
----------
622,753
----------
ASIA/PACIFIC -- 41.46%
- -----------------------------------
CHINA -- 1.16%
Anhui Expressway Co. Ltd............ 252,000 34,429
Huaneng Power International, Inc.
ADR............................... 1,200 20,550
Inner Mongolia Erdos Cashmere
Products Co. Ltd. Class B......... 64,000 18,176
Qingling Motors Company -- H
Shares............................ 67,000 16,235
Shanghai Diesel Engine Co. Ltd. --
Class B........................... 81,200 21,599
Shanghai Posts & Telecommunications
Equipment Co. Ltd. -- Class
B(a).............................. 55,900 30,186
Zhenhai Refining and Chemical
Company Ltd....................... 210,000 63,607
----------
204,782
----------
HONG KONG -- 8.05%
Asia Satellite Telecommunications
Holdings Ltd. ADR................. 16,000 37,636
Axa China Region Limited............ 140,000 111,876
Cheung Kong Holdings Ltd............ 17,000 151,187
Cheung Kong Infrastructure
Holdings.......................... 10,000 20,687
China Southern Airlines Company
Limited(a)........................ 158,000 40,322
Citic Pacific Ltd................... 31,000 98,890
CLP Holdings Ltd.................... 11,000 53,450
Guangdong Kelon Electrical Holdings
Co. Ltd. -- H Shares.............. 45,000 52,490
Hong Kong Electric Holdings Ltd..... 24,500 78,945
Hong Kong Telecommunications Ltd.... 34,400 89,341
HSBC Holdings plc................... 3,341 121,865
Li & Fung Ltd....................... 46,000 110,277
New World Development Company Ltd... 41,000 122,863
Ng Fung Hong Limited................ 48,000 39,904
Shanghai Industrial Holdings
Limited........................... 35,000 83,456
Union Bank of Hong Kong Ltd......... 4,000 3,093
Wharf Holdings Ltd. (with 4,100
warrants(a))...................... 48,000 153,523
Wing Hang Bank Limited.............. 16,000 51,453
----------
1,421,258
----------
ISRAEL -- 1.18%
Koor Industries Limited -- Sponsored
ADR............................... 8,900 208,033
----------
MALAYSIA(B) -- 7.94%
Arab Malaysian Corporation(a)....... 140,000 64,842
Berjaya Sports Toto Berhad.......... 65,000 150,526
Genting Berhad...................... 41,000 156,447
KFC Holdings (Malaysia) Berhad...... 97,000 124,058
London & Pacific Insurance Company
Berhad(a)......................... 90,400 103,722
Malayan Banking Berhad.............. 58,000 174,000
Perusahaan Otomobil Nasional
Berhad(a)......................... 68,000 157,474
Public Bank Berhad.................. 139,200 105,865
Public Bank Berhad -- Foreign
Registered........................ 102,000 106,832
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Sime Darby Berhad................... 80,000 $ 104,842
Sime UEP Properties Berhad.......... 120,000 154,105
----------
1,402,713
----------
PHILIPPINES -- 3.16%
Alaska Milk Corporation(a).......... 1,700,000 120,634
Asian Terminals, Inc.(a)............ 1,177,500 40,231
Belle Corporation(a) (with 61,400
Warrants(a))...................... 607,000 65,836
Benpres Holdings Corporation
Sponsored GDR(a).................. 15,000 70,313
Manila Electric Company -- B
Shares............................ 10,000 36,006
Metropolitan Bank & Trust Company... 11,728 117,129
Music Corporation(a)................ 127,000 23,031
Southeast Asia Cement Holdings,
Inc............................... 1,051,519 15,200
Universal Robina Corporation........ 329,000 70,039
----------
558,419
----------
SINGAPORE -- 5.56%
Asia Pulp & Paper Company Ltd. --
Sponsored ADR(a) (with 800
warrants(a))...................... 4,000 40,600
DBS Land Ltd........................ 92,000 183,733
Development Bank of Singapore
Limited -- Foreign Registered..... 24,200 295,665
Elec & Eltek International Co.
Ltd............................... 12,700 49,530
Fraser & Neave Ltd. Ordinary........ 35,000 155,216
Singapore Airlines Ltd. -- Foreign
Registered........................ 27,000 256,921
----------
981,665
----------
SOUTH KOREA -- 10.30%
Hyundai Motor Company, Ltd.......... 16,283 386,162
Hyundai Motor Company Ltd. GDR
144A.............................. 844 4,695
Korea Electric Power Corp. Sponsored
ADR............................... 12,400 254,200
Pohang Iron & Steel Company Ltd..... 4,000 487,653
Samsung Fire & Marine Insurance..... 767 540,065
Shinhan Bank........................ 13,016 146,189
----------
1,818,964
----------
THAILAND -- 4.11%
Advanced Info Service Public Company
Limited -- Foreign(a)............. 5,000 67,799
Bangkok Bank Public Company Ltd --
Foreign Registered(a)............. 36,000 134,730
Bangkok Bank Public Company Ltd..... 20,000 43,662
Krungthai Thanakit PCL -- Foreign
Registered(a)..................... 24,000 7,973
Robinson Department Store Public
Company Limited(a)................ 637,200 105,411
Siam Cement Public Company
Limited --
Foreign Registered(a)............. 9,300 282,476
Thai Farmers Bank Public Company
Limited --
Foreign Registered(a)............. 27,000 83,474
----------
725,525
----------
EUROPE -- 14.91%
- -----------------------------------
CZECH REPUBLIC -- 3.40%
Czech Power Company (The)(a)........ 109,000 223,478
Inzenyrske a Prumyslove Stavby
(IPS)............................. 55,500 233,581
</TABLE>
3
<PAGE> 124
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Restitucni Invest Fund Ceske....... 1,200 $ 41,664
Skoda Plzen a.s.(a)................ 2,000 8,471
Zivnobanka -- Investicni Fond...... 5,300 93,015
-----------
600,209
-----------
FINLAND -- 0.98%
Hansabank Ltd.(a).................. 36,500 173,151
-----------
GREECE -- 1.10%
Hellenic Telecommunications
Organization S.A. ADR............ 17,500 193,594
-----------
HUNGARY -- 6.76%
BorsodChem Rt.(a).................. 5,600 135,443
Gedeon Richter Rt.................. 5,980 259,723
Magyar Tavkozlesi Rt............... 44,200 239,208
MOL Magyar Olaj-es Gazipari Rt..... 8,800 212,112
Pannonplast Rt..................... 9,500 184,602
Pick Szeged Rt..................... 5,800 162,821
-----------
1,193,909
-----------
POLAND -- 1.89%
Bank Rozwoju Eksportu S.A.......... 1,550 48,791
Telekomunikacja Polska S.A......... 40,000 285,000
-----------
333,791
-----------
PORTUGAL -- 0.39%
Portugal Telecom S.A. -- Sponsored
ADR.............................. 1,100 45,306
Sonae Industria E Investimentos.... 700 23,808
-----------
69,114
-----------
RUSSIA -- 0.10%
Gorkovsky Auto Plant (GAZ)(a)...... 500 18,563
-----------
TURKEY -- 0.29%
Turkiye Garanti Bankasi A.S........ 6,770,883 50,540
-----------
SOUTH AND CENTRAL AMERICA -- 29.70%
- ----------------------------------
ARGENTINA -- 6.42%
Banco de Galicia y Buenos Aires
S.A. de C.V...................... 29,650 152,124
Banco Frances S.A. (with 21,000
rights(a))....................... 21,000 136,517
Bansud S.A. -- Class B Shares(a)... 52,401 133,640
Inversiones y Representaciones S.A.
(IRSA)........................... 65,139 200,654
Perez Companc S.A. -- Class B...... 13,000 75,410
Quilmes Industrial S.A............. 20,000 247,500
Telefonica de Argentina S.A. --
Sponsored ADR.................... 6,000 188,250
-----------
1,134,095
-----------
BRAZIL -- 12.93%
Banco Bradesco S.A. Preferred...... 30,000,000 149,920
Centrais Electricas Brasileiras
S.A.(Electrobras)................ 10,200,000 192,154
Tam -- Cia de Invetimentos em
Transportes Preferred(a)(c)...... 9,200,000 247,053
Cia Energetica de Minas Gerais
(CEMIG) Preferred................ 3,879,016 81,389
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar........................... 8,148,100 151,431
Companhia Paulista de Forca e Luz
Dividend Preferred Receipts...... 1,156 71
Companhia Vale do Rio Doce --
Preferred A (with 5,000 non
tradeable debentures(a))......... 14,000 274,796
Embratel Participacoes S.A......... 8,500 117,938
Petroleo Brasileiro S.A.
(Petrobras)...................... 1,354,300 210,064
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Tele Centro Oeste Celular Part.
S.A.............................. 140,000,000 $ 173,722
Tele Norte Leste Participacoes
S.A.............................. 11,000 204,188
Telecomunicacoes Brasileiras S.A.
(Telebras) -- Sponsored ADR
Preferred Block.................. 1,700 153,319
Telesp Participacoes S.A. ADR...... 6,400 146,400
Uniao de Bancos Brasileiras S.A.
(Unibanco) Sponsored GDR......... 3,900 93,844
Uniao de Bancos Brasileiros S.A.
(Unibanco) -- Units.............. 1,950,000 87,989
-----------
2,284,278
-----------
CHILE -- 5.26%
A.F.P. Provida S.A. -- Sponsored
ADR.............................. 6,700 147,400
Antofagasta Holdings plc........... 37,963 176,531
Cristalerias de Chile Sponsored
ADR.............................. 14,800 228,475
Gener S.A. Sponsored ADR........... 3,590 63,723
Laboratorio Chile S.A. ADR......... 4,000 72,000
Vina Concha y Toro S.A. Sponsored
ADR.............................. 6,700 241,200
-----------
929,329
-----------
COLUMBIA -- 0.61%
Bancolombia S.A. Sponsored ADR..... 22,700 107,825
-----------
MEXICO -- 2.44%
Grupo Posadas S.A. -- Series A..... 83,785 57,999
Panamerican Beverages Inc.......... 5,500 130,969
Telefonos de Mexico S.A. ADR Class
L................................ 3,000 242,438
-----------
431,406
-----------
PERU -- 0.90%
Telefonica del Peru S.A. -- Class
B................................ 105,900 159,069
-----------
VENEZUELA -- 1.14%
Cia Anonima Nacional Telefonos de
Venezuela (CANTV) ADR............ 7,400 201,650
-----------
TOTAL INVESTMENTS -- 89.60%
(Cost -- $15,921,976)(d)......... 15,824,635
OTHER ASSETS, LESS LIABILITIES --
10.40%........................... 1,836,894
-----------
NET ASSETS -- 100%................. $17,661,529
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Under the Malaysian Government policy, which
went into effect on February 15, 1999,
proceeds repatriated from the sale of
Malaysian securities will be subject to a
graduated levy. The levy ranges from zero to
ten percent of proceeds, depending on the
holding period and the time of repatriation.
(c) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
(d) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 2,901,403
Gross unrealized depreciation............... (2,998,744)
-----------
Net unrealized depreciation............. $ (97,341)
===========
Purchases and sales of securities other than short-term
obligations aggregated $3,859,000 and $5,673,986,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
4
<PAGE> 125
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $15,921,976)...... $15,824,635
Cash........................................................ 1,867,440
Receivables
Investments sold.......................................... 37,410
Fund shares sold.......................................... 6,395
Dividends and Interest.................................... 73,651
Manager for expense reimbursement......................... 2,189
Deferred organization expenses.............................. 3,287
Other assets................................................ 13,248
-----------
Total assets.............................................. 17,828,255
-----------
LIABILITIES
Payables
Investments purchased..................................... 7,135
Fund shares repurchased................................... 34,976
Management fee............................................ 13,932
12b-1 service and distribution fees....................... 11,226
Other payables to related parties......................... 10,170
Accrued expenses............................................ 89,287
-----------
Total liabilities......................................... 166,726
-----------
NET ASSETS.................................................. $17,661,529
===========
CLASS A
Net asset value and redemption price per share
($6,012,971/743,483 shares outstanding)................... $ 8.09
===========
Maximum offering price per share ($8.09 x 100/94.25)*....... $ 8.58
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($7,535,388/948,931 shares outstanding)............. $ 7.94
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($3,993,254/500,463 shares outstanding)............. $ 7.98
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($119,916/14,729 shares outstanding)................ $ 8.14
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $25,640,586
Accumulated net realized loss on investments and foreign
currency transactions................................... (7,834,092)
Undistributed net investment income....................... 3,827
Net unrealized depreciation on investments and foreign
currency transactions................................... (148,792)
-----------
NET ASSETS.................................................. $17,661,529
===========
</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%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 126
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $23,119 foreign taxes withheld.......... $ 190,220
Interest.................................................. 11,827
-----------
202,047
-----------
EXPENSES
Management fee............................................ $70,675
Transfer agent............................................ 34,045
Administrative services fee............................... 7,068
Custodian fees............................................ 26,365
Blue Sky fees............................................. 14,513
Auditing and accounting fees.............................. 11,319
Shareholder reports....................................... 5,119
Amortization of organization expenses..................... 4,896
Fund accounting........................................... 17,777
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 51,057
Legal..................................................... 11,850
Other..................................................... 1,461
-----------
260,122
Expenses reimbursed by Manager............................ (71,251)
-----------
Net expenses............................................ 188,871
-----------
NET INVESTMENT INCOME....................................... 13,176
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (1,060,804)
Net change in unrealized depreciation on investments and
foreign currency transactions, net of taxes of
$64,894................................................. 5,206,945
-----------
Net gain on investment transactions..................... 4,146,141
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 4,159,317
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 127
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 13,176 $ 64,818
Net realized loss on investments and foreign currency
transactions............................................ (1,060,804) (6,212,483)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 5,206,945 3,893,124
------------ ------------
Net increase (decrease) resulting from operations....... 4,159,317 (2,254,541)
------------ ------------
Class A distributions
Dividends from net investment income...................... -- (3,738)
------------ ------------
Total distributions to Class A shareholders............. -- (3,738)
------------ ------------
Class B distributions
Dividends from net investment income...................... -- (4,282)
------------ ------------
Total distributions to Class B shareholders............. -- (4,282)
------------ ------------
Class C distributions
Dividends from net investment income...................... -- (1,761)
------------ ------------
Total distributions to Class C shareholders............. -- (1,761)
------------ ------------
Advisor Class distributions
Dividends from net investment income...................... -- (54)
------------ ------------
Total distributions to Advisor Class shareholders....... -- (54)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (869,994) (2,149,545)
Class B................................................... (517,855) (1,249,929)
Class C................................................... 527,801 436,012
Advisor Class............................................. 7,284 90,457
------------ ------------
Net decrease resulting from Fund share transactions..... (852,764) (2,873,005)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 3,306,553 (5,137,381)
NET ASSETS
Beginning of period....................................... 14,354,976 19,492,357
------------ ------------
END OF PERIOD............................................. $ 17,661,529 $ 14,354,976
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 3,827 --
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 128
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------
for the six for the period
months ended November 1, 1994
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 6.02 $ 6.82 $ 10.12 $ 9.05 $ 8.64 $ 10.00
-----------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a).............. .02(b) .06(b) .01 (.02)(b) .01 --
Net gains or losses on securities (both
realized
and unrealized)............................ 2.05(b) (.86)(b) (2.80) 1.09(b) .54 (1.36)(b)
-----------------------------------------------------------------------------
Total from investment operations............. 2.07 (.80) (2.79) 1.07 .55 (1.36)
-----------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............... -- -- -- -- .01 --
In excess of net investment income....... -- -- .01 -- -- --
Distributions
From capital gains....................... -- -- .30 -- .10 --
In excess of capital gains............... -- -- .20 -- .03 --
-----------------------------------------------------------------------------
Total distributions........................ -- -- .51 -- .14 --
-----------------------------------------------------------------------------
Net asset value, end of period................. $ 8.09 $ 6.02 $ 6.82 $10.12 $ 9.05 $ 8.64
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Total return (%)............................... 34.39(c) (11.67)(d) (27.42)(d) 11.83(d) 6.40(d) (13.50)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $6,013 $ 5,487 $ 8,584 $9,925 $3,435 $ 611
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............... 2.28(f) 2.18 2.31 2.45 2.55 2.20 (f)
Without expense reimbursement (%)............ 3.29(f) 3.47 2.39 2.82 7.18 20.74 (f)
Ratio of net investment income (loss) to
average net assets (%)(a).................... .58(f) .88 .09 (.23) .24 .52 (f)
Portfolio turnover rate (%).................... 28 47 42 27 14 --
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------------------
for the six for the period
months ended November 1, 1994
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 5.93 $ 6.77 $ 10.04 $ 9.05 $ 8.64 $ 10.00
-----------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a).............. (--)(b) .01(b) (.06) (.06)(b) (.02) -- (b
Net gains or losses on securities (both
realized
and unrealized)............................ 2.01(b) (.85)(b) (2.76) 1.05(b) .51 (1.36)(b)
-----------------------------------------------------------------------------
Total from investment operations............. 2.01 (.84) (2.82) .99 .49 (1.36)
-----------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............... -- -- -- -- -- --
In excess of net investment income....... -- -- .01 -- -- --
Distributions
From capital gains....................... -- -- .28 -- .08 --
In excess of capital gains............... -- -- .16 -- -- --
-----------------------------------------------------------------------------
Total distributions........................ -- -- .45 -- .08 --
-----------------------------------------------------------------------------
Net asset value, end of period................. $ 7.94 $ 5.93 $ 6.77 $10.04 $ 9.05 $ 8.64
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Total return (%)............................... 33.90(c) (12.35)(d) (27.93)(d) 10.95(d) 5.62(d) (13.60)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $7,535 $ 6,145 $ 8,488 $6,269 $ 945 $ 121
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............... 2.93(f) 2.96 3.09 3.20 3.30 2.95 (f)
Without expense reimbursement (%)............ 3.94(f) 4.25 3.17 3.57 7.93 21.49 (f)
Ratio of net investment income (loss) to
average net assets (%)(a).................... (.07)(f) .10 (.69) (.98) (.51) (.23)(f)
Portfolio turnover rate (%).................... 28 47 42 27 14 --
</TABLE>
<PAGE> 129
9
- -------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
- -----------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- -----------------------------------------------------------
1999 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5.96 $ 6.79 $ 10.06 $ 9.89
- -----------------------------------------------------------
(--)(b) .01(b) (.07) (.02)(b)
2.02 (b) (.84)(b) (2.76) .19 (b
- -----------------------------------------------------------
2.02 (.83) (2.83) .17
- -----------------------------------------------------------
-- -- -- --
-- -- .01 --
-- -- .27 --
-- -- .16 --
- -----------------------------------------------------------
-- -- .44 --
- -----------------------------------------------------------
$ 7.98 $ 5.96 $ 6.79 $ 10.06
- -----------------------------------------------------------
- -----------------------------------------------------------
33.89 (c) (12.16)(d) (28.01)(d) 1.73 (c
$ 3,993 $ 2,641 $ 2,420 $ 1,854
2.87 (f) 2.96 3.12 3.16 (f)
3.88 (f) 4.25 3.20 3.53 (f)
(.07)(f) .10 (.72) (.94)(f)
28 47 42 27
</TABLE>
- -----------------------------------
(a) Net investment income (loss) 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) Total return does not reflect a sales charge.
(e) Beginning in 1995, total expenses include fees paid
indirectly, if any, through an expense
offset arrangement.
(f) Annualized.
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------
for the six for the period
months ended April 30, 1998
June 30, (commencement)
(unaudited) to December 31,
-----------------------------------
1999 1998
-------------------------------
<S> <C> <C>
$ 6.05 $ 7.48
-----------------------------------
.04(b) .04 (b)
2.05(b) (1.47)(b)
-----------------------------------
2.09 (1.43)
-----------------------------------
-- --
-- --
-- --
-- --
-----------------------------------
-- --
-----------------------------------
$ 8.14 $ 6.05
-----------------------------------
-----------------------------------
34.55(c) (19.06)(c)
$ 120 $ 82
1.76(f) 1.68 (f)
2.77(f) 2.97 (f)
1.10(f) 1.38 (f)
28 47
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 130
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
Board valued securities amounted to $247,053 (1.4% of net assets) 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. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At June 30,
1999, the interest rate was 4.25%.
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
$6,641,000 as of December 31, 1998 which may be applied against any realized net
taxable gain of each succeeding fiscal year until fully utilized or until the
expiration date, whichever occurs first. The carryforward expires in 2006.
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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, prior to the
effectiveness of Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," 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 and Net realized loss on investments and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accord-
10
<PAGE> 131
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ingly, the Fund may make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI 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. For each of the following nine
years, IMI will limit these expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $1,512.
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 $6,350,
$31,159 and $13,548, 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 $14,200, $14,245, $5,435 and $165, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 89,799 $ 669,191 339,762 $ 1,889,391
Issued on
reinvestment of
distributions....... -- -- 449 2,705
Repurchased.......... (257,509) (1,539,185) (688,352) (4,041,641)
-------- ----------- -------- ----------- ---
Net decrease......... (167,710) $ (869,994) (348,141) $(2,149,545)
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 71,653 $ 478,361 249,973 $ 1,513,934
Issued on
reinvestment of
distributions....... -- -- 414 2,490
Repurchased.......... (158,673) (996,216) (469,091) (2,766,353)
-------- ----------- -------- ----------- ---
Net decrease......... (87,020) $ (517,855) (218,704) $(1,249,929)
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 149,645 $ 1,101,944 240,773 $ 1,338,143
Issued on
reinvestment of
distributions....... -- -- 106 548
Repurchased.......... (92,630) (574,143) (153,701) (902,679)
-------- ----------- -------- ----------- ---
Net increase......... 57,015 $ 527,801 87,178 $ 436,012
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED APRIL 30, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
- --------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 29,000 $ 213,530 14,503 $ 95,403
Issued on
reinvestment of
distributions....... -- -- 9 54
Repurchased.......... (27,770) (206,246) (1,013) (5,000)
-------- ----------- -------- ----------- ---
Net increase......... 1,230 $ 7,284 13,499 $ 90,457
======== =========== ======== =========== ===
</TABLE>
11
<PAGE> 132
03IDNF063099
<PAGE> 133
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY SOUTH AMERICA FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
In our view, the fundamentals governing the emergency fiscal package implemented
South American economies and equity at the time of the devaluation is
markets have improved substantially since producing positive results. Analysts'
the beginning of the year. The devalua- expectations for growth for 1999 have been
tion of the Brazilian currency, the real, upgraded significantly, from projections
at the end of January was viewed by many of a wrenching contraction to flat or
analysts as the final event of the slightly positive growth. And, our
emerging market crisis that started with research indicates a recovery of growth in
the devaluation of the Thai currency, the excess of 3% in 2000.
baht, two years ago. With the end of the
crisis, it appears that previously gun- The absence of a big increase in
shy investors have started to venture back postdevaluation inflation has allowed a
into riskier asset classes. According to steady reduction in interest rates from
our research, commodity prices have crisis levels. Barring any additional
improved. And, capital flows to South external shock, we expect additional
America have increased, although they interest rate declines that could bring
remain well below precrisis levels. These rates to below 20%, a 25-year low, by
improvements in both global and regional year-end. In addition to stimulating
fundamentals have been reflected in share economic activity, we believe that
prices, with markets across the region interest rate cuts would be extremely
posting double-digit returns for the first positive for share prices, as domestic
half of 1999. investors reallocate from fixed income
into equities. According to our research,
Our research indicates that Brazil, the Brazilian market, trading at 11 times
which represents 55% of the holdings of estimated 1999 earnings, is at a 20%
the Ivy South America Fund, has discount to the rest of the region,
experienced the most dramatic turnaround despite this year's depressed earnings. In
in the region. Since the devaluation of addition to offering the best value of the
the real at the end of January, it appears bigger markets in the region on current
that market sentiment turned from pessi- year earnings, in our view, the Brazilian
mism to optimism as the worst-case market will also offer the most leverage
scenario that many market participants to earnings recovery in 2000.
predicted failed to materialize. We
believe that, while challenges remain, Argentina, which comprises 15% of Fund
prospects for the Brazilian market are assets, has perhaps been hardest hit by
improving. In our view, the recent crisis. The Brazilian
devaluation served to
</TABLE>
<PAGE> 134
2
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
deepen a recession that had, in large part, been initially triggered by the
Asian crisis and depressed commodity prices. Despite Argentina's current
economic difficulties, Brazil's currency crisis has had a much milder impact on
the Argentine economy than the December 1994 Mexican peso crisis did--indicating
some of the progress that has been made in recent years. Although the bulk of
Argentina's privatization program was completed in 1993 and 1994, asset sales
continue in banking, oil and water, and could bring in significant revenues in
1999. Since the Tequila crisis, structural reforms, particularly in the banking
sector, have dramatically increased Argentina's ability to withstand external
shocks. While short-term prospects are somewhat clouded by uncertainty
surrounding upcoming presidential elections, we believe that longer-term
prospects for the economy remain sound. The country remains popular with
multinational businesses seeking a toehold in the region, as demonstrated by
Repsol's $16 billion bid for Argentine oil giant YPF earlier this year.
Chile also continues to suffer from the aftereffects of last year's crisis,
when a sharp downturn in Asian demand and a fall in copper prices triggered the
country's first recession in 15 years. However, we believe a turnaround is in
sight. We expect the current slowdown to ease by the end of 1999, as the central
bank's most recent 75 basis point reduction in interest rates reaches the
domestic economy. In our view, increased demand from Asia, which represents 27%
of Chilean exports, should also be supportive of Chile's economy, as will
improving copper prices, which make up 40% of the country's exports. While the
market has responded positively to recent rate cuts and improvements in Chile's
trade prospects, we believe the market still offers value on a selective basis.
As of June 30, 1999, Chile represented 17% of the Ivy South America Fund.
The Andean markets of Colombia, Peru and Venezuela also offer attractive
valuations. On a collective basis, they are trading at a 30% discount to the
rest of the region. We remain cautious regarding Colombia, due to uncertainty
surrounding peace talks and bank-sector reforms. However, we continue to look
for opportunities to increase the Ivy South America Fund's exposure to Peru
(currently 5.5% of Fund assets) and Venezuela (2.3%). We believe that Peru is
particularly interesting as the economy recovers from the effects of El Nino,
which hit the country's fishing industry particularly hard, and depressed Asian
demand, as well.
South American markets have posted strong performance since the beginning
of the year, as investors apparently anticipate the brighter prospects ahead for
the region as a whole. In our view, improvements in both the domestic and global
environments have substantially lowered the risks associated with investment in
the region. But, despite a recovery in share prices since the beginning of the
year, South American markets continue to trade 30% below 1997 levels. We believe
that at a discount of over 50% to the US market, equity markets in the region
represent good value.
IVY MANAGEMENT, INC.
<PAGE> 135
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 96.35% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 15.67%
Banco de Galicia y Buenos Aires S.A.
de C.V............................. 10,957 $ 56,217
Banco Frances S.A. (with 7,500
rights)(a)......................... 7,500 48,756
Bansud S.A. -- Class B Shares(a)..... 8,809 22,466
Inversiones y Representaciones S.A.
(IRSA)............................. 14,936 46,009
Perez Companc S.A. -- Class B........ 10,555 61,227
Quilmes Industrial S.A............... 2,830 35,021
Telecom Argentina S.A. Sponsored
ADR................................ 2,700 72,225
Telefonica de Argentina
S.A. -- Sponsored ADR.............. 2,700 84,713
----------
426,634
----------
BRAZIL -- 52.71%
Aracruz Celulose S.A. ADR............ 1,750 38,500
Banco Bradesco S.A. Preferred........ 8,636,032 43,157
Banco Itau S.A....................... 97,000 49,514
Centrais Electricas Brasileiras S.A.
(Electrobras) Preferred............ 4,808,000 96,814
Cia Brasileira de Distribuicao Grupo
Pao de Acucar...................... 4,600,000 85,490
Cia Cervejaria Brahma Preferred...... 92,551 52,097
Cia Energeti ca de Minas Gerais
(Cemig) Preferred.................. 3,368,933 70,687
Cia Paranaense de Energia (COPEL).... 6,800,000 33,752
Cia Paulista de Forca e Luz (CPFL)
(with 5,046 Dividend Preferred
Receipts).......................... 350,000 22,420
Cia Saneamento Basico (SABESP)....... 320,030 26,174
Cia Siderurgica de Tubarao
Preferred.......................... 3,400,000 36,724
Cia Vale do Rio Doce -- Preferred A
(with 8,300 nontradeable
debentures(a))..................... 4,900 96,179
Elevadores Atlas S.A. 144A........... 4,000 56,629
Embratel Participacoes S.A. -- ADR... 2,600 36,075
Gerdau S.A........................... 2,200,000 36,606
Light Servicos de Eletricidade
S.A................................ 230,153 18,550
Petroleo Brasileiro S.A.
(Petrobras)........................ 1,139,000 176,669
Rossi Residencial S.A. GDR........... 10,000 12,188
Tam -- Cia de Invetimentos em
Transportes Preferred(a)(b)........ 2,450,000 65,791
Tele Centro Oeste Celular
Participacoes S.A. -- Preferred.... 20,000,000 24,817
Tele Centro Sul Participacoes
S.A. -- ADR........................ 520 28,860
Tele Norte Leste Participacoes
S.A. -- ADR........................ 2,600 48,263
Tele Sudeste Celular Participacoes
S.A. -- ADR........................ 520 15,080
Telecomunicacoes de Minas Gerais
(Telemig) -- Preferred B........... 582,043 14,412
Telecomunicacoes de Sao Paulo S.A.
(Telesp) Preferred................. 591,796 69,429
Telemig Celular Participacoes
S.A. -- ADR........................ 130 3,201
Telesp Celular S.A. Preferred B...... 673,807 34,204
Telesp Participacoes S.A. -- ADR..... 2,600 59,475
Uniao de Bancos Brasileiros S.A
(Unibanco) -- Units................ 1,189,847 53,689
Usinas Siderurgicas de Minas Gerais
S.A. Preferred (USIMINAS).......... 9,010 30,288
----------
1,435,734
----------
CHILE -- 16.36%
A.F.P. Provida S.A. -- Sponsored
ADR................................ 2,100 $ 46,200
Antofagasta Holdings plc............. 11,700 54,406
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Banco Santander Chile Sponsored
ADR................................ 2,100 32,550
Cristalerias de Chile Sponsored
ADR................................ 2,600 40,138
Empresa Nacional Electricidad S.A. --
Sponsored ADR...................... 2,793 33,865
Gener S.A. Sponsored ADR............. 1,728 30,672
Laboratorio Chile S.A. ADR........... 2,500 45,000
Madeco S.A. Sponsored ADR............ 3,700 37,463
Sociedad Quimica y Minera de Chile
S.A. Sponsored ADR................. 1,100 38,913
Vina Concha y Toro S.A. Sponsored
ADR................................ 2,400 86,400
----------
445,607
----------
COLUMBIA -- 1.48%
Bancolombia S.A. Sponsored ADR....... 6,100 28,975
Cementos Diamante GDR 144A........... 8,300 11,413
----------
40,388
----------
MEXICO -- 2.36%
Panamerican Beverages Inc............ 2,700 64,294
----------
PERU -- 5.47%
Banco Wiese ADR...................... 7,200 8,550
Credicorp Limited.................... 5,273 58,003
Southern Peru Copper Corp............ 1,900 27,431
Telefonica del Peru S.A. -- Class
B.................................. 36,600 54,976
----------
148,960
----------
VENEZUELA -- 2.30%
Cia Anonima Nacional Telefonos de
Venezuela (CANTV) ADR.............. 2,300 62,671
----------
TOTAL INVESTMENTS -- 96.35%
(Cost -- $3,348,784)(c)............ 2,624,288
OTHER ASSETS, LESS LIABILITIES -- 3.65% 99,446
----------
NET ASSETS -- 100%................... $2,723,734
==========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Securities valued in good faith by the
Valuation Committee of the Board of Trustees.
See Note 1 to the Financial Statements.
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION
At June 30, 1999, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation................ $ 302,196
Gross unrealized depreciation................ (1,026,692)
----------
Net unrealized depreciation.............. $ (724,496)
==========
Purchases and sales of securities other than short-term
obligations aggregated $62,942 and $523,432, respectively, for
the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 136
4
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $3,348,784)....... $2,624,288
Cash........................................................ 68,224
Receivables
Fund shares sold........................................... 100
Dividends and interest..................................... 25,410
Manager for expense reimbursement.......................... 13,362
Deferred organization expenses.............................. 4,105
Other assets................................................ 13,103
----------
Total assets............................................... 2,748,592
----------
LIABILITIES
Payables
Fund shares repurchased.................................... 1,793
Management fee............................................. 2,224
12b-1 service and distribution fees........................ 1,370
Other payables to related parties.......................... 3,366
Accrued expenses............................................ 16,105
----------
Total liabilities.......................................... 24,858
----------
NET ASSETS.................................................. $2,723,734
==========
CLASS A
Net asset value and redemption price per share
($1,609,061/247,115 shares outstanding)................... $ 6.51
==========
Maximum offering price per share ($6.51 x 100/94.25)*....... $ 6.91
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($990,069/154,313 shares outstanding)................ $ 6.42
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($124,604/19,540 shares outstanding)................. $ 6.38
==========
NET ASSETS CONSIST OF
Capital paid-in............................................ $4,210,269
Accumulated net realized loss on investments and foreign
currency transactions.................................... (861,161)
Undistributed net investment income........................ 103,007
Net unrealized depreciation on investments and foreign
currency transactions.................................... (728,381)
----------
NET ASSETS.................................................. $2,723,734
==========
</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%.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $6,878 foreign taxes withheld............ $ 57,194
Interest................................................... 1,314
-----------
58,508
-----------
EXPENSES
Management fee............................................. $12,801
Transfer agent............................................. 8,742
Administrative services fee................................ 1,280
Custodian fees............................................. 20,082
Blue Sky fees.............................................. 14,354
Auditing and accounting fees............................... 9,225
Shareholder reports........................................ 3,040
Amortization of organization expenses...................... 6,176
Fund accounting............................................ 9,975
Trustees' fees............................................. 3,977
12b-1 service and distribution fees........................ 6,978
Legal...................................................... 11,754
Other...................................................... 374
-----------
108,758
Expenses reimbursed by Manager............................. (76,818)
-----------
Net expenses............................................. 31,940
-----------
NET INVESTMENT INCOME....................................... 26,568
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................. (191,928)
Net change in unrealized depreciation on investments and
foreign currency transactions............................ 524,481
-----------
Net gain on investment transactions...................... 332,553
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 359,121
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 137
5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
------------ ------------
1999 1998
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income..................................... $ 26,568 $ 87,659
Net realized loss on investments and foreign currency
transactions............................................ (191,928) (677,203)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 524,481 (1,807,210)
----------- ------------
Net increase (decrease) resulting from operations....... 359,121 (2,396,754)
----------- ------------
Class A distributions
Dividends from capital gains.............................. -- (44,650)
----------- ------------
Total distributions to Class A shareholders............. -- (44,650)
----------- ------------
Class B distributions
Dividends from capital gains.............................. -- (28,480)
----------- ------------
Total distributions to Class B shareholders............. -- (28,480)
----------- ------------
Class C distributions
Dividends from capital gains.............................. -- (4,060)
----------- ------------
Total distributions to Class C shareholders............. -- (4,060)
----------- ------------
Fund share transactions (Note 5)
Class A................................................... (247,158) (2,470,662)
Class B................................................... (110,946) (1,266,307)
Class C................................................... (35,037) (184,076)
----------- ------------
Net decrease resulting from Fund share transactions..... (393,141) (3,921,045)
----------- ------------
TOTAL DECREASE IN NET ASSETS................................ (34,020) (6,394,989)
NET ASSETS
Beginning of period....................................... 2,757,754 9,152,743
----------- ------------
END OF PERIOD............................................. $ 2,723,734 $ 2,757,754
=========== ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 103,007 $ 76,439
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 138
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
for the six for the period
months ended November 1, 1994
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 5.58 $ 8.96 $ 8.51 $ 6.88 $ 8.37 $ 10.00
----------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment (loss)(a)................... .08(b) .21 .06 .01 .01 --
Net gains or losses on securities (both
realized
and unrealized).......................... .85(b) (3.44) .53 1.66 (1.45) (1.63)(b)
----------------------------------------------------------------------------------
Total from investment operations........... .93 (3.23) .59 1.67 (1.44) (1.63)
----------------------------------------------------------------------------------
Less distributions
Dividends from net investment income....... -- -- .04 -- -- --
Distributions from capital gains........... -- .15 .10 .04 -- --
Returns of capital......................... -- -- -- -- .05 --
----------------------------------------------------------------------------------
Total distributions...................... -- .15 .14 .04 .05 --
----------------------------------------------------------------------------------
Net asset value, end of period............... $ 6.51 $ 5.58 $ 8.96 $ 8.51 $ 6.88 $ 8.37
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Total return (%)............................. 16.67(c) (36.07)(d) 7.03(d) 24.22(d) (17.28)(d) (16.10)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $ 1,609 $ 1,638 $ 5,671 $ 4,016 $ 2,015 $ 571
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............. 2.16(f) 2.38 2.45 2.55 2.61 2.20 (f)
Without expense reimbursement (%).......... 8.16(f) 5.09 3.18 4.89 9.26 16.22 (f)
Ratio of net investment income (loss) to
average net assets (%)(a).................. 2.41(f) 1.96 .65 .24 .22 .21 (f)
Portfolio turnover rate (%).................. 3 26 10 20 45 82
</TABLE>
(a) Net investment income (loss) 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) Total return does not reflect a sales charge.
(e) Beginning in 1995, total expenses include fees paid indirectly, if any,
through an expense offset arrangement.
(f) Annualized
6
<PAGE> 139
7
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS B CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
for the six for the period for the six for the period
month ended November 1, 1994 month ended April 30, 1996
June 30, for the year ended (commencement) June 30, for the year ended (commencement)
(unaudited) December 31, to December 31, (unaudited) December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 5.52 $ 8.94 $ 8.48 $ 6.88 $ 8.37 $ 10.00 $ 5.48 $ 8.89 $ 8.46 $ 7.96
- --------------------------------------------------------------------------------------------------------------------------------
.05(b) .12 (.01) (.03)(b) (.02)(b) (.01)(b) .05(b) .12 (.02) (.02)
.85(b) (3.39) .53 1.63(b) (1.47)(b) (1.62)(b) .85(b) (3.38) .53 .55
- --------------------------------------------------------------------------------------------------------------------------------
.90 (3.27) .52 1.60 (1.49) (1.63) .90 (3.26) .51 .53
- --------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- -- --
-- .15 .06 -- -- -- -- .15 .08 .03
-- -- -- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
-- .15 .06 -- -- -- -- .15 .08 .03
- --------------------------------------------------------------------------------------------------------------------------------
$ 6.42 $ 5.52 $ 8.94 $ 8.48 $ 6.88 $ 8.37 $ 6.38 $ 5.48 $ 8.89 $ 8.46
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
16.30(c) (36.59)(d) 6.18(d) 23.26(d) (17.90)(d) (16.20)(c) 16.42(c) (36.69)(d) 6.06(d) 6.66(c)
$ 990 $ 972 $ 3,028 $ 2,025 $ 684 $ 122 $ 125 $ 148 $ 453 $ 111
3.01(f) 3.18 3.23 3.33 3.36 2.95(f) 3.02(f) 3.21 3.30 3.46(f)
9.01(f) 5.89 3.96 5.67 10.01 16.97(f) 9.02(f) 5.92 4.03 5.80(f)
(f)
1.56 1.16 (.13) (.54) (.53) (.54)(f) 1.55(f) 1.13 (.20) (.68)(f)
3 26 10 20 45 82 3 26 10 20
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 140
8
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy South America 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 on which
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, or on the basis of
dealer quotes. 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, 1999,
Board valued securities amounted to $65,791 (2.4% of net assets) 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. 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 $529,000
as of December 31, 1998, 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 2006.
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
<PAGE> 141
9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
or at the exchange rate prevailing on the date of the transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 prior to the effectiveness
of Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
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 and Net realized loss on investments and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accordingly, the Fund may
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI 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. For each of the following nine
years, IMI will limit these expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $68.
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
$1,941, $4,460 and $577, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. -- (IMSC), a wholly owned subsidiary of MIMI, is
the transfer and shareholder servicing agent for the Fund. For those services,
the Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $5,006, $3,302, and $434, for Class A, Class B and Class C
respectively, are reflected as Transfer agent in the Statement of Operations.
<PAGE> 142
10
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 54,751 $ 333,536 131,225 $ 1,039,478
Issued on
reinvestment of
distributions....... -- -- 6,020 34,396
Repurchased.......... (101,352) (580,694) (476,199) (3,544,536)
-------- --------- -------- -----------
Net decrease......... (46,601) $(247,158) (338,954) $(2,470,662)
======== ========= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 8,098 $ 46,246 27,768 $ 209,828
Issued on
reinvestment of
distributions....... -- -- 3,019 16,992
Repurchased.......... (29,906) (157,192) (193,307) (1,493,127)
-------- --------- -------- -----------
Net decrease......... (21,808) $(110,946) (162,520) $(1,266,307)
======== ========= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 5,476 $ 30,068 3,891 $ 32,908
Issued on
reinvestment of
distributions....... -- -- 161 902
Repurchased.......... (12,902) (65,105) (28,074) (217,886)
-------- --------- -------- -----------
Net decrease......... (7,426) $ (35,037) (24,022) $ (184,076)
======== ========= ======== ===========
</TABLE>
<PAGE> 143
11
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 144
03ISAF063099
<PAGE> 145
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY US BLUE CHIP FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
The US stock market has continued to an overheated economy, the fear of
perform well in 1999 and has extended its inflation and the fear of higher interest
multiyear bull market trend. The Dow Jones rates. Although we believe that any one of
Industrial Average has moved well past these concerns can easily cause the market
10,000, and, in our view, it now appears to correct 10% or more, in our view,
that investors are viewing 10,000 as the experience indicates that it is best to
floor to the market instead of the keep focused on the long-term trend of the
ceiling. Moreover, as opposed to the market, and to view corrections as major
narrow advances the market experienced in buying opportunities.
recent years that singularly favored
large-capitalization growth stocks, In our view, long-term investors have many
according to our research, this year's reasons to remain optimistic. We believe
move has broadened to include other the threat of a significant rise in
sectors, such as cyclical, inflation is remote. Historically,
small-capitalization and international monetary growth in the US has presaged low
securities. inflation. We believe the recent rise in
interest rates is likely to reverse once
In our view, many of the concerns the market accepts and reflects a low-
expressed by investors early in the year inflation environment. The economy
have dissipated. According to our continues to grow, which, we believe,
research, earnings growth has not slowed. should support higher corporate profits.
The narrow scope of the market has Further, we believe that the increasing
broadened. Weakness in foreign economies need for baby boomers to invest for
has not caused the US economy to slow. retirement should provide a positive
Rather, it seems that the strength in the influence on stock prices.
US economy and US stock market has buoyed
overseas economies and markets. In our The Ivy US Blue Chip Fund benefited from
view, the fear of deflation has subsided, rising equity prices during the first half
and the fear of financial-market collapse of 1999. The Fund was invested primarily
has been replaced by the fear that in high-quality, large-cap companies that
financial markets are overvalued. Our hold leading positions in their indus-
research also indicates that the fear of tries or we believe are expected to be
overvaluation, which has existed since the leaders in the future.
Dow passed 6,000, was unfounded.
The Fund continues to be managed in
In 1999, the investment community has accordance with a disciplined investment
given birth to new fears. We now witness philosophy, the key to which is stock
the fear of selection. Typically, the manager makes no
</TABLE>
<PAGE> 146
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
attempt to time the market. Therefore, the Fund is fully invested at all times
and the manager ignores short-term market volatility. During the first half of
1999, cash positions within the Fund were held to a minimum, generally less than
2%.
When selecting companies for the Fund's portfolio, the manager divides the
stock market into nine broad economic sectors, and the weightings within the
Fund approximate the weighting of each sector within the market, as represented
by the S&P 500 Index. Since there is no attempt to time the market or to make
sector bets, the manager focuses entirely on selecting the appropriate
individual securities in which the Fund invests. The manager utilizes an equity
style that is a blend of growth and value stocks. The Fund is invested in
companies that, in the judgment of the manager, have had a proven and consistent
record of earnings profitability, but whose prices do not adequately reflect the
underlying profitability of the companies. The profitability of each company is
compared to the patterns of that company's industry to account for normal
cyclicality.
In addition to earnings profitability, the manager also considers
dividend-paying ability, financial strength, trading liquidity and technical
readings. Normally, the Ivy US Blue Chip Fund maintains a portfolio with
below-market price to earnings ratio, and an above-market return on equity.
However, individual companies within the Fund may possess diagnostics that are
different from the overall Fund due to the dominance of the company within its
industry or to the nature of the industry itself.
IVY MANAGEMENT, INC.
2
<PAGE> 147
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS -- 98.99% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 4.64%
Georgia-Pacific Group................ 2,700 $ 127,913
PPG Industries, Inc.................. 2,600 153,563
Praxair, Inc......................... 3,700 181,069
Southwest Airlines Co................ 3,100 96,488
-----------
559,033
-----------
CAPITAL GOODS -- 8.46%
AlliedSignal Inc..................... 1,600 100,800
General Electric Company............. 2,200 248,600
Honeywell Inc........................ 2,000 231,750
Tyco International Ltd............... 2,500 236,875
United Technologies Corporation...... 2,800 200,725
-----------
1,018,750
-----------
CONSUMER CYCLICAL -- 8.90%
Ford Motor Company................... 2,100 118,519
Gap, Inc. (The)...................... 3,150 158,681
General Motors Corporation........... 2,500 165,000
Goodyear Tire & Rubber Co. (The)..... 3,200 188,200
Lowe's Companies, Inc................ 2,500 141,719
May Department Stores Co. (The)...... 2,500 102,188
Tommy Hilfiger Corporation(a)........ 2,700 198,450
-----------
1,072,757
-----------
CONSUMER STAPLES -- 12.24%
Anheuser-Busch Companies, Inc........ 3,400 241,188
Avon Products, Inc................... 3,100 172,050
Coca-Cola Company (The).............. 2,300 143,750
Colgate-Palmolive Company............ 2,200 217,250
General Mills, Inc................... 1,700 136,638
H.J. Heinz Company................... 2,700 135,338
PepsiCo, Inc......................... 2,500 96,719
Proctor & Gamble Company, (The)...... 1,600 142,800
Wm. Wrigley Jr. Company.............. 2,100 189,000
-----------
1,474,733
-----------
ENERGY -- 6.00%
Atlantic Richfield Company (ARCO).... 2,200 183,838
Chevron Corporation.................. 1,700 161,818
Exxon Corporation.................... 600 46,275
Mobil Corporation.................... 1,700 168,300
Texaco Inc........................... 2,600 162,500
-----------
722,731
-----------
FINANCIAL SERVICES -- 16.24%
American International Group, Inc.... 1,300 152,181
Bank of America Corporation.......... 2,500 183,280
Bank of New York Company, Inc.,
(The).............................. 3,700 135,743
Bank One Corporation................. 2,600 154,862
Chase Manhattan Corporation, (The)... 1,900 164,587
Fannie Mae........................... 1,800 123,075
First Union Corporation.............. 2,100 98,700
Mellon Bank Corporation.............. 4,500 163,688
Merrill Lynch & Co., Inc............. 2,700 215,831
Morgan Stanley Dean Witter & Co...... 2,900 297,250
Providian Financial Corporation...... 1,400 130,900
Wells Fargo Company.................. 3,200 136,800
-----------
1,956,897
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
COMMON STOCKS SHARES VALUE
<S> <C> <C>
HEALTHCARE -- 11.10%
Abbott Laboratories.................. 4,600 $ 209,300
American Home Products Corporation... 3,700 212,750
Bristol-Myers Squibb Company......... 3,200 225,400
Johnson & Johnson.................... 2,400 235,200
Merck & Co, Inc...................... 3,000 222,000
Schering-Plough Corporation.......... 4,400 233,200
-----------
1,337,850
-----------
TECHNOLOGY -- 20.40%
Altera Corporation(a)................ 4,000 147,250
Applied Materials, Inc.(a)........... 2,700 199,463
Cisco Systems, Inc.(a)............... 2,200 141,900
Dell Computer Corporation(a)......... 3,200 118,400
Equifax Inc.......................... 3,400 121,337
Intel Corporation.................... 4,800 285,600
International Business Machines
Corp............................... 3,000 387,750
Microsoft Corporation(a)............. 2,800 252,525
Novellus Systems, Inc.(a)............ 2,900 197,925
Sun Microsystems, Inc.(a)............ 3,600 247,950
Texas Instruments Inc................ 1,200 174,000
Xerox Corporation.................... 3,100 183,094
-----------
2,457,194
-----------
UTILITIES -- 11.01%
ALLTEL Corporation................... 2,900 207,350
AT&T Corporation..................... 4,400 245,575
Bell Atlantic Corporation............ 3,200 209,200
BellSouth Corporation................ 4,100 192,187
Duke Energy Corporation.............. 2,500 135,937
SBC Communications Inc............... 3,600 208,800
Southern Company, (The).............. 4,800 127,200
-----------
1,326,249
-----------
TOTAL INVESTMENTS -- 98.99%
(Cost -- $10,957,970)(b)........... 11,926,194
OTHER ASSETS, LESS
LIABILITIES -- 1.01%............... 121,918
-----------
NET ASSETS -- 100%................... $12,048,112
===========
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 1,103,095
Gross unrealized depreciation............... (134,871)
-----------
Net unrealized appreciation............. $ 968,224
===========
Purchases and sales of securities other than short-term
obligations aggregated $10,993,193 and $2,233,752,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE> 148
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $10,957,970)...... $11,926,194
Cash........................................................ 131,152
Receivables
Fund shares sold.......................................... 34,302
Dividends and interest.................................... 6,116
Manager for expense reimbursement......................... 17,646
Deferred offering costs..................................... 35,841
Other assets................................................ 7,254
-----------
Total assets.............................................. 12,158,505
-----------
LIABILITIES
Payables
Investments purchased..................................... 26,006
Fund shares repurchased................................... 14,159
Management fee............................................ 6,932
12b-1 service and distribution fees....................... 7,851
Other payables to related parties......................... 42,330
Accrued expenses............................................ 13,115
-----------
Total liabilities......................................... 110,393
-----------
NET ASSETS.................................................. $12,048,112
===========
CLASS A.....................................................
Net asset value and redemption price per share
($2,425,714/205,199 shares outstanding)................... $ 11.82
===========
Maximum offering price per share ($11.82 X 100/94.25)*...... $ 12.54
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($6,393,829/543,055 shares outstanding)............. $ 11.77
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($2,390,166/202,896 shares outstanding)............. $ 11.78
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($838,403/70,714 shares outstanding)................ $ 11.86
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $11,189,931
Accumulated net realized loss on investments.............. (94,298)
Accumulated net investment loss........................... (15,745)
Net unrealized appreciation on investments................ 968,224
-----------
NET ASSETS.................................................. $12,048,112
===========
</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%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 149
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 50,984
Interest.................................................. 213
---------
51,197
---------
EXPENSES
Management fee............................................ $28,028
Transfer agent............................................ 5,729
Administrative services fee............................... 3,737
Custodian fees............................................ 12,274
Blue Sky fees............................................. 9,918
Auditing and accounting fees.............................. 5,881
Shareholder reports....................................... 1,426
Amortization of deferred offering costs................... 52,743
Fund accounting........................................... 11,787
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 27,851
Legal..................................................... 10,748
Other..................................................... 516
---------
174,615
Expenses reimbursed by Manager............................ (103,788)
---------
Net expenses............................................ 70,827
---------
NET INVESTMENT LOSS......................................... (19,630)
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments.......................... (84,384)
Net change in unrealized appreciation on investments...... 871,019
---------
Net gain on investment transactions..................... 786,635
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 767,005
=========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED NOVEMBER 2, 1998
JUNE 30, (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31,
---------------------------------
1999 1998
---------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (19,630) $ (195)
Net realized loss on investments.......................... (84,384) (9,914)
Net change in unrealized appreciation on investments...... 871,019 97,205
----------- ----------
Net increase resulting from operations.................. 767,005 87,096
----------- ----------
Fund share transactions (Note 4)
Class A................................................... 1,526,085 702,150
Class B................................................... 4,931,972 1,021,585
Class C................................................... 2,174,153 108,021
Advisor Class............................................. 230,035 500,010
----------- ----------
Net increase resulting from Fund share transactions..... 8,862,245 2,331,766
----------- ----------
TOTAL INCREASE IN NET ASSETS................................ 9,629,250 2,418,862
NET ASSETS
Beginning of period....................................... 2,418,862 --
----------- ----------
END OF PERIOD............................................. $12,048,112 $2,418,862
=========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 3,885
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 150
6
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------------------------------------------------
for the six for the period for the six for the period
months ended November 2, 1998 months ended November 6, 1998
June 30, (commencement) June 30, (commencement)
(unaudited) to December 31, (unaudited) to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
SELECTED PER SHARE DATA ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $10.74 $10.00 $10.72 $10.30
---------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)(b)...................... -- -- (.04) (.01)
Net gains on securities (both realized and
unrealized)(a)........................................ 1.08 .74 1.09 .43
---------------------------------------------------------------------
Total from investment operations........................ 1.08 .74 1.05 .42
---------------------------------------------------------------------
Net asset value, end of period............................ $11.82 $10.74 $11.77 $10.72
---------------------------------------------------------------------
---------------------------------------------------------------------
Total return (%)(c)....................................... 10.06 7.40 9.79 4.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $2,426 $ 726 $6,394 $1,047
Ratio of expenses to average net assets (%)
With expense reimbursement (%)(d)....................... 1.46 1.43 2.15 2.13
Without expense reimbursement (%)(d).................... 4.24 6.34 4.93 7.04
Ratio of net investment income (loss) to average net
assets (%)(b)(d)........................................ (.09) .02 (.79) (.68)
Portfolio turnover rate (%)............................... 31 3 31 3
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C ADVISOR CLASS
---------------------------------------------------------------------
for the six for the period for the six for the period
months ended November 6, 1998 months ended November 2, 1998
June 30, (commencement) June 30, (commencement)
(unaudited) to December 31, (unaudited) to December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
SELECTED PER SHARE DATA ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $10.72 $10.30 $10.74 $10.00
---------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)(b)...................... (.04) (.01) .01 .01
Net gains on securities (both realized and
unrealized)(a)........................................ 1.10 .43 1.11 .73
---------------------------------------------------------------------
Total from investment operations........................ 1.06 .42 1.12 .74
---------------------------------------------------------------------
Net asset value, end of period............................ $11.78 $10.72 $11.86 $10.74
---------------------------------------------------------------------
---------------------------------------------------------------------
Total return (%)(c)....................................... 9.89 4.08 10.43 7.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $2,390 $ 110 $ 838 $ 537
Ratio of expenses to average net assets (%)
With expense reimbursement (%)(d)....................... 2.08 2.22 1.08 1.08
Without expense reimbursement (%)(d).................... 4.86 7.13 3.86 5.99
Ratio of net investment income (loss) to average net
assets (%)(b)(d)........................................ (.71) (.77) .28 .37
Portfolio turnover rate (%)............................... 31 3 31 3
</TABLE>
(a) Based on average shares outstanding
(b) Net investment income (loss) is net of expenses reimbursed by Manager.
(c) Total return represents aggregate total return and does not reflect a sales
charge.
(d) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 151
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy US Blue Chip 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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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.
DEFERRED OFFERING COSTS -- Offering costs are being amortized over a one year
period beginning November 2, 1998, the date the Fund commenced operations.
Offering costs have been paid by Mackenzie Investment Management Inc. (MIMI) and
will be reimbursed by the Fund.
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 and Net
realized loss on investments for a reporting period may differ significantly in
amount and character from distributions during such period. Accordingly, the
Fund may make reclassifications among certain of its capital accounts without
impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .75% of the
Fund's average net assets. Currently, IMI 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 1.15% of its average net assets. For each of the following nine
years, IMI will limit these expenses to 2.50% of the Fund's average net assets.
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. At June 30, 1999, MIMI owned 4.9% of the Fund's
shares outstanding.
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, 1999, the net amount of underwriting
discount retained by IMDI was $6,772.
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
7
<PAGE> 152
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- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
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 $2,024, $20,039 and $5,788, 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 $1,731, $3,188, $498 and $312, 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>
FOR THE PERIOD
NOVEMBER 2, 1998
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1999 TO DECEMBER 31,
(UNAUDITED) 1998
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold.................. 189,013 $2,096,025 67,905 $ 705,555
Repurchased........... (51,395) (569,940) (324) (3,405)
------- ---------- ------ ---------- ---
Net increase.......... 137,618 $1,526,085 67,581 $ 702,150
======= ========== ====== ========== ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 6, 1998
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1999 TO DECEMBER 31,
(UNAUDITED) 1998
- ----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold.................. 452,474 $5,010,947 97,672 $1,021,966
Repurchased........... (7,054) (78,975) (37) (381)
------- ---------- ------ ---------- ---
Net increase.......... 445,420 $4,931,972 97,635 $1,021,585
======= ========== ====== ========== ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 6, 1998
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1999 TO DECEMBER 31,
(UNAUDITED) 1998
- ----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold.................. 201,165 $2,269,285 10,223 $ 108,031
Repurchased........... (8,491) (95,132) (1) (10)
------- ---------- ------ ---------- ---
Net increase.......... 192,674 $2,174,153 10,222 $ 108,021
======= ========== ====== ========== ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 2, 1998
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 1999 TO DECEMBER 31,
(UNAUDITED) 1998
- ----------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold.................. 21,370 $ 237,654 50,001 $ 500,010
Repurchased........... (657) (7,619) -- --
------- ---------- ------ ---------- ---
Net increase.......... 20,713 $ 230,035 50,001 $ 500,010
======= ========== ====== ========== ===
</TABLE>
03IBCF063099
8
<PAGE> 153
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY BOND FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
Thus far in 1999, bond markets have not when investors neither were interested nor
been friendly to investors. The US had the cash. According to our research,
treasury market spent the first half of cash outflows from the corporate bond
the year in a bear market. Our research market, particularly the high yield
indicates that the sell-off was caused by market, combined with heavy new issues
several factors. The two most significant also pressured the market.
of these were the continued trend of a
flight to quality that took place during As interest rates increased, bond prices
1998, and fear that the Federal Reserve decreased. This negatively impacted the
would begin raising interest rates. These Ivy Bond Fund despite it having less
conditions are taking place in an exposure to interest rates than most of
environment where inflation remains very its peers. The Federal Reserve lowered
low and productivity gains continue to interest rates three times in 1998--each
keep a lid on wage inflation. time by 25 basis points. This was largely
because global bond markets ceased to
The US corporate bond market began function properly in the wake of the
the year on a positive note. Yield spreads financial crisis that developed. By
tightened slowly as investors returned to lowering rates, the US central bank
the corporate market, apparently focused provided liquidity to global markets and
on buying high-quality corporate bonds. reassured investors that it stood ready to
However, this had a negative impact on the soften any negative impact the global
Ivy Bond Fund, which is positioned largely economic turmoil might have on the US
in middle-quality bonds with some exposure economy. In our view, now that global
to lower-quality bonds. These sectors did markets are more stable and US growth is
not perform as well. still strong, it would seem only natural
that the Federal Reserve would begin to
Toward the end of the first quarter, move rates back to precrisis levels.
it seems that weakness in the US treasury Federal Reserve Chairman Alan Greenspan
market, fear of increases in interest made this clear as the June 30, 1999
rates, heavy new-issue supply and Federal Open Market Committee (FOMC)
illiquidity all conspired to weaken the meeting approached. Our research indicates
market, and yield spreads widened once that most investors were not surprised by
again. In addition, the new-issue market the 25 basis point increase. What
was very active. In our view, many issuers investors apparently were anxious to hear
were trying to bring their bonds to market was the Federal Reserve's future policy
at a time
</TABLE>
<PAGE> 154
[IVY LEAF LOGO]
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IVY BOND FUND
- --------------------------------------------------------------------------------
plan--they announced a shift from a bias to raise rates to a more neutral
stance. Commentary released from the FOMC meeting indicated that the Federal
Reserve "must be especially alert to the emergence or potential emergence of
inflationary forces that could undermine economic growth." In our view, this
sounded as though they had left the door open for future rate increases. We
believe that any future actions, however, will be largely determined by the
strength of economic data to be released.
Against the backdrop of a strong US economy, there has been a lot of
discussion by economists about the level of noninflationary growth that our
"new" economy can withstand. We believe that while the information and
technological revolution has had a substantial impact on the US economy and the
way we conduct business, it has not repealed the old laws of the business cycle.
In our view, inflation can and will become a problem if the Federal Reserve does
not continue to act as needed in a preemptive manner. We believe it will.
Despite some volatility, valuations for emerging market corporate bonds are
largely unchanged since the beginning of the year. Many of these bonds continue
to trade at significant discounts after last year's economic crisis. This has
caused the Ivy Bond Fund to lag behind its peers, as not all funds hold bonds
that are issued in Mexico, Brazil and Argentina. However, we continue to believe
these bonds are sound investments, as most of them would have higher ratings if
located in more developed countries. We believe this is what makes them
attractive. In our view, investors are paid a premium to hold these investments,
and the premium is higher than is necessary to compensate for the additional
risk.
Looking into the second half of 1999, we see the continued possibility of
interest-rate increases, though we believe the Federal Reserve should move
gradually and cautiously. Should the Federal Reserve raise rates, we believe the
Ivy Bond Fund's focus on corporate bonds, which have historically outperformed
government bonds in times of increasing interest rates, should help to lessen
the impact usually associated with rising rates. In our view, the economy should
remain firm despite some slowing to be engineered by the Federal Reserve, and
global deflation should contain pricing power and challenge corporate credit
quality. However, we believe any slowing should not significantly weaken the
economy. In our view, oversupply of new issues should moderate. Already, many
new issues are being brought to market only when they have been priced at
attractive levels. Others are being delayed or even canceled completely. We
believe that with supply and demand in balance, this should help improve the
outlook for corporate bonds. We expect that emerging markets should continue to
recover as the reform process continues, though some delays could occur due to
the coming elections in Argentina and Mexico.
The year 2000 issue creates uncertainty. However, our research indicates
that the vast majority of companies held in the Ivy Bond Fund have been working
to update their systems and expect to complete their year 2000 readiness before
the end of 1999.
Some of the Ivy Bond Fund competitors are no longer as focused on corporate
bonds, while others have boosted returns by investing in foreign government
bonds and currencies. This can help in the short run, but we believe it is not
why investors choose a corporate bond fund. There have been no changes to the
strategy or positioning of the Ivy Bond Fund. We continue to invest largely in
middle-quality corporate bonds, with some exposure to lower-quality and emerging
market bonds. We believe this is where we, as the investment manager, can add
the most value. We also believe that investors with a long-term horizon should
benefit from this type of strategy.
IVY MANAGEMENT, INC.
2
<PAGE> 155
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
U.S. CORPORATE BONDS -- 81.53% PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
Amresco Inc., 9.875%, 03/15/05(b).. $1,000,000 $ 810,000
BRE Properties, 7.125%, 02/15/13... 2,000,000 1,807,500
Burlington Industries, 7.25%,
09/15/05......................... 1,000,000 911,250
Burlington Industries, 7.25%,
08/01/27......................... 1,000,000 888,750
CBS Corp., 7.15%, 05/20/05......... 975,000 970,125
CBS Corp., 7.125%, 11/01/23........ 1,000,000 922,500
CHS Electronics, 9.875%,
04/15/05(b)...................... 1,505,000 1,008,350
Circus Circus Enterprises, 7.625%,
07/15/13(b)...................... 1,000,000 882,500
Continental Airlines, 6.545%,
02/02/2019....................... 1,500,000 1,408,125
Cyprus Amax Minerals, 8.375%,
02/01/23......................... 1,575,000 1,639,969
Darden Restaurants Inc, 7.125%,
02/01/16......................... 1,250,000 1,140,625
Delphi Financial Group Inc., 8.00%,
10/01/03......................... 2,500,000 2,537,500
Delta Air Lines, 9.30%, 01/02/11... 1,000,000 1,120,000
Delta Air Lines, 9.59%, 01/12/17... 1,500,000 1,681,245
Developers Diversified Realty
Corp., 6.96%, 12/17/07........... 2,000,000 1,892,500
Developers Diversified Realty
Corp., 6.625%, 01/15/08.......... 1,000,000 912,500
Farmers Insurance Exchange, 8.625%,
05/01/24......................... 2,000,000 2,152,500
Franchise Finance Corp America,
6.86%, 06/15/07.................. 4,000,000 3,640,000
Freeport-McMoRan Copper & Gold,
Inc., 7.50%, 11/15/06(b)......... 1,975,000 1,471,375
Goldman Sachs Group LP, 7.20%,
03/01/07......................... 1,000,000 973,750
Goss Graphic Systems Inc., 12.00%,
10/15/06(b)...................... 825,000 280,500
Green Tree Financial, 6.50%,
09/26/02......................... 3,000,000 2,850,000
Indianapolis Life Ins. Co. 144A,
8.66%, 04/01/11.................. 2,000,000 2,132,500
Indiantown Cogeneration, 9.77%,
12/15/20......................... 1,500,000 1,726,875
International Knife & Saw, 11.375%,
11/15/06(b)...................... 1,300,000 1,280,500
Jackson National Life Ins. Co.
144A, 8.15%, 03/15/27............ 1,000,000 1,037,500
Jefferies Group Inc., 7.50%,
08/15/07......................... 2,500,000 2,515,625
Leucadia National Corp., 7.75%,
08/15/13......................... 2,415,000 2,381,794
Level 3 Communications, 9.125%,
05/01/08(b)...................... 950,000 935,750
Lumbermens Mutual Casualty 144A,
9.15%, 07/01/26.................. 2,000,000 2,122,500
McCaw International Ltd., 15.67%,
04/15/07(b)...................... 2,000,000 1,030,000
McDermott Inc., 8.75%, 05/19/23.... 2,000,000 1,980,000
Medpartners Inc., 7.375%,
10/01/06(b)...................... 2,000,000 1,765,000
Meritor Automotive, 6.80%,
02/15/09......................... 1,000,000 947,500
News America Holdings, 7.75%,
01/20/24......................... 1,000,000 975,000
News America Holdings, 7.70%,
10/30/25......................... 2,000,000 1,955,000
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
U.S. CORPORATE BONDS PRINCIPAL VALUE
<S> <C> <C>
Nextel Communications, 9.75%,
08/15/04(b)...................... $1,000,000 $ 1,017,500
Northrop Grumman Corp., 9.375%,
10/15/24......................... 2,000,000 2,155,000
Pegasus Media & Communications
144A, 12.50%, 07/01/05(b)........ 1,000,000 1,097,500
Pioneer-Standard Electronics,
8.50%, 08/01/06(b)............... 2,000,000 2,057,500
Praxair Inc., 8.70%, 07/15/22...... 2,500,000 2,565,625
Protection One, 7.375%, 08/15/05... 2,000,000 1,900,000
Pulte Corp., 7.625%, 10/15/17...... 1,500,000 1,443,750
Regal Cinemas, 8.875%,
12/15/10(b)...................... 1,000,000 922,500
RJ Reynolds 144A, 7.375%,
05/15/03......................... 1,000,000 986,250
Royal Caribbean Cruises, 7.50%,
10/15/27......................... 2,300,000 2,187,875
Servicemaster Company, 7.25%,
03/01/38......................... 3,000,000 2,715,000
Silverleaf Resorts Inc., 10.50%,
04/01/08(b)...................... 2,000,000 1,655,000
Sithe/Independence Funding Corp.,
9.00%, 12/30/13.................. 2,000,000 2,152,500
Spieker Properties, 7.35%,
12/01/17......................... 2,975,000 2,744,438
Storage USA Partnership L.P.,
7.00%, 12/01/07.................. 1,200,000 1,108,500
Storage USA Partnership L.P.,
8.20%, 06/01/17.................. 2,240,000 2,125,200
Storage USA Partnership L.P.,
7.45%, 07/01/18.................. 1,000,000 875,000
TCI Communications, Inc., 8.75%,
08/01/15......................... 1,000,000 1,145,000
TCI Communications, Inc., 9.25%,
01/15/23......................... 2,000,000 2,202,500
TE Products Pipeline Co., 7.51%,
01/15/28......................... 1,975,000 1,821,938
Terex Corp., 8.875%, 04/01/08(b)... 1,975,000 1,928,093
Time Warner Inc., 9.125%,
01/15/13......................... 2,000,000 2,335,000
Time Warner Inc., 9.15%,
02/01/23......................... 1,500,000 1,736,250
Tommy Hilfiger USA, 6.50%,
06/01/03......................... 975,000 939,656
Torchmark Corporation, 7.875%,
05/15/23......................... 2,000,000 1,977,500
Trump Atlantic City Associates,
11.25%, 05/01/06(b).............. 1,975,000 1,787,375
Turner Broadcasting System, 8.40%,
02/01/24......................... 1,000,000 1,050,000
Watson Pharmaceuticals, 7.125%,
05/15/08......................... 3,475,000 3,353,374
------------
TOTAL U.S. CORPORATE BONDS
(Cost $100,046,040).............. 104,672,932
------------
U.S. DOLLAR DENOMINATED FOREIGN
CORPORATE BONDS -- 16.65%
Abitibi Consolidated Inc., 7.50%,
4/01/28.......................... 2,000,000 1,800,000
Acindar Industria Argentina de
Aceros S.A., 11.25%,
02/15/04(b)...................... 1,500,000 1,117,500
Alestra 144A, 12.125%,
05/15/06(b)...................... 600,000 568,500
APP Fin II Mauritius Ltd., 12.00%,
12/29/49(b)...................... 1,500,000 960,000
Buenos Aires Embotelladora
Argentina S.A. (BAESA), 12.00%,
08/03/05 (a)(b)(d)............... 161,000 161,000
Cemex S.A., 12.75%, 07/15/07(b).... 750,000 847,500
Cemex S.A. 144A, 12.75%,
07/15/06(b)...................... 500,000 565,000
</TABLE>
3
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- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
U.S. DOLLAR DENOMINATED
FOREIGN CORPORATE BONDS PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
Cia Brasileira de Petroleo Ipiranga
S.A. 144A, 10.625%,
02/25/03(b)...................... $1,000,000 $ 940,000
Cia Latino Americana de
Infraestructuctra & Servicos S.A.
(CLISA) 144A, 11.625%,
06/01/04(b)...................... 1,000,000 575,000
Equimar Shipholdings Ltd. 9.875%,
07/01/07(b)...................... 1,300,000 841,750
Espirito Santo-Escelsa, 10.00%,
07/15/07(b)...................... 1,400,000 1,050,000
Greater Beijing, 9.50%,
06/15/07(b)...................... 1,000,000 520,000
Grupo Industrial Durango S.A.
(GIDUSA), 12.625%, 08/01/03(b)... 1,500,000 1,455,000
Grupo Televisa S.A., 13.51%,
05/15/08(b)...................... 1,000,000 815,000
GS Superhighway Holdings, 10.25%,
08/15/07(b)...................... 1,000,000 480,000
Iochpe-Maxion S.A. 144A, 12.375%,
11/08/02(b)...................... 900,000 792,000
MRS Logistica S.A., 10.625%,
08/15/05(b)...................... 500,000 329,375
MRS Logistica S.A. 144A, 10.625%,
08/15/05(b)...................... 1,000,000 658,750
Mastellone Hermanos S.A., 11.75%,
04/01/08(b)...................... 1,750,000 1,242,500
Navigator Gas Transport 144A,
10.50%, 06/30/07(b).............. 1,170,000 573,300
Polysindo International Finance Co.
BV, 11.375%, 06/15/06(b)(c)...... 1,000,000 200,000
RSL Communications, 10.50%,
11/15/08(b)...................... 1,425,000 1,403,625
Sideco Americana S.A. 144A, 9.125%,
08/01/02(b)...................... 1,500,000 1,155,000
Telekomunikacja Polska S.A. Finance
BV (TPSA) 144A, 7.75%,
12/10/08......................... 1,500,000 1,475,625
Trikem S.A. 144A, 10.625%,
07/24/07(b)...................... 1,500,000 855,000
------------
TOTAL U.S. DOLLAR DENOMINATED
FOREIGN CORPORATE BONDS
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITY -- 0.03% SHARES VALUE
FOREIGN CORPORATE BONDS PRINCIPAL VALUE
<S> <C> <C>
(Cost -- $36,698,586)............ $ 21,381,425
------------
Buenos Aires Embotelladora
Argentina SA (BAESA)(a) (Cost --
$309,698)........................ 1,219,559 $ 38,165
------------
RIGHTS & WARRANTS(A) -- 0.17%
Gothic Energy Restricted
Warrants......................... 4,767 --
Gothic Energy Warrants............. 6,941 --
Gothic Energy 144A Warrants........ 14,000 14,000
McCaw International Ltd.
Warrants......................... 2,000 5,000
RSL Communications Ltd. 144A
Warrants......................... 1,000 100,000
Terex Corp. -- Appreciation
Rights........................... 4,000 96,000
------------
TOTAL RIGHTS & WARRANTS
(Cost -- $0)..................... 215,000
------------
TOTAL INVESTMENTS -- 98.38%
(Cost -- $137,054,324)(e)........ 126,307,522
OTHER ASSETS, LESS LIABILITIES -- 1.62% 2,084,397
------------
NET ASSETS -- 100%................. $128,391,919
============
(a) Non-income producing security
(b) Below investment grade security
(c) Issuer is in default on interest payments.
(d) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
(e) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation.............. $ 2,332,604
Gross unrealized depreciation.............. (13,079,406)
------------
Net unrealized depreciation............ $(10,746,802)
============
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $18,191,760
and $40,546,215, respectively, for the period ended June 30,
1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
4
<PAGE> 157
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $137,054,324)..... $126,307,522
Cash........................................................ 624,563
Receivables
Fund shares sold.......................................... 210,206
Dividends and interest.................................... 3,143,299
Other assets................................................ 26,769
------------
Total assets.............................................. 130,312,359
------------
LIABILITIES
Payables
Distributions to shareholders............................. 378,610
Fund shares repurchased................................... 1,332,875
Management fee............................................ 73,825
12b-1 service and distribution fees....................... 58,509
Other payables to related parties......................... 46,327
Accrued expenses............................................ 30,294
------------
Total liabilities......................................... 1,920,440
------------
NET ASSETS.................................................. $128,391,919
============
CLASS A
Net asset value and redemption price per share
($86,021,165/9,680,719 shares outstanding)................ $ 8.89
============
Maximum offering price per share ($8.89 x 100/95.25)*....... $ 9.33
============
CLASS B
Net asset value, offering price and redemption price** per
share ($36,516,229/4,113,937 shares outstanding).......... $ 8.88
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($5,602,108/629,314 shares outstanding)............. $ 8.90
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($252,417/28,422 shares outstanding)................ $ 8.88
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $148,113,586
Accumulated net realized loss on investments.............. (8,874,017)
Accumulated net investment loss........................... (100,848)
Net unrealized depreciation on investments................ (10,746,802)
------------
NET ASSETS.................................................. $128,391,919
============
</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>
The accompanying notes are an integral part of the financial statements.
<PAGE> 158
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 6,515,168
-----------
EXPENSES
Management fee............................................ $ 489,633
Transfer agent............................................ 183,948
Administrative services fee............................... 73,132
Custodian fees............................................ 24,764
Blue Sky fees............................................. 15,677
Auditing and accounting fees.............................. 22,690
Shareholder reports....................................... 11,339
Fund accounting........................................... 51,015
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 365,115
Legal..................................................... 13,040
Other..................................................... 3,223
-----------
Total expenses........................................ 1,257,553
-----------
NET INVESTMENT INCOME....................................... 5,257,615
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments.......................... (4,963,613)
Net change in unrealized depreciation on investments...... (5,488,448)
-----------
Net loss on investments............................... (10,452,061)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(5,194,446)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30 YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
---------------------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 5,257,615 $ 10,579,351
Net realized loss on investments.......................... (4,963,613) (701,990)
Net change in unrealized depreciation on investments...... (5,488,448) (10,804,689)
------------ ------------
Net decrease resulting from operations................ (5,194,446) (927,328)
------------ ------------
Class A distributions
Dividends
From net investment income................................ (3,649,597) (7,864,249)
In excess of net investment income........................ (17,933) --
------------ ------------
Total distributions to Class A shareholders........... (3,667,530) (7,864,249)
------------ ------------
Class B distributions
Dividends
From net investment income................................ (1,323,741) (2,093,426)
In excess of net investment income........................ (12,157) (65,500)
------------ ------------
Total distributions to Class B shareholders........... (1,335,898) (2,158,926)
------------ ------------
Class C distributions
Dividends
From net investment income................................ (275,967) (598,287)
In excess of net investment income........................ -- (12,551)
------------ ------------
Total distributions to Class C shareholders........... (275,967) (610,838)
------------ ------------
Advisor Class distributions
Dividends
From net investment income................................ (8,310) (23,389)
In excess of net investment income........................ -- (513)
------------ ------------
Total distributions to Advisor Class shareholders..... (8,310) (23,902)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (16,461,045) 11,160,978
Class B................................................... (2,806,634) 26,333,094
Class C................................................... (5,053,094) 5,413,523
Advisor Class............................................. (78,089) 374,347
------------ ------------
Net (decrease) increase resulting from Fund share
transactions......................................... (24,398,862) 43,281,942
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (34,881,013) 31,696,699
NET ASSETS
Beginning of period....................................... 163,272,932 131,576,233
------------ ------------
END OF PERIOD............................................. $128,391,919 $163,272,932
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 160
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------
for the six
months ended for the six
June 30, for the year months ended
(unaudited) ended December 31, December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 9.54 $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38
-------------------------------------------------------------------------------------
Income from investment operations
Net investment income................... .35 .69 .80 .72 .67(a) .33(a)
Net gains or losses on securities (both
realized and unrealized).............. (.65) (.69) .42 .03 .84 (.29)
-------------------------------------------------------------------------------------
Total from investment operations........ (.30) -- 1.22 .75 1.51 .04
-------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............ .35 .68 .80 .72 .63 .32
In excess of net investment income.... -- -- -- .01 -- --
Distributions in excess of capital
gains................................. -- -- -- -- -- .09
Returns of capital...................... -- -- -- -- .11 --
-------------------------------------------------------------------------------------
Total distributions................... .35 .68 .80 .73 .74 .41
-------------------------------------------------------------------------------------
Net asset value, end of period............ $ 8.89 $ 9.54 $ 10.22 $ 9.80 $ 9.78 $ 9.01
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Total return (%).......................... (3.19)(b) .00(c) 11.87(c) 8.06(c) 17.41(c) .43(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).............................. $86,021 $109,445 $106,497 $ 97,881 $108,840 $110,232
Ratio of expenses to average net assets
With expense reimbursement (%).......... -- -- -- -- 1.54 1.50(d)
Without expense reimbursement (%)....... 1.43(d) 1.39 1.47 1.56 1.54 1.52(d)
Ratio of net investment income to average
net assets (%).......................... 7.48(d) 6.88 7.08 7.36 7.09(a) 6.92(a)(d)
Portfolio turnover rate (%)............... 12 43 71 90 93 44
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------
for the six
months ended for the six
June 30, for the year months ended
(unaudited) ended December 31, December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 9.53 $ 10.22 $ 9.80 $ 9.78 $ 9.01 $ 9.38
-------------------------------------------------------------------------------------
Income from investment operations
Net investment income................... .31 .59 .68 .64 .60(a) .30(a)
Net gains or losses on securities (both
realized and unrealized).............. (.65) (.67) .46 .04 .84 (.29)
-------------------------------------------------------------------------------------
Total from investment operations........ (.34) (.08) 1.14 .68 1.44 .01
-------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............ .31 .59 .72 .64 .56 .29
In excess of net investment income.... -- .02 -- .02 -- --
Distributions in excess of capital
gains................................. -- -- -- -- -- .09
Returns of capital...................... -- -- -- -- .11 --
-------------------------------------------------------------------------------------
Total distributions................... .31 .61 .72 .66 .67 .38
-------------------------------------------------------------------------------------
Net asset value, end of period............ $ 8.88 $ 9.53 $ 10.22 $ 9.80 $ 9.78 $ 9.01
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Total return (%).......................... (3.63)(b) (.81)(c) 11.12(c) 7.25(c) 16.54(c) .06(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).............................. $36,516 $ 42,166 $ 18,499 $ 5,300 $ 5,184 $ 2,420
Ratio of expenses to average net assets
With expense reimbursement (%).......... -- -- -- -- 2.29 2.25(d)
Without expense reimbursement (%)....... 2.33(d) 2.13 2.21 2.29 2.29 2.27(d)
Ratio of net investment income to average
net assets (%).......................... 6.58(d) 6.14 6.35 6.62 6.34(a) 6.17(a)(d)
Portfolio turnover rate (%)............... 12 43 71 90 93 44
</TABLE>
<PAGE> 161
9
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
- -------------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
- -------------------------------------------------------------
1999 1998 1997 1996
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 9.55 $ 10.24 $ 9.82 $ 9.44
- -------------------------------------------------------------
.31 .60 .64 .39
(.65) (.68) .48 .43
- -------------------------------------------------------------
(.34) (.08) 1.12 .82
- -------------------------------------------------------------
.31 .60 .70 .39
-- .01 -- .05
-- -- -- --
-- -- -- --
- -------------------------------------------------------------
.31 .61 .70 .44
- -------------------------------------------------------------
$ 8.90 $ 9.55 $ 10.24 $ 9.82
- -------------------------------------------------------------
- -------------------------------------------------------------
(3.58)(b) (.81)(c) 11.11(c) 8.81(b)
$ 5,602 $ 11,266 $ 6,580 $ 618
-- -- -- --
2.16 (d) 2.12 2.20 2.35(d)
6.74 (d) 6.15 6.35 6.56(d)
12 43 71 90
</TABLE>
- --------------------------------------
(a) Net investment income is net of expenses
reimbursed by Manager.
(b) Total return represents aggregate total
return and does not reflect a sales charge.
(c) Total return does not reflect a sales
charge.
(d) Annualized
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
for the six for the period
months ended January 20, 1998
June 30, (commencement)
(unaudited) to December 31,
- ----------------------------------------
1999 1998
- ----------------------------------------
<S> <C> <C>
$ 9.54 $ 10.28
- ----------------------------------------
.35 .69
(.66) (.72)
- ----------------------------------------
(.31) (.03)
- ----------------------------------------
.35 .69
-- .02
-- --
-- --
- ----------------------------------------
.35 .71
- ----------------------------------------
$ 8.88 $ 9.54
- ----------------------------------------
- ----------------------------------------
(3.30)(b) (.30)(b)
$ 252 $ 347
-- --
1.37 (d) 1.11 (d)
7.54 (d) 7.16 (d)
12 43
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE> 162
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
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, Class I 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 -- 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, or on the basis of dealer quotes. 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,
1999, securities valued by the Valuation Committee amounted to $161,000 (0.1% of
net assets) 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. Interest income is accrued on a daily basis.
Corporate actions are recorded on the ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. 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
$3,564,000 as of December 31, 1998 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 $984,000 in
1999, $2,215,000 in 2003 and $365,000 in 2006.
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 and Net realized loss on investments may differ
significantly in amount and character from distributions during such period.
Accordingly, the Fund may make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .75% of the
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 six months ended June 30, 1999, the net amount of underwriting
discount retained by IMDI was $3,737.
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
10
<PAGE> 163
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
for purposes of advertising and marketing shares of the Fund. Such fees of
$121,700, $200,229, and $43,186, 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 $103,006, $72,029, $8,468 and $445, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 2,046,916 $ 18,836,530 4,228,736 $ 42,547,340
Issued on
reinvestment of
distributions...... 238,076 2,173,724 492,080 4,877,468
Repurchased.......... (4,080,117) (37,471,299) (3,661,831) (36,263,830)
---------- ------------ ---------- ------------ ---
Net (decrease)/
increase........... (1,795,125) $(16,461,045) 1,058,985 $ 11,160,978
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 844,894 $ 7,811,747 3,607,412 $ 36,104,675
Issued on
reinvestment of
distributions...... 57,223 521,687 98,591 972,810
Repurchased.......... (1,212,211) (11,140,068) (1,092,874) (10,744,391)
---------- ------------ ---------- ------------ ---
Net (decrease)/
increase........... (310,094) $ (2,806,634) 2,613,129 $ 26,333,094
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 88,336 $ 813,518 796,777 $ 8,013,954
Issued on
reinvestment of
distributions...... 6,900 63,137 13,159 132,586
Repurchased.......... (645,052) (5,929,749) (273,586) (2,733,017)
---------- ------------ ---------- ------------ ---
Net (decrease)/
increase........... (549,816) $ (5,053,094) 536,350 $ 5,413,523
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED JANUARY 20, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 15,549 $ 139,090 59,160 $ 601,995
Issued on
reinvestment of
distributions...... 671 6,140 1,241 12,160
Repurchased.......... (24,122) (223,319) (24,077) (239,808)
---------- ------------ ---------- ------------ ---
Net (decrease)/
increase........... (7,902) $ (78,089) 36,324 $ 374,347
========== ============ ========== ============ ===
</TABLE>
11
<PAGE> 164
03IBFX063099
<PAGE> 165
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY MONEY MARKET FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
Inflation in the US remains at histor- returning to more favorable conditions,
ically low levels. In our view, this is our research indicates that monetary
due to several factors. Commodity prices policy is viewed by many economists as
are still at very low levels despite an being too accommodative, considering the
increase in the price of oil and some strong growth we see in the economy.
other industrial commodities. Low-cost Therefore, in our view, it seems logical
Asian imports have kept downward pres- that the Federal Reserve would want to
sure on prices, preventing price increases move interest rates back to precrisis
in US final goods. Our research indicates levels to prevent the economy from
that increasing levels of productivity overheating.
have offset increased wages and the
concern over wage inflation. There has been a lot of discussion amongst
analysts and economists about the level of
So why has the Federal Reserve non- inflationary growth that our "new"
recently raised interest rates and economy can withstand. In our view, while
considered further corrective actions? the information and technological
During the global financial crisis that revolution has had a substantial impact on
developed last year, the Federal Reserve our economy and the way in which we
lowered rates three times in 25 basis conduct business, it has not repealed the
point increments, a move that was designed old laws of the business cycle. We believe
to provide liquidity to the global credit that inflation can and will become a
markets and to reassure investors in the problem if the Federal Reserve does not
US that the US central bank would try to continue to act as needed in a preemptive
mitigate any negative effects of the manner. We believe it will.
global economic crisis on the US economy.
In our view, the US has weathered these We believe the Ivy Money Market Fund is
events well, and growth did not slow as well positioned in the current
many had feared. The weakness in exports environment. The Fund will continue to
was largely confined to the manufac- search out attractive investments within
turing sector, which is a small part of the money market universe while seeking to
the US economy. Our research indicates provide investors with a competitive
that consumers, who drive more than yield.
two-thirds of the economy, continue to
spend, as employment is strong. Now that IVY MANAGEMENT, INC.
the crisis has passed and markets are
</TABLE>
<PAGE> 166
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
2
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 20.58%
Abbott Laboratories, 4.75%, 07/12/99........................ $1,000,000 $ 998,549
Associates Corp. Of N.A., 5.00%, 08/16/99................... 1,000,000 993,611
Chevron Oil Finance Co., 5.03%, 07/19/99.................... 1,000,000 997,485
General Electric Capital, 4.79%, 07/01/99................... 1,000,000 1,000,000
Paccar Financial Corp., 4.70%, 07/22/99..................... 1,000,000 997,258
-----------
TOTAL COMMERCIAL PAPER
(Cost -- $4,986,903)...................................... 4,986,903
-----------
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 76.38%
Federal Home Loan Mortgage Corp., 4.70%, 07/14/99........... 3,000,000 2,994,909
Federal Home Loan Mortgage Corp., 4.75%, 08/05/99........... 3,500,000 3,483,837
Federal Home Loan Mortgage Corp., 5.00%, 08/12/99........... 3,200,000 3,181,333
Federal Home Loan Mortgage Corp., 4.85%, 08/23/99........... 2,500,000 2,482,149
Federal National Mortgage Association, 4.80%, 08/13/99...... 1,400,000 1,391,973
Federal National Mortgage Association, 4.98%, 08/24/99...... 4,000,000 3,970,120
Student Loan Marketing Association, 5.10%, 08/02/99(a)...... 1,000,000 1,007,946
-----------
TOTAL U.S. GOVERNMENT AGENCY
Obligations (Cost -- $18,512,267)......................... 18,512,267
-----------
TOTAL INVESTMENTS -- 96.96%
(Cost -- $23,499,170)(b).................................. 23,499,170
OTHER ASSETS, LESS LIABILITIES -- 3.04%..................... 736,423
-----------
NET ASSETS -- 100%.......................................... $24,235,593
===========
</TABLE>
(a) Floating rate note; reflects variable rate as of the latest reset date, June
29, 1999.
(b) Cost is the same for Federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
<PAGE> 167
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified -- $23,499,170)........... $23,499,170
Cash........................................................ 952,322
Receivable from Manager for expense reimbursement........... 10,531
Other assets................................................ 20,171
-----------
Total assets.............................................. 24,482,194
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 6,699
Fund shares repurchased................................... 119,010
Management fee............................................ 7,418
Other payables to related parties......................... 12,341
Accrued expenses............................................ 11,133
-----------
Total liabilities......................................... 156,601
-----------
NET ASSETS.................................................. $24,325,593
===========
CLASS A
Net asset value and redemption price per share
($17,286,729/17,286,729 shares outstanding)............... $ 1.00
===========
CLASS B
Net asset value, offering price and redemption price* per
share ($6,794,769/6,794,769 shares outstanding)........... $ 1.00
===========
CLASS C
Net asset value, offering price and redemption price* per
share ($244,095/244,095 shares outstanding)............... $ 1.00
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $24,325,593
-----------
NET ASSETS.................................................. $24,325,593
===========
</TABLE>
* Subject to any applicable contingent deferred sales charge.
<PAGE> 168
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
4
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $620,408
--------
EXPENSES
Management fee............................................ $51,483
Transfer agent............................................ 50,171
Administrative services fee............................... 12,871
Custodian fees............................................ 2,600
Blue Sky fees............................................. 14,228
Auditing and accounting fees.............................. 3,561
Shareholder reports....................................... 6,050
Fund accounting........................................... 16,572
Trustees' fees............................................ 3,977
Legal..................................................... 11,968
Other..................................................... 876
--------
174,357
Expenses reimbursed by Manager............................ (65,686)
--------
Net expenses............................................ 108,671
--------
NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................. $511,737
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 169
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
---------------------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 511,737 $ 1,162,955
----------- -----------
Net increase resulting from operations.................. 511,737 1,162,955
----------- -----------
Distributions to shareholders from net investment income
Class A................................................... (371,773) (910,735)
Class B................................................... (130,606) (233,841)
Class C................................................... (9,358) (18,379)
----------- -----------
Total distributions to shareholders..................... (511,737) (1,162,955)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (1,816,499) 3,718,599
Class B................................................... 159,229 2,823,837
Class C................................................... (178,905) 18,004
----------- -----------
Net (decrease) increase resulting from Fund share
transactions........................................... (1,836,175) 6,560,440
----------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (1,836,175) 6,560,440
NET ASSETS
Beginning of period....................................... 26,161,768 19,601,328
----------- -----------
END OF PERIOD............................................. $24,325,593 $26,161,768
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 170
6
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
SELECTED PER SHARE DATA ------------------------------------------------------------------------
<S> <C> <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 .05 .04 .05 .04
Less distributions
Dividends from net investment income......... (.02) (.05) (.05) (.04) (.05) (.04)
------------------------------------------------------------------------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------
---------------------------------------------------------------------
Total return (%)............................... 1.96(b) 4.51 4.60 4.47 4.80 4.21
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $17,287 $ 19,103 $ 15,385 $ 21,359 $ 24,609 $ 26,827
Ratio of expenses to average net assets
With expense reimbursement (%)............... .87(c) .87 .88 .86 .85 .85
Without expense reimbursement (%)............ 1.38(c) 1.42 1.57 1.86 1.39 1.24
Ratio of net investment income to average net
assets (%)(a)................................ 3.95(c) 4.50 4.60 4.47 4.91 3.29
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- -----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------
Income from investment operations
Net investment income (a)................................. .02 .05 .05 .05
Less distributions
Dividends from net investment income...................... (.02) (.05) (.05) (.05)
--------------------------------------------------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------
-----------------------------------------------
Total return (%)............................................ 2.01(b) 4.59 4.77 4.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 6,795 $ 6,636 $ 3,812 $ 3,474
Ratio of expenses to average net assets
With expense reimbursement (%)............................ .76(c) .76 .70 .77
Without expense reimbursement (%)......................... 1.27(c) 1.31 1.39 1.77
Ratio of net investment income to average net assets
(%)(a).................................................... 4.06(c) 4.61 4.77 4.57
</TABLE>
<PAGE> 171
7
(a) Net investment income is net of
expenses reimbursed by Manager.
(b) Total return represents aggregate
total return.
(c) Annualized
NOTE: The seven day yield as of June 30,
1999 was 4.10%. The thirty day yield
as of June 30, 1999 was 4.06%.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------
for the six
months ended for the year from April 30, 1996
June 30, ended (commencement)
(unaudited) December 31, to December 31,
--------------------------------------------------------
1999 1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1.00 $1.00 $1.00 $1.00
--------------------------------------------------------
.02 .05 .05 .03
(.02) (.05) (.05) (.03)
--------------------------------------------------------
$ 1.00 $1.00 $1.00 $1.00
--------------------------------------------------------
--------------------------------------------------------
1.99 (b) 4.55 4.78 4.78(b)
$ 244 $ 423 $ 405 $ 74
.81 (c) .81 .70 .56(c)
1.32 (c) 1.36 1.39 1.56(c)
4.01 (c) 4.56 4.78 4.78(c)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 172
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
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 Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .40% of the
Fund's average net assets. Currently, IMI 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. For each of the following nine years, IMI will
limit these expenses to 1.25% 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 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 $39,404, $9,925 and $842, 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
JUNE 30, 1999 YEAR ENDED
CLASS A (UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------
<S> <C> <C>
Sold................. 31,223,407 71,915,171
Issued on
reinvestment of
distributions....... 330,009 820,735
Repurchased.......... (33,369,915) (69,017,307)
----------- -----------
Net (decrease)/
increase............ (1,816,499) 3,718,599
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999 YEAR ENDED
CLASS B (UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------
<S> <C> <C>
Sold................. 5,911,740 15,159,484
Issued on
reinvestment of
distributions....... 105,257 183,070
Repurchased.......... (5,857,768) (12,518,717)
----------- -----------
Net increase......... 159,229 2,823,837
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999 YEAR ENDED
CLASS C (UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------
<S> <C> <C>
Sold................. 2,235,163 3,746,980
Issued on
reinvestment of
distributions....... 8,034 13,517
Repurchased.......... (2,422,102) (3,742,493)
----------- -----------
Net (decrease)/
increase............ (178,905) 18,004
=========== ===========
</TABLE>
03IMMF063099
8
<PAGE> 173
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY ASIA PACIFIC FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
Following a rebound in the fourth quarter good news, our outlook for Asian equities
of 1998, markets in Asia (non-Japan) have over the next few years remains positive.
continued to rally throughout the first
half of 1999. According to our research, In addition to the benefits of economic
strong stock market performance has been recovery, we believe that corporate
supported by improving macroeconomic restructuring will be instrumental in
fundamentals, increasing trade surpluses driving markets higher. In our view, the
resulting from an increase in export economic crisis that swept through Asia
growth, and improving consumer confidence. over the last two years has highlighted
Our research indicates that currencies the need for a change in the way business
have stabilized and, in many cases, is done in the region. Governments appear
interest rates have returned to precrisis to be adopting measures to restructure
levels. Economies across the region appear their economies: opening markets,
to have bottomed out. Attracted by strengthening bankruptcy laws and banking
declining interest rates and the promise systems, and improving disclosure
of economic recovery, international requirements. At the corporate level, our
investors who fled Asia during its research indicates that there is a
economic crisis are again investing there. new-found emphasis on the efficient use of
capital and increased management focus. In
In our view, the strong performance our view, improved corporate governance
of Asian markets combined with steep has the potential to generate
declines in interest rates have fed a significantly higher return on equity
"virtuous" cycle in the region. Lower (ROE) as companies restructure, sell off
interest costs have provided relief for noncore assets and improve operating
debt-strapped companies. Rising exports efficiency. Morgan Stanley, the noted
and mounting trade surpluses have helped international investment banking firm,
build foreign reserves, which were badly argues that even without widespread
depleted during the crisis. In addition, restructuring in Asia, there is still
our research indicates that lower-risk significant upside potential as ROE
premiums have attracted much-needed returns to precrisis levels. Simply
foreign capital back into the region, returning to Asian average ROE at a
which has helped to recapitalize banks and precrisis level of 12.4% from its current
companies affected by the crisis. Although 3.3% would generate average annual
we believe that, in the shorter term, compound earnings growth of more than 30%
markets in the region have priced in much over the next five years.
of the
</TABLE>
<PAGE> 174
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
The largest country weighting in the Ivy Asia Pacific Fund remains Hong
Kong. While its economy continues to suffer from the aftereffects of the crisis,
our research suggests there are signs of a recovery. Property transactions, of
particular importance to the Hong Kong economy, are beginning to pick up, and
developers have resumed capital investment. While top-line growth is still
scarce, our research indicates that earnings upgrades are starting to come
through. In our view, the broader market has priced in a fairly optimistic
recovery. While large-cap stocks led the recovery, we are uncovering value in
many mid-cap and second-tier companies, which we will be adding to the Fund.
We continue to be positive on prospects for the Singaporean market, where
we expect current account surpluses and a relatively low demand for credit will
keep interest rates low. We expect economic growth to accelerate next year as
the recovery broadens, aided by low interest rates and an increase in exports
from the important technology sector. Our research indicates that the Malaysian
market has performed well since March, as capital controls, which were imposed
at the height of the crisis, have been liberalized and the market has been
readmitted to international benchmarks. Aggressive interest rate cuts have
helped support the rally, as well.
Going forward, we expect restructuring to continue to be the driving force
in the Korean and Thai markets, as oversized conglomerates pare down their asset
bases and focus on core businesses. Improvements in bankruptcy laws in both
countries raise the incentive for companies to "get their houses in order." Our
research indicates that progress has also been made on strengthening disclosure
requirements and accounting standards.
Though a number of Asian stock markets have doubled from the low levels
reached in the third quarter of 1998, according to our research, they continue
to trade 20% to 30% below precrisis levels in US dollar terms. While markets
across the region do appear to be discounting much of this year's recovery, we
believe there is still value to be found in the region, particularly in some of
the mid- and smaller-cap stocks. The first wave of the rebound was in the most
liquid, large-cap stocks and drove up broader indices. We expect that the next
leg of the recovery is likely to be more selective. Accordingly, we have been
adding positions to the Fund in smaller, high-quality companies that have lagged
behind their larger-cap counterparts. In the long-term, we believe that
countries and companies in the region will continue to emerge stronger than they
were before the economic crisis, making the prospects for investment
opportunities in Asia good.
IVY MANAGEMENT, INC.
2
<PAGE> 175
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 89.59% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
CHINA -- 1.36%
Anhui Expressway Co. Ltd.............. 110,000 $ 15,028
Qingling Motors Company -- H Shares... 288,000 69,786
Zhenhai Refining and Chemical Company
Ltd................................. 84,000 25,444
----------
110,258
----------
HONG KONG -- 39.03%
Asia Satellite Telecommunications
Holdings Ltd. ADR................... 30,000 70,567
Axa China Region Limited.............. 134,000 107,081
CDL Hotels International Ltd.......... 360,000 150,800
Cheung Kong Holdings Ltd.............. 26,000 231,227
China Resources Enterprise Limited.... 26,000 45,910
China Southern Airlines Company
Limited(a).......................... 116,000 29,603
Citic Pacific Ltd..................... 48,000 153,120
CLP Holdings Ltd...................... 23,000 111,760
Dao Heng Bank Group Ltd............... 31,000 139,045
Giordano International Ltd............ 360,000 255,200
Gold Peak Industries (Holdings)
Limited............................. 200,000 42,791
Guangdong Kelon Electrical Holdings
Co. Ltd. -- H. Shares............... 39,000 45,491
Hong Kong Electric Holdings Ltd....... 43,000 138,556
Hong Kong Land Holdings Ltd........... 52,000 84,240
Hong Kong Telecommunications Ltd...... 46,800 121,545
HSBC Holdings plc..................... 10,400 379,346
Jardine International Motor Holdings
Ltd................................. 160,000 82,489
Jardine Matheson Holdings Ltd......... 16,200 81,000
Jardine Strategic Holdings Ltd........ 30,500 79,300
Moulin International Holding Ltd...... 230,000 24,605
New World Development Company Ltd..... 65,000 194,784
Orient Overseas International
Ltd.(a)............................. 272,000 99,915
Sun Hung Kai Properties Ltd........... 8,000 72,951
Swire Pacific Ltd..................... 17,000 84,139
Union Bank of Hong Kong Ltd........... 8,266 6,392
VTech Holdings Limited................ 29,000 92,136
Wharf Holdings Ltd. (with 3,800
warrants(a))........................ 30,000 97,099
Wing Hang Bank Limited................ 35,000 112,552
Yue Yuen Industrial Holdings.......... 13,000 29,992
----------
3,163,636
----------
INDONESIA -- 1.59%
PT Bank Dagang Nasional Indonesia Tbk
Warrants(a)......................... 500 --
PT Hanjaya Mandala Sampoerna Tbk(a)... 56,000 128,515
----------
128,515
----------
MALAYSIA(B) -- 15.14%
Berjaya Sports Toto Berhad............ 61,000 141,263
Genting Berhad........................ 17,000 64,868
Johor Port Berhad..................... 204,000 95,558
KFC Holdings (Malaysia) Berhad........ 90,700 116,001
Malakoff Berhad....................... 32,000 85,053
Malayan Banking Berhad................ 34,400 103,200
Perusahaan Otomobil Nasional
Berhad(a)........................... 52,000 120,421
Petronas Gas Berhad................... 28,000 66,316
Public Bank Berhad.................... 40,000 30,421
Public Bank Berhad -- Foreign
Registered.......................... 50,000 52,368
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Sime Darby Berhad..................... 102,000 $ 133,674
Sime UEP Properties Berhad............ 68,000 87,326
Telekom Malaysia Berhad............... 35,000 130,789
----------
1,227,258
----------
NEW ZEALAND -- 1.53%
Fletcher Challenge Paper.............. 34,000 25,404
Tourism Holdings Limited(a)........... 74,428 98,602
----------
124,006
----------
PHILIPPINES -- 5.15%
Alaska Milk Corporation(a)............ 382,000 27,107
Benpres Holdings Corporation Sponsored
GDR(a).............................. 9,600 45,000
Manila Electric Company -- B Shares... 16,000 57,610
Metropolitan Bank & Trust Company..... 7,200 71,908
Music Corporation(a).................. 242,000 43,886
Philippine Long Distance Telephone
Co.................................. 1,972 60,121
Southeast Asia Cement Holdings,
Inc................................. 2,267,000 32,770
Universal Robina Corporation.......... 369,500 78,661
----------
417,063
----------
SINGAPORE -- 14.22%
Asia Pulp & Paper Company Ltd. --
Sponsored ADR(a) (with 2,560
warrants(a))........................ 12,800 268,989
DBS Land Ltd.......................... 73,000 153,330
Development Bank of Singapore
Limited -- Foreign Registered....... 12,550 160,095
Elec & Eltek International Co. Ltd.... 41,050 75,391
Fraser & Neave Ltd. Ordinary.......... 17,000 128,428
Overseas Union Bank Ltd............... 26,664 161,765
Singapore Airlines Ltd. -- Foreign
Registered.......................... 17,000 170,341
Singapore Press Holdings Ltd.......... 10,000 27,959
United Overseas Bank Ltd. -- Foreign
Registered.......................... 4,000 6,720
----------
1,153,018
----------
SOUTH KOREA -- 7.56%
Hyundai Motor Company, Ltd............ 6,432 152,539
Korea Electric Power Corp............. 2,000 83,113
Pohang Iron & Steel Company Ltd....... 1,000 121,913
Samsung Electronics Ltd. GDR.......... 2,970 96,466
Samsung Fire & Marine Insurance....... 137 159,155
----------
613,186
----------
THAILAND -- 4.01%
Advanced Info Service Public Company
Limited -- Foreign(a)............... 4,600 62,375
Bangkok Bank Public Company Ltd --
Foreign Registered(a)............... 23,800 89,071
Siam Cement Public Company Limited --
Foreign Registered(a)............... 1,200 36,449
Thai Airways International Public
Company Limited(a).................. 45,900 86,512
Thai Farmers Bank Public Company
Limited -- Foreign Registered(a).... 16,500 51,012
----------
325,419
----------
</TABLE>
3
<PAGE> 176
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
VALUE
- --------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS -- 89.59%
(Cost -- $4,790,384)(c).............. $ 7,262,359
OTHER ASSETS, LESS
LIABILITIES -- 10.41%................ 843,472
-----------
NET ASSETS -- 100%..................... $ 8,105,831
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Under the Malaysian Government policy, which
went into effect on February 15, 1999,
proceeds repatriated from the sale of
Malaysian securities will be subject to a
graduated levy. The levy ranges from zero to
ten percent of proceeds, depending on the
holding period and the time of repatriation.
(c) Cost is approximately the same for Federal
income tax purposes.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
VALUE
<S> <C> <C>
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 2,540,373
Gross unrealized depreciation............... (68,398)
-----------
Net unrealized appreciation............. $ 2,471,975
===========
Purchases and sales of securities other than short-term
obligations aggregated $986,173 and $1,054,175, respectively,
for the period ended June 30, 1999.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $4,790,384)....... $ 7,262,359
Cash........................................................ 853,837
Receivables
Fund shares sold........................................... 59,151
Dividends and Interest..................................... 13,036
Manager for expense reimbursement.......................... 987
Deferred organization expenses.............................. 23,958
Other assets................................................ 18,108
-----------
Total assets............................................... 8,231,436
-----------
LIABILITIES
Payables
Fund shares repurchased.................................... 47,673
Management fee............................................. 6,249
12b-1 service and distribution fees........................ 5,568
Other payables to related parties.......................... 4,189
Accrued expenses............................................ 61,926
-----------
Total liabilities.......................................... 125,605
-----------
NET ASSETS.................................................. $ 8,105,831
===========
CLASS A
Net asset value and redemption price per share
($2,010,200/262,454 shares outstanding)................... $ 7.66
===========
Maximum offering price per share ($7.66 x 100/94.25)*....... $ 8.13
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($3,207,204/423,620 shares outstanding).............. $ 7.57
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($2,888,427/380,292 shares outstanding).............. $ 7.60
===========
NET ASSETS CONSIST OF
Capital paid-in............................................ $ 7,620,313
Accumulated net realized loss on investments and foreign
currency transactions.................................... (1,960,418)
Undistributed net investment income........................ 1,334
Net unrealized appreciation on investments and foreign
currency transactions.................................... 2,444,602
-----------
NET ASSETS.................................................. $ 8,105,831
===========
</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%.
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 177
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $5,288 foreign taxes withheld............ $ 73,123
Interest................................................... 4,052
----------
77,175
----------
EXPENSES
Management fee............................................. $31,046
Transfer agent............................................. 10,437
Administrative services fee................................ 3,105
Custodian fees............................................. 20,190
Blue Sky fees.............................................. 14,178
Auditing and accounting fees............................... 10,295
Shareholder reports........................................ 3,993
Amortization of organization expenses...................... 4,873
Fund accounting............................................ 10,168
Trustees' fees............................................. 3,977
12b-1 service and distribution fees........................ 24,987
Legal...................................................... 11,785
Other...................................................... 1,513
----------
150,547
Expenses reimbursed by Manager............................. (53,102)
Fees paid indirectly....................................... (11,918)
----------
Net expenses........................................... 85,527
----------
NET INVESTMENT LOSS......................................... (8,352)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................. 138,133
Net change in unrealized appreciation on investments and
foreign currency transactions, net of taxes of $42,868... 2,135,308
----------
Net gain on investment transactions...................... 2,273,441
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $2,265,089
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (8,352) $ (115)
Net realized gain (loss) on investments and foreign
currency transactions................................... 138,133 (2,099,161)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 2,135,308 1,157,220
------------ ------------
Net increase (decrease) resulting from operations....... 2,265,089 (942,056)
------------ ------------
Class A distributions
Dividends from net investment income...................... -- (8,845)
Distributions from capital gains.......................... -- (1,561)
------------ ------------
Total distributions to Class A shareholders............. -- (10,406)
------------ ------------
Class B distributions
Dividends from net investment income...................... -- (3,991)
Distributions from capital gains.......................... -- (704)
------------ ------------
Total distributions to Class B shareholders............. -- (4,695)
------------ ------------
Class C distributions
Dividends from net investment income...................... -- (2,487)
Distributions from capital gains.......................... -- (439)
------------ ------------
Total distributions to Class C shareholders............. -- (2,926)
------------ ------------
Fund share transactions (Note 5)
Class A................................................... (21,706) 1,414,019
Class B................................................... 148,692 1,367,392
Class C................................................... 268,426 1,239,743
------------ ------------
Net increase resulting from Fund share transactions..... 395,412 4,021,154
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 2,660,501 3,061,071
NET ASSETS
Beginning of period....................................... 5,445,330 2,384,259
------------ ------------
END OF PERIOD............................................. $ 8,105,831 $ 5,445,330
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 1,334 $ 9,686
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 178
6
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------
for the six for the six for the six
months months months
ended ended ended
June 30, for the year ended June 30, for the year ended June 30,
(unaudited) December 31, (unaudited) December 31, (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999
SELECTED PER SHARE DATA ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 5.56 $ 6.01 $10.00 $ 5.53 $ 5.99 $10.00 $ 5.54
---------------------------------------------------------------------------------------
Loss from investment operations
Net investment income (loss)(a)...... .01(b) .03 .02 (.01)(b) (.01) -- (.01)(b)
Net gains or losses on securities
(both realized and unrealized)..... 2.09(b) (.44) (3.98) 2.05(b) (.44) (4.00) 2.07(b)
---------------------------------------------------------------------------------------
Total from investment operations..... 2.10 (.41) (3.96) 2.04 (.45) (4.00) 2.06
---------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income......... -- -- .01 -- -- -- --
In excess of net investment
income........................... -- .03 .02 -- .01 .01 --
Distributions from capital gains..... -- .01 -- -- -- -- --
---------------------------------------------------------------------------------------
Total distributions................ .04 .03 -- .01 .01 --
---------------------------------------------------------------------------------------
Net asset value, end of period........ $ 7.66 $ 5.56 $ 6.01 $ 7.57 $ 5.53 $ 5.99 $ 7.60
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Total return (%)...................... 37.77(c) (6.86)(d) (39.58)(d) 36.89(c) (7.48)(d) (39.96)(d) 37.18(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................... $2,010 $1,393 $ 692 $3,207 $2,197 $ 929 $2,888
Ratio of expenses to average net
assets(e)
With expense reimbursement (%)....... 2.59(f) 2.77 2.11 3.38(f) 3.65 2.86 3.29(f)
Without expense reimbursement (%).... 4.30(f) 6.15 10.17 5.09(f) 7.03 10.92 5.00(f)
Ratio of net investment income to
average net assets (%)(a)............ .28(f) .53 .63 (.50)(f) (.35) (.12) (.42)(f)
Portfolio turnover rate (%)........... 16 86 1 16 86 1 16
<CAPTION>
CLASS C
------------------
for the year ended
December 31,
- -------------------------------------- ------------------
1998 1997
SELECTED PER SHARE DATA ------------------
<S> <C> <C>
Net asset value, beginning of
period............................... $ 5.99 $10.00
---------------------------
Loss from investment operations
Net investment income (loss)(a)...... (.01) --
Net gains or losses on securities
(both realized and unrealized)..... (.43) (3.99)
---------------------------------------------
Total from investment operations..... (.44) (3.99)
---------------------------------------------------------------
Less distributions
Dividends
From net investment income......... -- --
In excess of net investment
income........................... .01 .02
Distributions from capital gains..... -- --
---------------------------------------------------------------------------------
Total distributions................ .01 .02
---------------------------------------------------------------------------------------
Net asset value, end of period........ $ 5.54 $ 5.99
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Total return (%)...................... (7.37)(d) (39.94)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................... $1,855 $ 764
Ratio of expenses to average net
assets(e)
With expense reimbursement (%)....... 3.54 2.74
Without expense reimbursement (%).... 6.92 10.80
Ratio of net investment income to
average net assets (%)(a)............ (.24) --
Portfolio turnover rate (%)........... 86 1
</TABLE>
(a) Net investment income (loss) 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) Total return does not reflect a sales charge.
(e) Total expenses include fees paid indirectly, if any, through an expense
offset arrangement.
(f) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 179
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends, are recorded on the ex-dividend date. If such information
is not available on the ex-dividend date, corporate actions are recorded as soon
as reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At June 30,
1999, the interest rate was 4.25%.
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
$1,951,000 as of December 31, 1998 which may be applied against any realized net
taxable gain of each succeeding fiscal year until fully utilized or until the
expiration date, whichever occurs first. The carryforward expires in 2006.
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 prior to the effectiveness
of Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
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 loss and Net realized 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
7
<PAGE> 180
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
of its capital accounts without impacting the net asset value of the Fund.
FEES PAID INDIRECTLY -- From January 1, 1999 through April 15, 1999, the Fund
had 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 from January 1, 1999 through April 15, 1999, custodian
fees were reduced by $11,918 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding taxes, 12b-1 fees, brokerage commissions,
interest, litigation and indemnification expenses, and other extraordinary
expenses) to an annual rate of 1.95% of its average net assets. For each of the
following nine years, IMI will limit these expenses to 2.50% 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, 1999, the net amount of underwriting
discount retained by IMDI was $683.
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 $2,020,
$12,305, and $10,662 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 $2,729,
$4,638 and $3,070, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 688,545 $ 3,878,302 587,033 $ 3,227,193
Issued on
reinvestment of
distributions....... -- -- 1,325 7,271
Repurchased.......... (676,530) (3,900,008) (453,035) (1,820,445)
-------- ----------- -------- ----------- ---
Net increase
(decrease).......... 12,015 $ (21,706) 135,323 $ 1,414,019
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 70,082 $ 427,163 367,268 $ 1,924,978
Issued on
reinvestment of
distributions....... -- -- 537 2,927
Repurchased.......... (44,019) (278,471) (125,329) (560,513)
-------- ----------- -------- ----------- ---
Net increase......... 26,063 $ 148,692 242,476 $ 1,367,392
======== =========== ======== =========== ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 101,585 $ 622,108 355,153 $ 1,944,016
Issued on
reinvestment of
distributions....... -- -- 432 2,364
Repurchased.......... (56,142) (353,682) (148,169) (706,637)
-------- ----------- -------- ----------- ---
Net increase......... 45,443 $ 268,426 207,416 $ 1,239,743
======== =========== ======== =========== ===
</TABLE>
03IAPF063099
8
<PAGE> 181
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY GROWTH FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
The US stock market has continued to overheated economy, the fear of inflation
perform well in 1999 and has extended its and the fear of higher interest rates.
multiyear bull market trend. The Dow Jones Although we believe that any one of these
Industrial Average has moved well past concerns can easily cause the market to
10,000, and, in our view, it now appears correct 10% or more, in our view, experi-
that investors are viewing 10,000 as the ence indicates that it is best to keep
floor to the market instead of the focused on the long-term trend of the
ceiling. Moreover, as opposed to the market, and to view corrections as buying
narrow advances the market experienced in opportunities.
recent years that singularly favored
large-cap growth stocks, our research We believe long-term investors have many
indicates that this year's move has reasons to remain optimistic. In our view,
broadened to include other sectors, such the threat of a significant rise in
as cyclical and small-cap inflation is remote. Historically,
securities. monetary growth in the US has presaged low
inflation. We believe the recent rise in
It seems that many of the concerns interest rates will likely reverse once
expressed by investors early in the year the market accepts and reflects a low-
have dissipated. According to our inflation environment. The economy
research, earnings growth has not slowed. continues to grow, which we believe should
The narrow scope of the market has support higher corporate profits. Further,
broadened. Weakness in foreign economies we believe that the increasing need for
has not caused the US economy to slow. baby boomers to invest for retirement
Rather, it seems that the strength in the should provide a positive influence on
US economy and US stock market has buoyed stock prices.
overseas economies and markets. In our
view, the fear of deflation has decreased, The Ivy Growth Fund is managed using a
and the fear of financial-market collapse three-pronged approach: the core portion
has been replaced by the fear that of the Fund invests primarily in large-cap
financial markets may be overvalued. Our US stocks, with the balance of the Fund
research also indicates that the fear of invested in US emerging growth stocks and
overvaluation, which has existed since the large-cap international stocks.
market passed 6,000, was unfounded.
The core portion of the Ivy Growth Fund
In 1999, the investment community has benefited from rising equity prices during
expressed new fears. We now witness the the first half of 1999. The Fund was
fear of an invested prima-
</TABLE>
<PAGE> 182
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
rily in high-quality, large-cap companies. The core portion continues to be
managed in accordance with a disciplined investment philosophy, the key to which
is stock selection.
The manager of the core portion makes no attempt to time the market. The
Fund is fully invested at all times and the manager ignores short-term market
volatility. The manager divides the stock market into nine broad economic
sectors, and the weightings within the core portion approximate the weighting of
each sector within the market, as represented by the S&P 500 Index.
The manager of the core portion focuses entirely on selecting the
appropriate individual securities in which the core portion invests. The manager
utilizes an equity style that is a blend of growth stocks and value stocks.
The core portion is invested in companies that, in the judgment of the
manager, have had a proven and consistent record of earnings profitability, but
whose prices do not adequately reflect the underlying profitability of the
companies. The profitability of each company is compared to the patterns of that
company's industry to account for normal cyclicality. In addition to earnings
profitability, the manager also considers dividend-paying ability, financial
strength, trading liquidity and technical readings.
Normally, the core portion maintains a below-market price to earnings ratio
and an above-market return on equity; however, individual companies within the
Fund may possess diagnostics that are different from the overall Fund due to the
dominance of the company within its industry or to the nature of the industry
itself.
The Ivy Growth Fund continues to invest a portion of its assets
(approximately 24%) in companies located outside the US. After experiencing
considerable volatility in 1998, the recovery in world equity markets during the
first half of 1999 has been a welcome relief. We believe that, in general, this
recovery has been driven by rising expectations for global economic growth and a
greater willingness by investors to accept risk.
Asian equity markets, which we believe hit bottom in the second quarter of
1999, have shown a dramatic recovery following two years of crisis. The bull
market in Europe continued during the first half of the year; however, higher
stock prices were overshadowed by weakness in the euro. Although politics have
played a role, our research indicates that low interest rates in the eurozone
(the 11 nations that have adopted the common European currency, the euro) have
been the primary factor in the currency's decline, with the gap between long-
term interest rates in the US and long-term interest rates in Germany at a
10-year high. While this has hampered dollar returns on European equities in the
first half of the year, we believe a weak euro should prove positive for
exporters.
Overall, we believe the environment for most international equity markets
is positive. Equities in Europe and Asia (non-Japan) are trading at reasonable
valuations. We believe that currencies in these areas have the potential to
appreciate relative to the dollar, and that interest rates have little risk of
rising in the coming months.
As of June 30, 1999, 32% of the Ivy Growth Fund was invested in US emerging
growth stocks. We believe the favorable business conditions that exist today,
combined with the many fine, small-growth companies from which to choose, make
this an exciting time to be an emerging growth investor. However, for most of
the last three years, valuation has been the missing ingredient. Since mid-1996,
the relative price to earnings ratios of small-company growth stocks have
followed a downward trend, as investors have been willing to pay more for
liquidity. As a result, in our view, growth is relatively cheap in the small-cap
sector of the market.
We continue to believe that the diversification strategy employed by the
Ivy Growth Fund is prudent in today's world and should reward investors for
their patience.
IVY MANAGEMENT, INC.
2
<PAGE> 183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 98.65% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 4.40%
AKZO Nobel NV(b)....................... 21,139 $ 889,442
Anglo American plc(a)(b)............... 11,639 543,922
AssiDoman AB(b)........................ 26,801 403,506
Billiton plc(b)........................ 107,624 375,346
Boliden Limited Swedish Depository
Receipt(a)(b)........................ 14,186 32,538
Broken Hill Proprietary Company
Limited(b)........................... 93,800 1,086,545
Cia Vale do Rio Doce -- Preferred
A(b)................................. 10,000 196,283
Cia Vale do Rio Doce -- Sponsored
ADR(b)............................... 30,000 588,900
Fletcher Challenge Building(b)......... 183,750 267,775
Fletcher Challenge Paper(b)............ 184,500 137,856
Georgia-Pacific Group.................. 20,000 947,500
Hanson plc Sponsored ADR(b)............ 13,700 607,938
Holderbank Financiere Glaris AG(b)..... 459 541,792
Imperial Chemical Industries plc --
Sponsored ADR(b)..................... 19,000 755,250
Nampak Limited(b)...................... 110,000 304,425
Pilkington plc(b)...................... 782,282 1,072,807
PPG Industries, Inc.................... 35,000 2,067,188
Praxair, Inc........................... 50,000 2,446,875
Rio Tinto plc(b)....................... 19,776 329,186
Stora Enso Oyj -- R Shares(b).......... 31,173 334,338
UPM-Kymmene Oyj(b)..................... 7,105 226,410
-----------
14,155,822
-----------
BUSINESS SERVICES -- 6.16%
Abacus Direct Corporation(a)........... 14,400 1,317,600
Corporate Services Group plc(b)........ 247,500 331,614
CSG Systems International, Inc.(a)..... 21,400 560,413
Dendrite International, Inc.(a)........ 38,700 1,398,038
Equifax, Inc........................... 60,000 2,141,250
FactSet Research Systems Inc........... 28,300 1,602,488
Inspire Insurance Solutions, Inc.(a)... 41,100 595,950
International Telecommunication Data
Systems, Inc.(a)..................... 39,750 636,000
Metro Networks, Inc.(a)................ 28,200 1,505,175
Metzler Group, Inc. (The)(a)........... 19,380 535,373
NOVA Corporation(a).................... 44,900 1,122,500
Paychex, Inc........................... 33,750 1,075,781
ProBusiness Services, Inc.(a).......... 21,600 774,900
Profit Recovery Group International,
Inc. (The)(a)........................ 49,300 2,332,506
SGS Societe Generale de Surveillance
Holding S.A.(a)(b)................... 1,088 1,126,779
Sykes Enterprises, Inc.(a)............. 38,900 1,298,287
Transaction Network Services,
Inc.(a).............................. 49,950 1,461,038
-----------
19,815,692
-----------
CAPITAL GOODS -- 3.38%
AlliedSignal Inc....................... 22,500 1,417,500
General Electric Company............... 24,500 2,768,500
Honeywell Inc.......................... 20,000 2,317,500
Matsushita Electric Industrial
Co.(b)............................... 34,000 660,133
Schneider S.A.(b)...................... 15,379 863,573
Tyco International Ltd................. 27,380 2,594,255
Valmet-Rauma Oyj(b).................... 21,803 258,575
-----------
10,880,036
-----------
COMPUTER EQUIPMENT &
STORAGE -- 4.00%
Dell Computer Corporation(a)........... 45,000 1,665,000
International Business Machines
Corp................................. 30,000 3,877,500
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Network Appliance, Inc.(a)............. 31,700 $ 1,771,237
Sun Microsystems, Inc.(a).............. 80,600 5,551,325
-----------
12,865,062
-----------
CONGLOMERATES -- 1.39%
Cheung Kong Holdings Ltd.(b)........... 144,500 1,285,088
Genting Berhad(b)(d)................... 140,000 534,211
Investor AB(b)......................... 102,572 1,146,158
Pacific Dunlop Limited(b).............. 365,000 526,691
Sime Darby Berhad(b)(d)................ 737,000 965,858
-----------
4,458,006
-----------
CONSUMER CYCLICAL -- 3.55%
Gap, Inc.(The)......................... 37,500 1,889,063
General Motors Corporation............. 30,000 1,980,000
Goodyear Tire & Rubber Co. (The)....... 30,000 1,764,375
Hornbach Holding AG Preferred(b)....... 6,677 285,761
Lowe's Companies, Inc.................. 31,000 1,757,313
May Department Stores Co. (The)........ 37,500 1,532,813
Tommy Hilfiger Corporation(a).......... 30,000 2,205,000
-----------
11,414,325
-----------
CONSUMER DURABLES -- 1.69%
Compagnie Generale des Etablissements
Michelin Class B(b).................. 14,400 589,112
DaimlerChrysler AG(b).................. 10,218 892,529
Electrolux AB Series B(b).............. 52,500 1,099,186
Perusahaan Otomobil Nasional
Berhad(a)(b)(d)...................... 166,000 384,421
Peugeot Citroen(b)..................... 4,703 742,061
Volkswagen AG(b)....................... 14,000 903,374
Volvo AB B Free(b)..................... 28,000 811,833
-----------
5,422,516
-----------
CONSUMER NON-DURABLES -- 9.45%
Action Performance Companies,
Inc.(a).............................. 28,700 947,100
Adidas-Salomon AG(b)................... 10,300 1,002,726
Anheuser-Busch Companies, Inc.......... 40,000 2,837,500
Avon Products, Inc..................... 30,000 1,665,000
Cadbury Schweppes plc(b)............... 54,000 344,737
Coca-Cola Company (The)................ 25,000 1,562,500
Colgate-Palmolive Company.............. 17,500 1,728,125
Compagnie Financiere Richemont AG(b)... 720 1,384,802
Cutter & Buck, Inc.(a)................. 42,300 713,813
Diageo plc -- Sponsored ADR(b)......... 23,417 1,006,931
Fraser & Neave Ltd. ORD(b)............. 130,000 576,516
Fuji Photo Film ORD(b)................. 29,000 1,097,358
Gallaher Group plc(b).................. 134,000 825,887
General Mills, Inc..................... 30,000 2,411,250
Groupe Danone(b)....................... 2,300 592,981
H. J. Heinz Company.................... 25,000 1,253,125
Nestle AG Registered(b)................ 568 1,023,400
PepsiCo, Inc........................... 55,000 2,127,813
Pernod-Ricard(b)....................... 11,100 744,063
Proctor & Gamble Company, (The)........ 20,000 1,785,000
South African Breweries plc(b)......... 20,044 174,055
South African Breweries 144A(b)........ 10,244 88,959
Swatch Group, (The) AG(b).............. 1,300 874,700
Tate & Lyle plc(b)..................... 109,000 684,690
Unilever NV(b)......................... 11,428 797,103
Vina Concha y Toro S.A. Sponsored
ADR(b)............................... 9,800 352,800
Wm. Wrigley Jr. Company................ 20,000 1,800,000
-----------
30,402,934
-----------
</TABLE>
3
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES -- 4.59%
Abercrombie & Fitch Co................. 18,600 $ 892,800
Advantage Learning Systems, Inc.(a).... 25,100 555,338
Apollo Group, Inc. -- Class A(a)....... 32,000 850,000
Blyth Industries, Inc.(a).............. 9,350 321,406
British Airways plc(b)................. 135,000 928,342
CBT Group plc -- Sponsored ADR(a)(b)... 44,800 739,200
Dollar Tree Stores, Inc.(a)............ 31,100 1,368,400
Galeries Lafayette(b).................. 2,600 344,012
Guitar Center, Inc.(a)................. 47,700 497,869
International Speedway Corp. -- Class
A.................................... 17,800 845,500
Lusomundo -- SGPS S.A. Preferred
Shares(b)............................ 51,200 521,675
Next plc(b)............................ 21,000 255,219
Premier Parks, Inc.(a)................. 56,700 2,083,725
Singapore Airlines Ltd. -- Foreign
Registered(a)(b)..................... 150,000 1,427,340
Southwest Airlines Co.................. 30,000 933,750
Speedway Motorsports, Inc.(a).......... 21,800 857,013
Sunrise Assisted Living, Inc.(a)....... 13,000 453,375
Tourism Holdings Limited(a)(b)......... 669,856 887,425
-----------
14,762,389
-----------
ELECTRONIC DESIGN
AUTOMATION -- 0.20%
Synopsys, Inc.(a)...................... 11,600 640,175
-----------
ELECTRONIC MANUFACTURING
SERVICES -- 1.10%
Elec & Eltek International Co.
Ltd.(a)(b)........................... 99,500 388,050
Flextronics International Ltd.(a)...... 26,300 1,459,650
Jabil Circuit, Inc.(a)................. 15,400 694,925
Sanmina Corporation(a)................. 13,100 993,962
-----------
3,536,587
-----------
ELECTRONICS -- 1.14%
Koninklijke Philips Electric(b)........ 12,588 1,241,695
Sharp Corporation(b)................... 116,000 1,370,500
Sony Corporation(b).................... 9,700 1,045,843
-----------
3,658,038
-----------
ENERGY -- 4.16%
Atlantic Richfield Company (ARCO)...... 20,000 1,671,250
BP Amoco plc(b)........................ 28,375 508,105
Chevron Corporation.................... 15,000 1,427,813
Elf Aquitaine S.A.(b).................. 5,762 845,574
Exxon Corporation...................... 12,500 964,063
Fletcher Challenge Energy(b)........... 133,750 362,889
Mobil Corporation...................... 30,000 2,970,000
Norsk Hydro A.S. Sponsored ADR(b)...... 18,100 692,325
Repsol S.A. -- Sponsored ADR(b)........ 24,000 487,500
Shell Transport & Trading Co. plc(b)... 113,699 852,209
Texaco Inc............................. 25,000 1,562,500
Total Fina S.A. ADR(b)................. 16,155 1,040,988
-----------
13,385,216
-----------
FINANCIAL SERVICES -- 12.66%
A.F.P. Provida S.A. -- Sponsored
ADR(b)............................... 10,300 226,600
American International Group, Inc...... 10,000 1,170,625
Arab Malaysian Corporation(a)(b)(d).... 189,000 87,537
Australia & New Zealand Banking
Group Ltd.(b)........................ 78,000 573,557
Banca Popolare di Milano(b)............ 90,000 695,180
Bank of America Corporation............ 20,100 1,473,581
Bank of Ireland(b)..................... 48,175 809,505
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Bank of New York Company, Inc.,
(The)................................ 60,000 $ 2,201,250
Bank One Corporation................... 25,000 1,489,063
Banque Nationale de Paris(b)........... 10,700 891,597
Barclay's Bank ORD(b).................. 25,858 753,652
Chase Manhattan Corporation, (The)..... 25,000 2,165,625
Compagnie Financiere de Paribas(b)..... 12,455 1,396,196
Den Danske Bank Group(b)............... 6,721 728,941
Fannie Mae............................. 30,000 2,051,250
Federal Agricultural Mortgage Corp.
Class C(a)........................... 8,000 549,000
Federal Home Loan Mortgage
Corporation.......................... 25,000 1,450,000
First Union Corporation................ 28,000 1,316,000
Fortis NL NV(b)........................ 26,414 815,839
HSBC Holdings plc(b)................... 41,497 1,513,628
ING Groep NV(b)........................ 16,156 874,715
Liberty Life Association of Africa
Limited(b)........................... 29,455 377,320
Litchfield Financial Corp.............. 43,500 736,781
Mellon Bank Corporation................ 45,000 1,636,875
Merrill Lynch & Co., Inc............... 17,500 1,398,906
Morgan Stanley Dean Witter & Co........ 20,000 2,050,000
National Australia Bank Ltd.(b)........ 42,000 695,018
National Westminster Bank plc(a)(b).... 31,500 667,342
Nava Finance Public Company Limited-
Foreign(a)(b)(c)..................... 40,000 --
Overseas Union Bank Ltd.(b)............ 226,600 1,091,427
Providian Financial Corporation........ 20,000 1,870,000
Scor S.A.(b)........................... 6,000 297,625
Societe Generale(b).................... 4,700 828,349
Unidanmark A/S(b)...................... 7,800 520,594
United Overseas Bank Ltd. -- Foreign
Registered(b)........................ 60,000 419,391
United Technologies Corporation........ 25,000 1,792,188
Wells Fargo Corporation................ 41,600 1,778,400
Westpac Banking Corp. Ltd.(b).......... 84,000 544,894
Willis Lease Finance Corporation(a).... 48,200 786,263
-----------
40,724,714
-----------
HEALTHCARE -- 8.59%
Abbott Laboratories.................... 65,000 2,957,500
Alkermes, Inc.(a)...................... 20,000 462,500
American Home Products Corporation..... 45,000 2,587,500
Bristol-Myers Squibb Company........... 35,000 2,465,313
ChiRex Inc.(a)......................... 43,600 1,400,650
Eclipsys Corporation(a)................ 33,400 799,513
First Consulting Group, Inc.(a)........ 69,200 735,250
Health Management Associates,
Inc.(a).............................. 25,450 286,313
Johnson & Johnson...................... 35,000 3,430,000
Medicis Pharmaceutical Corporation --
Class A(a)........................... 47,200 1,197,700
MedQuist Inc.(a)....................... 34,500 1,509,375
Merck & Co, Inc........................ 40,000 2,960,000
Merck KGaA(a)(b)....................... 25,548 827,294
Novartis AG Registered(a)(b)........... 846 1,235,323
Pharmacyclics, Inc.(a)................. 8,000 224,000
Renal Care Group, Inc.(a).............. 40,600 1,050,525
Superior Consultant Holdings
Corporation(a)....................... 17,400 429,563
Schering-Plough Corporation............ 35,000 1,855,000
Sepracor, Inc.(a)...................... 8,700 706,875
VISX, Incorporated(a).................. 6,400 506,800
-----------
27,626,994
-----------
</TABLE>
4
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL -- 0.40%
Clipsal Industries Limited(b)...... 152,000 $ 235,600
Hunter Douglas NV(b)............... 19,800 679,959
Societe Generale d'Enterprises
S.A.(b).......................... 7,500 363,523
------------
1,279,082
------------
INTERNET & ELECTRONIC
COMMERCE -- 3.80%
About.com, Inc.(a)................. 8,100 420,188
America Online, Inc.(a)............ 40,000 4,420,000
At Home Corporation -- Series
A(a)............................. 11,200 604,100
Broadcast.com Inc.(a).............. 3,300 440,756
CNET, Inc.(a)...................... 15,800 910,475
Inktomi Corporation(a)............. 6,438 840,561
Network Solutions Inc.(a).......... 6,000 474,750
Pilot Network Services, Inc.(a).... 50,000 490,625
QRS Corporation(a)................. 19,000 1,482,000
Sterling Commerce, Inc............. 16,100 587,650
Transactions Systems Architects,
Inc.............................. 26,400 1,029,600
WebTrends Corporation(a)........... 11,000 507,375
------------
12,208,080
------------
NETWORK EQUIPMENT AND
SOFTWARE -- 6.16%
American Power Conversion
Corporation(a)................... 92,400 1,859,550
Cisco Systems, Inc.(a)............. 241,500 15,576,750
Concord Communications, Inc.(a).... 14,200 639,000
Micromuse Inc.(a).................. 21,200 1,057,350
Visual Networks, Inc.(a)........... 21,500 688,000
------------
19,820,650
------------
OFFICE EQUIPMENT -- 0.97%
Canon Inc(a)(b).................... 26,000 747,545
Xerox Corporation.................. 40,000 2,362,500
------------
3,110,045
------------
PROPERTY DEVELOPERS AND
INVESTMENT -- 0.08%
Sime UEP Properties Berhad(b)(d)... 200,000 256,842
------------
SEMICONDUCTORS -- 3.65%
Altera Corporation(a).............. 70,000 2,576,875
Intel Corporation.................. 76,000 4,522,000
Linear Technology Corporation...... 16,000 1,076,000
Maxim Integrated Products,
Inc.(a).......................... 20,800 1,383,200
Rambus Inc.(a)..................... 8,000 737,500
Texas Instruments Incorporated..... 10,000 1,450,000
------------
11,745,575
------------
SEMICONDUCTOR EQUIPMENT -- 1.88%
Applied Materials, Inc.(a)......... 27,500 2,031,563
Etec Systems.(a)................... 12,800 425,600
Novellus Systems, Inc.(a).......... 40,000 2,730,000
Photronics, Inc.(a)................ 13,700 335,650
Teradyne, Inc.(a).................. 7,400 530,950
------------
6,053,763
------------
SOFTWARE -- 3.17%
BMC Software Inc.(a)............... 7,000 378,000
Citrix Systems, Inc.(a)............ 26,000 1,469,000
Legato Systems, Inc.(a)............ 16,900 975,975
Microsoft Corporation(a)........... 66,600 6,006,488
New Era of Networks, Inc.(a)....... 11,700 514,068
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Peregrine Systems, Inc.(a)......... 14,800 $ 380,175
Veritas Software Corp.(a).......... 5,050 479,434
------------
10,203,140
------------
SYSTEM INTEGRATORS -- 0.73%
International Network
Services(a)...................... 25,950 1,047,730
Whittman-Hart, Inc.(a)............. 41,300 1,311,275
------------
2,359,005
------------
TELECOMMUNICATION
EQUIPMENT -- 3.13%
Alcatel S.A.(a)(b)................. 5,700 802,381
Comverse Technology Inc.(a)........ 21,150 1,596,825
E-Tek Dynamics, Inc(a)............. 12,300 585,019
Lucent Technologies Inc............ 33,165 2,236,565
Tellabs, Inc.(a)................... 36,200 2,445,762
Uniphase Corporation(a)............ 7,500 1,245,000
WinStar Communications, Inc.(a).... 24,000 1,170,000
------------
10,081,552
------------
TELECOMMUNICATION
SERVICES -- 1.07%
Global Crossing Ltd.(a)............ 16,292 694,446
Koninklijke KPN NV(b).............. 17,761 833,396
Metromedia Fiber Network,
Inc.(a).......................... 14,700 528,280
Nextel Communications, Inc.(a)..... 27,600 1,385,175
------------
3,441,297
------------
UTILITIES -- 7.15%
ALLTEL Corporation................. 45,000 3,217,500
AT&T Corporation................... 47,500 2,651,094
Bell Atlantic Corporation.......... 35,000 2,288,125
BellSouth Corporation.............. 45,000 2,109,375
Centrais Electricas Brasileiras
S.A. (Electrobras)
Preferred(b)..................... 10,000,000 201,358
Cia de Telecomunicaciones de Chile
S.A. Sponsored ADR(b)............ 10,625 262,968
Duke Energy Corporation............ 25,000 1,359,375
Endesa S.A. -- Sponsored ADR(b).... 37,600 799,000
Portugal Telecom S.A. -- Sponsored
ADR(b)........................... 10,800 444,825
PowerGen plc(b).................... 68,210 733,820
SBC Communications Inc............. 45,000 2,610,000
Southern Company, (The)............ 60,000 1,590,000
Suez Lyonnaise des Eaux(b)......... 5,899 1,064,000
Telecom Corporation of New Zealand
Limited(b)....................... 119,000 510,790
Telecomunicacoes Brasileiras S.A.
(Telebras) -- Sponsored ADR
Preferred Block(b)............... 18,355 1,655,391
Telefonica de Argentina S.A. --
Sponsored ADR(b)................. 9,100 285,512
Telefonica S.A. -- Sponsored
ADR(b)........................... 8,187 1,204,441
------------
22,987,574
------------
TOTAL INVESTMENTS -- 98.65%
(Cost -- $209,157,992)(e)........ 317,295,111
OTHER ASSETS, LESS
LIABILITIES -- 1.35%............. 4,356,012
------------
NET ASSETS -- 100%................. $321,651,123
============
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Foreign security
</TABLE>
5
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- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
<S> <C> <C>
(c) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
(d) Under the Malaysian Government policy,
which went into effect on February 15,
1999, proceeds repatriated from the sale of
Malaysian securities will be subject to a
graduated levy. The levy ranges from zero
to ten percent of proceeds, depending on
the holding period and the time of
repatriation.
(e) Cost is approximately the same for Federal
income tax purposes.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
<S> <C> <C>
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial
statement and Federal income tax purposes is as follows:
Gross unrealized appreciation.............. $116,130,884
Gross unrealized depreciation.............. (7,993,765)
------------
Net unrealized appreciation............ $108,137,119
============
Purchases and sales of securities other than short-term
obligations aggregated $79,833,479 and $108,778,331,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
6
<PAGE> 187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $209,157,992)..... $317,295,111
Cash........................................................ 5,714,275
Receivables
Investments sold.......................................... 246,578
Fund shares sold.......................................... 8,219
Dividends and Interest.................................... 448,579
Other assets................................................ 36,102
------------
Total assets.............................................. 323,748,864
------------
LIABILITIES
Payables
Investments purchased..................................... 504,064
Fund shares repurchased................................... 1,139,808
Management fee............................................ 217,204
12b-1 service and distribution fees....................... 20,701
Other payables to related parties......................... 96,942
Accrued expenses............................................ 119,022
------------
Total liabilities......................................... 2,097,741
------------
NET ASSETS.................................................. $321,651,123
============
CLASS A
Net asset value and redemption price per share
($314,550,726/14,599,797 shares outstanding).............. $ 21.54
============
Maximum offering price per share ($21.54 X 100/94.25)*...... $ 22.85
============
CLASS B
Net asset value, offering price and redemption price** per
share ($6,447,459/305,026 shares outstanding)............. $ 21.14
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($284,626/13,700 shares outstanding)................ $ 20.78
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($368,312/17,077 shares outstanding)................ $ 21.57
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $186,911,464
Undistributed net realized gain on investments and foreign
currency transactions................................... 26,402,479
Undistributed net investment income....................... 285,765
Net unrealized appreciation on investments and foreign
currency transactions................................... 108,051,415
------------
NET ASSETS.................................................. $321,651,123
============
</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>
The accompanying notes are an integral part of the financial statements.
<PAGE> 188
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IVY GROWTH FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 2,351,851
Interest.................................................. 103,635
-----------
2,455,486
-----------
EXPENSES
Management fee............................................ $1,321,468
Transfer agent............................................ 388,328
Administrative services fee............................... 155,467
Custodian fees............................................ 46,114
Blue Sky fees............................................. 14,238
Auditing and accounting fees.............................. 26,589
Shareholder reports....................................... 20,464
Fund accounting........................................... 57,014
Trustees' fees............................................ 3,977
12b-1 service and distribution fees....................... 111,026
Legal..................................................... 14,434
Other..................................................... 10,199
-----------
Total expenses........................................ 2,169,318
-----------
NET INVESTMENT INCOME....................................... 286,168
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 26,471,010
Net change in unrealized appreciation on investments and
foreign currency transactions,
net of taxes of $83,011................................. (1,537,100)
-----------
Net gain on investment transactions................... 24,933,910
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $25,220,078
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, YEAR ENDED
(UNAUDITED) DECEMBER 31,
1999 1998
---------------------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income..................................... $ 286,168 $ 60,787
Net realized gain (loss) on
Investments and foreign currency transactions........... 26,471,010 1,904,081
Written options......................................... -- (771,173)
Net change in unrealized appreciation on
investments and foreign currency transactions........... (1,537,100) 40,776,096
------------ ------------
Net increase resulting from operations................ 25,220,078 41,969,791
------------ ------------
Class A distributions
Dividends
From net investment income.............................. -- (237,344)
In excess of net investment income...................... -- (24,015)
Distributions
From capital gains...................................... -- (6,250,567)
------------ ------------
Total distributions to Class A shareholders........... -- (6,511,926)
------------ ------------
Class B distributions
Dividends
From net investment income.............................. -- (3,953)
In excess of net investment income...................... -- (400)
Distributions
From capital gains...................................... -- (104,113)
------------ ------------
Total distributions to Class B shareholders........... -- (108,466)
------------ ------------
Class C distributions
Dividends
From net investment income.............................. -- (201)
In excess of net investment income...................... -- (20)
Distributions
From capital gains...................................... -- (5,297)
------------ ------------
Total distributions to Class C shareholders........... -- (5,518)
------------ ------------
Advisor Class distributions
Dividends
From net investment income.............................. -- (255)
In excess of net investment income...................... -- (26)
Distributions
From capital gains...................................... -- (6,708)
------------ ------------
Total distributions to Advisor Class shareholders..... -- (6,989)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (28,619,610) (36,404,872)
Class B................................................... 1,113,505 (5,127)
Class C................................................... 374 (167,500)
Advisor Class............................................. (5,571) 349,248
------------ ------------
Net decrease resulting from Fund share transactions... (27,511,302) (36,228,251)
------------ ------------
TOTAL DECREASE IN NET ASSETS................................ (2,291,224) (891,359)
NET ASSETS
Beginning of period....................................... 323,942,347 324,833,706
------------ ------------
END OF PERIOD............................................. $321,651,123 $323,942,347
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 285,765 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 190
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 19.88 $ 17.80 $ 17.76 $ 16.75 $ 13.91 $ 15.14
------------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income............ .02(a) .01 .02 .02(b) .05(b) .05 (b)
Net gains or losses on securities
(both realized and
unrealized).................... 1.64(a) 2.49 1.98 2.86 3.73 (.49)
------------------------------------------------------------------------------------------
Total from investment
operations..................... 1.66 2.50 2.00 2.88 3.78 (.44)
------------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income..... -- .02 .02 .02 .02 .05
In excess of net investment
income....................... -- -- .13 .11 -- --
Distributions
From capital gains............. -- .40 1.81 1.74 .89 .74
In excess of capital gains..... -- -- -- -- .03 --
------------------------------------------------------------------------------------------
Total distributions............ -- .42 1.96 1.87 .94 .79
------------------------------------------------------------------------------------------
Net asset value, end of period..... $ 21.54 $ 19.88 $ 17.80 $ 17.76 $ 16.75 $ 13.91
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Total return (%)................... 8.35(c) 14.05(d) 11.69(d) 17.22(d) 27.33(d) (2.97)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)....................... $ 314,551 $ 318,444 $ 320,000 $ 314,908 $ 289,954 $ 231,446
Ratio of expenses to average net
assets
With expense reimbursement (%)... -- -- -- 1.45 1.59 1.38
Without expense reimbursement
(%)............................ 1.38(e) 1.38 1.38 1.45 1.60 1.49
Ratio of net investment income to
average net assets (%)........... .20(e) .03 .13 .13(b) .32(b) .32 (b)
Portfolio turnover rate (%)........ 26 59 39 72 41 39
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
(unaudited) December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 19.60 $ 17.72 $ 17.69 $ 16.75 $ 13.91 $ 15.14
------------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income............ (.08)(a) (.16) (.14) (.13)(b) (.08)(b) (.04)(b)
Net gains or losses on securities
(both realized and
unrealized).................... 1.62(a) 2.46 1.96 2.81 3.71 (.54)
------------------------------------------------------------------------------------------
Total from investment
operations..................... 1.54 2.30 1.82 2.68 3.63 (.58)
------------------------------------------------------------------------------------------
Less distributions
Dividends
From net investment income..... -- .02 -- -- -- --
In excess of net investment
income....................... -- -- .07 -- -- --
Distributions
From capital gains............. -- .40 1.72 1.74 .73 .52
In excess of capital gains..... -- -- -- -- .06 .13
------------------------------------------------------------------------------------------
Total distributions............ -- .42 1.79 1.74 .79 .65
------------------------------------------------------------------------------------------
Net asset value, end of period..... $ 21.14 $ 19.60 $ 17.72 $ 17.69 $ 16.75 $ 13.91
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Total return (%)................... 7.86(c) 12.99(d) 10.69(d) 16.02(d) 26.13(d) (3.90)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)....................... $ 6,447 $ 4,889 $ 4,433 $ 3,850 $ 2,669 $ 1,399
Ratio of expenses to average net
assets
With expense reimbursement (%)... -- -- -- 2.37 2.55 2.34
Without expense reimbursement
(%)............................ 2.34(e) 2.32 2.30 2.37 2.56 2.45
Ratio of net investment income to
average net assets (%)........... (.76)(e) (.90) (.79) (.79)(b) (.64)(b) (.64)(b)
Portfolio turnover rate (%)........ 26 59 39 72 41 39
</TABLE>
<PAGE> 191
11
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
(unaudited) December 31, to December 31,
--------------------------------------------------------
1999 1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
$ 19.27 $ 17.47 $ 17.59 $ 18.46
--------------------------------------------------------
(.08)(a) (.16) (.07) (.06)(b)
1.59(a) 2.38 1.86 1.02
--------------------------------------------------------
1.51 2.22 1.79 .96
--------------------------------------------------------
-- .02 -- --
-- -- .13 .09
-- .40 1.78 1.74
-- -- -- --
--------------------------------------------------------
-- .42 1.91 1.83
--------------------------------------------------------
$ 20.78 $ 19.27 $ 17.47 $ 17.59
--------------------------------------------------------
--------------------------------------------------------
7.84(c) 12.72(d) 10.58(d) 5.20(c)
$ 285 $ 263 $ 400 $ 90
-- -- -- 2.44(e)
2.44(e) 2.53 2.33 2.44(e)
(.86)(e) (1.11) (.82) (.86)(b)(e)
26 59 39 72
</TABLE>
- --------------------------------------
(a) Based on average shares outstanding
(b) Net investment income (loss) is net of
expenses reimbursed by Manager.
(c) Total return represents aggregate total
return and does not reflect a sales
charge.
(d) Total return does not reflect a sales
charge.
(e) Annualized
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------
for the six for the period
months ended April 30, 1998
June 30, (commencement)
(unaudited) to December 31,
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
$ 19.91 $ 20.36
------------------------------------
.02(a) .03
1.64(a) (.06)
------------------------------------
1.66 (.03)
------------------------------------
-- .02
-- --
-- .40
-- --
------------------------------------
-- .42
------------------------------------
$ 21.57 $ 19.91
------------------------------------
------------------------------------
8.34(c) (.14)(c)
$ 368 $ 347
-- --
1.41(e) 1.18(e)
.17(e) .24(e)
26 59
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE> 192
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
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 on which
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, or on the basis of
dealer quotes. 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, 1999,
securities valued by the Valuation Committee have no value 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. Corporate actions,
including dividends, are recorded on ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may invest in option contracts for the purpose of increasing
or decreasing its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect the value of the
Fund's securities. An option is a right to buy or sell a particular security at
a specified price within a limited period of time. The buyer of the option, in
return for a premium paid to the seller, has the right to buy, in the case of a
call option, or sell, in the case of a put option, the underlying security of
the contract. An option on a stock index gives the purchaser the right to
receive from the seller cash equal to the difference between the closing price
of the index and the exercise price of the option.
When the Fund writes or purchases an option, an amount equal to the premium
received or paid by the Fund is recorded as a liability or an asset and is
subsequently adjusted to the current market value of the option written or
purchased. Premiums received or paid from writing or purchasing options which
expire unexercised are treated by the Fund on the expiration date as realized
gains or losses. The difference between the premium and the amount paid or
received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the cost of the purchase
or proceeds of the sale in determining whether the Fund has realized a
12
<PAGE> 193
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
gain or loss on the transaction. For options on indices, cash settlement by the
Fund is required if the option is exercised. The Fund, as writer of an option,
has no control over whether the underlying securities may be sold (call) or
purchased (put) and as a result bears the market risk of an unfavorable change
in the price of the securities underlying the written option. Exchange traded
written options are valued daily at the last sale price or, in the absence of a
sale, at the calculated mean of the bid and asked prices, subject to certain
reasonability criteria on the spread between the bid and asked prices.
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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, passive foreign investment companies, and certain securities sold at
a loss. As a result, Net investment income and Net realized gain on investments
and foreign currency transactions for a reporting period may differ
significantly in amount and character from distributions during such period.
Accordingly, the Fund may make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .85% of the
Fund's first $350 million in average net assets and .75% of the Fund's average
net assets in excess of $350 million.
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, 1999, the net amount of underwriting
discount retained by IMDI was $4,693.
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
13
<PAGE> 194
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
for purposes of advertising and marketing shares of the Fund. Such fees of
$82,497, $27,124 and $1,405, 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 $380,150, $7,100, $508 and $570, 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
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 188,494 $ 3,810,459 865,388 $ 15,843,739
Issued on
reinvestment of
distributions....... -- -- 305,995 5,966,659
Repurchased.......... (1,603,765) (32,430,069) (3,129,049) (58,215,270)
---------- ------------ ---------- ------------ ---
Net decrease......... (1,415,271) $(28,619,610) (1,957,666) $(36,404,872)
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 109,270 $ 2,175,518 87,314 $ 1,611,127
Issued on
reinvestment of
distributions....... -- -- 4,946 95,108
Repurchased.......... (53,703) (1,062,013) (92,930) (1,711,362)
---------- ------------ ---------- ------------ ---
Net increase/
(decrease).......... 55,567 $ 1,113,505 (670) $ (5,127)
========== ============ ========== ============ ===
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
- ------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 3,161 $ 61,031 9,823 $ 171,281
Issued on
reinvestment of
distributions....... -- -- 176 3,330
Repurchased.......... (3,097) (60,657) (19,282) (342,111)
-------- --------- --------- ---------- ---
Net increase/
(decrease).......... 64 $ 374 (9,283) $ (167,500)
======== ========= ========= ========== ===
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED APRIL 30, 1998
JUNE 30, 1999 (COMMENCEMENT)
(UNAUDITED) TO DECEMBER 31, 1998
- ------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sold................. 2,293 $ 46,524 20,466 $ 408,401
Issued on
reinvestment of
distributions....... -- -- 358 6,989
Repurchased.......... (2,627) (52,095) (3,413) (66,142)
-------- --------- --------- ---------- ---
Net (decrease)/
increase............ (334) $ (5,571) 17,411 $ 349,248
======== ========= ========= ========== ===
</TABLE>
14
<PAGE> 195
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 196
03IGFX063099
<PAGE> 197
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY EUROPEAN OPPORTUNITIES FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
We would like to take this opportunity to to their market capitalization. The Fund
welcome you as a shareholder of the Ivy attempts to capitalize on what the manager
European Opportunities Fund. The Fund believes are the best stock opportunities
typically invests at least 65% of its available. And the final component is what
total assets in the equity securities of is known as growth at a reasonable price
European companies, which may include (GARP)--it is important not to overpay for
companies operating in Europe's emerging a stock given its anticipated level of
markets; small-capitalization companies in growth.
the more developed markets of Europe; and
large European companies or a company of In the period since the Fund was
any size that, in the opinion of the Fund launched, European equity markets have
manager, provides special investment proved lackluster, with the Morgan Stanley
opportunities. Capital International Europe Index down
3.5% in US-dollar terms. The weakness of
The Fund's objective is to achieve the euro, the new common currency adopted
high growth. In pursuing this objective, by 11 European nations, continued to
the manager employs a distinctive hinder performance for non-European
bottom-up, value-conscious approach, with investors, as it fell to further lows.
an eye toward the growth dynamics of each Despite the European Central Bank's 50
company. basis point cut in interest rates in April
and the resolution of the crisis in
There are four key components to this Kosovo, the currency's weakness was
strategy. The first component is exacerbated by permission granted to Italy
identifying companies that the Fund by the European Union to overshoot its
manager believes are significantly budget deficit target for 1999, as well as
undervalued relative to their history, poor economic data early in the period.
sector, global peer companies or the However, during June, we believe signs
overall market, whichever applies. The began to emerge of an improving European
Fund manager refers to the second facet of economic background. German GDP for the
the strategy as "contrariety." He believes first quarter of 1999 came in at a
the time to sell is when everyone loves a better-than-expected 0.4%, and the German
stock and the time to buy is when it is government has announced a tax reform and
friendless. The third component entails savings package for 2000 and 2001.
being opportunistic. Whenever possible, Overall, the package was surprisingly
the Fund manager seeks out companies that tough. We believe, however, it is being
he believes should provide the highest viewed positively by analysts, and not
returns, without regard just for the German market,
</TABLE>
<PAGE> 198
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
which has been considered a major drag on European markets year to date, but
also for the other nations of the European Union.
There were two major features in European equity markets during the period.
First, there was a switch from growth and momentum stocks to cyclical and
business-sensitive stocks in their early stages, although this tapered off as
the period progressed. Second, many new issues came to market, notably in
Germany. This inevitably led to some oversupply, and a number of issues were
either pulled or had their issue price cut significantly to ensure success.
Of the four key components of the Fund's strategy, GARP has been used to
the greatest advantage. The Fund's manager has generally focused on the
better-quality companies that are expected to have more durable growth in the
future.
On June 30, 1999, the Ivy European Opportunities Fund held 25 stocks. As
the year progresses, the number of stocks is expected to increase. It is
expected that, in time, the Fund will own 35-45 stocks.
Looking forward, the Fund manager believes the European economic background
should continue to improve, providing a positive impetus for European equity
markets. While the euro has continued to languish, it appears to be close to
bottoming out and the Fund manager believes it could be stronger by the end of
1999. The Fund manager will continue to be selective and opportunistic in his
approach to stock selection, as well as seeking quality and value.
During the period May 3, 1999 (commencement) to June 30, 1999, the Ivy
European Opportunities Fund invested in securities of 11 companies in their
initial public offering (IPO). The Fund's investment in IPO securities had a
favorable impact on the Fund's performance. The Fund's Class A total return
during the period was 71.03%, of which 51.35% resulted from the impact of the
IPOs.
The availability of IPO securities is limited. As the Fund's assets
increase, IPO securities likely will become a smaller component of overall Fund
performance. Future performance of the Fund, therefore, likely will be lower
than during the current period. Past performance is no guarantee of future
results.
IVY MANAGEMENT, INC.
2
<PAGE> 199
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 72.48% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
EUROPE -- 68.38%
- ----------------------------------------
FRANCE -- 7.48%
Integra S.A.(a).......................... 1,800 $ 53,276
Technip S.A.............................. 250 28,051
Transiciel S.A........................... 200 21,244
----------
102,571
----------
GERMANY -- 16.56%
GFT Technologies AG(a)................... 3,000 169,851
Intershop Communications AG(a)........... 100 24,029
Zapf Creation AG(a)...................... 1,400 33,207
----------
227,087
----------
GREECE -- 3.71%
Elgeka S.A.(a)(b)........................ 1,230 10,155
Interamerican Insurance Co.(b)........... 1,830 40,678
----------
50,833
----------
ITALY -- 3.56%
Monte dei Paschi di Siena SpA(a)......... 11,000 48,779
----------
NETHERLANDS -- 3.48%
IHC Caland NV............................ 618 24,218
Koninklijke KPN NV....................... 500 23,461
----------
47,679
----------
NORWAY -- 3.53%
EniTel ASA(a)(b)......................... 1,200 17,530
Tandberg Television ASA(a)............... 3,000 30,868
----------
48,398
----------
PORTUGAL -- 3.83%
ParaRede, SGPS(a)........................ 6,000 52,595
----------
SPAIN -- 8.78%
Telefonica Publicidad e Informacion,
S.A.(a)................................ 5,000 99,776
TelePizza, S.A.(a)....................... 4,000 20,708
----------
120,484
----------
SWEDEN -- 3.04%
Ericsson LM Telephone Series B Free...... 1,300 41,668
----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
SWITZERLAND -- 8.35%
Charles Voegele Holding AG(a)............ 250 $ 37,791
Distefora Holding AG(a).................. 200 20,584
Selecta Group (The)...................... 65 25,923
Swisslog Holding AG...................... 250 30,273
----------
114,571
----------
UNITED KINGDOM -- 6.06%
Garban plc............................... 10,000 47,289
Sun Life and Provincial Holdings plc..... 5,000 35,841
----------
83,130
----------
NORTH AMERICA -- 4.10%
- ----------------------------------------
UNITED STATES -- 4.10%
Global TeleSytems Group, Inc.(a)......... 400 32,400
MIH Ltd. Class A(a)...................... 900 23,850
----------
56,250
----------
TOTAL INVESTMENTS -- 72.48%
(Cost -- $847,055)(c).................. 994,045
OTHER ASSETS, LESS
LIABILITIES -- 27.52%.................. 377,460
----------
NET ASSETS -- 100%....................... $1,371,505
==========
(a) Non-income producing security
(b) When-issued security
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation........ $ 164,199
Gross unrealized depreciation........ (17,209)
----------
Net unrealized appreciation...... $ 146,990
==========
Purchases and sales of securities other than short-term
obligations aggregated $1,591,631 and $1,040,406,
respectively, for the period ended June 30, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE> 200
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $847,055)......... $ 994,045
Cash........................................................ 356,320
Receivables
Investments sold.......................................... 120,344
Dividends and Interest.................................... 763
Manager for expense reimbursement......................... 17,674
Deferred offering costs..................................... 49,298
----------
Total assets.............................................. 1,538,444
----------
LIABILITIES
Payables
Investments purchased..................................... 93,273
Management fee............................................ 804
12b-1 service and distribution fees....................... 119
Other payables to related parties......................... 56,337
Accrued expenses............................................ 16,406
----------
Total liabilities......................................... 166,939
----------
NET ASSETS.................................................. $1,371,505
==========
CLASS A
Net asset value and redemption price per share
($352,990/20,623 shares outstanding)...................... $ 17.12
==========
Maximum offering price per share ($17.12 x 100/94.25)*...... $ 18.16
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($163,103/9,530 shares outstanding)................. $ 17.11
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($17/1 shares outstanding).......................... $ 17.08
==========
CLASS I
Net asset value, offering price and redemption price per
share ($17/1 shares outstanding).......................... $ 17.08
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($855,378/50,002 shares outstanding)................ $ 17.11
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 930,925
Undistributed net realized gain on investments and foreign
currency transactions................................... 300,643
Undistributed net investment income....................... 839
Net unrealized appreciation on investments and foreign
currency transactions................................... 139,098
----------
NET ASSETS.................................................. $1,371,505
==========
</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>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 201
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 3, 1999 (COMMENCEMENT)
TO JUNE 30, 1999(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $291 foreign taxes withheld............. $ 1,782
Interest.................................................. 1,554
--------
3,336
--------
EXPENSES
Management fee............................................ $ 1,242
Transfer agent............................................ 26
Administrative services fee............................... 124
Custodian fees............................................ 10,000
Amortization of offering costs............................ 5,695
Fund accounting........................................... 1,655
Trustees' fees............................................ 421
12b-1 service and distribution fees....................... 122
Legal..................................................... 5,991
--------
25,276
Expenses reimbursed by Manager............................ (22,779)
--------
Net expenses............................................ 2,497
--------
NET INVESTMENT INCOME....................................... 839
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 300,643
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 139,098
--------
Net gain on investment transactions..................... 439,741
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $440,580
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 3, 1999 (COMMENCEMENT)
TO JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 839
Net realized gain on investments and foreign currency
transactions............................................ 300,643
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 139,098
----------
Net increase resulting from operations.................. 440,580
----------
Fund share transactions (Note 4)
Class A................................................... 309,698
Class B................................................... 121,182
Class C................................................... 10
Class I................................................... 10
Advisor Class............................................. 500,025
----------
Net increase resulting from Fund share transactions..... 930,925
----------
NET ASSETS AT END OF PERIOD................................. $1,371,505
==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 839
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 202
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B ADVISOR CLASS
-----------------------------------------------------------------
For the period For the period For the period
May 4, 1999 May 24, 1999 May 3, 1999
(commencement) (commencement) (commencement)
to June 30 to June 30 to June 30
(unaudited) (unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA 1999 1999 1999
-----------------------------------------------------------------
Net asset value, beginning of period...................... $10.01 $10.21 $10.01
-----------------------------------------------------------------
Income from investment operations
Net investment income(a)................................ .01(b) --(b) .02(b)
Net gains on securities (both realized and
unrealized)........................................... 7.10(b) 6.90(b) 7.08(b)
-----------------------------------------------------------------
Total from investment operations........................ 7.11 6.90 7.10
-----------------------------------------------------------------
Net asset value, end of period............................ $17.12 $17.11 $17.11
-----------------------------------------------------------------
-----------------------------------------------------------------
Total return(%)(c)........................................ 71.03 67.58 70.93
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................. $ 353 $ 163 $ 855
Ratio of expenses to average net assets(%)
With expense reimbursement(%)(d)........................ 2.14 2.86 1.84
Without expense reimbursement(%)(d)..................... 20.48 21.20 20.18
Ratio of net investment (loss) to average net
assets(%)(a)(d)......................................... .55 (.18) .85
Portfolio turnover rate(%)................................ 128 128 128
</TABLE>
(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
6
<PAGE> 203
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy European Opportunities 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, Class I 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 on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked prices in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities, or on the basis of
dealer quotes. 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, 1999,
there were no Board valued 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. Corporate actions,
including dividends are recorded on the ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At June 30,
1999, the interest rate was 4.25%.
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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 OFFERING COSTS -- Offering costs are being amortized over a one year
period beginning May 3, 1999, the date the Fund commenced operations. Offering
costs have been paid by Mackenzie Investment Management Inc. (MIMI) and will be
reimbursed by the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI 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. For each of the following
nine years, IMI will limit these expenses to 2.50% 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
7
<PAGE> 204
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
certain out-of-pocket expenses. Such fees and expenses are reflected as
Administrative services fee and Fund accounting in the Statement of Operations.
At June 30, 1999 MIMI owned 62.38% of the Fund's shares outstanding.
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, 1999, the net amount of underwriting
discount retained by IMDI was $74.
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 $32 and
$90 for Class A and Class B, 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 $8, $3 and $15 for Class A, Class B 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, Class I and Advisor Class
were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 4, 1999
(COMMENCEMENT)
TO JUNE 30, 1999
- -----------------------------------------------------------------
CLASS A SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 20,623 $309,698
------ --------
Net increase.................................. 20,623 $309,698
====== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 24, 1999
(COMMENCEMENT)
TO JUNE 30, 1999
- -----------------------------------------------------------------
CLASS B SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 9,530 $121,182
------ --------
Net increase.................................. 9,530 $121,182
====== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT)
TO JUNE 30, 1999
- -----------------------------------------------------------------
CLASS C SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 1 $ 10
------ --------
Net increase.................................. 1 $ 10
====== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT)
TO JUNE 30, 1999
- -----------------------------------------------------------------
CLASS I SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 1 $ 10
------ --------
Net increase.................................. 1 $ 10
====== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT)
TO JUNE 30, 1999
- -----------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 50,002 $500,025
------ --------
Net increase.................................. 50,002 $500,025
====== ========
</TABLE>
Effective June 21, 1999, orders for the purchase of shares of the Fund are no
longer being accepted.
8
03IEOF063099
<PAGE> 205
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 Highway
Boca Raton, Florida 33432-6139
800.456.5111
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
TRANSFER AGENT
Ivy Mackenzie Services Corp.
PO Box 3022
Boca Raton, Florida 33431-0922
800.777.6472
AUDITORS
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
[Ivy Mackenzie Logo]
[Ivy Funds Logo]
June 30, 1999 IVY INTERNATIONAL STRATEGIC BOND FUND
MARKET COMMENTARY
<TABLE>
<S> <C>
Bond markets in developed countries showed countries' exports are heavily tied to
disappointing performance for the first those and other commodities. Much of the
half of 1999. The Salomon Smith Barney return from emerging markets was driven by
World Government Bond Index (WGBI) has the 109% gain in Russian assets. In our
returned -7.2%, year to date, in US view, however, it is important to remember
dollars, with full currency exposure, and that Russia defaulted on its debt and
0.10% with currency exposure hedged. devalued its currency just last year.
Emerging markets did better in the first Because of this, it seems most market
half of 1999. According to JP Morgan, participants, other than surviving hedge
emerging market sovereign bonds have fund managers, were underweight Russia
delivered a 10.6% return and Latin this year. However, it appears that most
American corporate bonds are up 5.6% for emerging markets did rally
the six months ended June 30, 1999. this year.
Of the 18 markets represented in the Given the performance in bond markets this
WGBI, 16 are down in local currency terms. year and the fact that at least 65% of the
The range for the 16 is -0.5% to -2.5%, assets of Ivy International Strategic Bond
with Canada and the US occupying the Fund must be invested in investment grade
respective ends of the range. Ten of the bonds, which have been the primary victims
11 European countries that have converted of this trend, we have been investing
to the euro and that issue bonds, returned slowly since the Fund's inception in
between -0.5% and -1.3%. In our view, April. This Fund will de-emphasize
European markets offered compelling developed country government bond markets.
opportunities when each country had its The Fund purchased positions in the
own currency. Under a single currency, emerging market sovereigns of Turkey and
however, performance of these markets has South Africa. The Fund also bought
converged. When looking at returns peso-denominated Mexican treasury bills
inclusive of currency, the picture appears and bonds of a Mexican tele-
bleak. Any market tied to the euro was communications company. We expect to be
down approximately 13%. In comparison, adding Mexican sovereign debt in the near
Canada and Australia were up 3.3% and future. Mexico has been benefiting from
5.4%, respectively. They appear to have the boom in the US and from well-conceived
gained because their currencies fiscal and monetary policies.
appreciated due to rising prices for oil,
metals, lumber and paper products. Both Brazil, which will likely be added to the
Fund in the near future, was up 15.8% for
the year
</TABLE>
<PAGE> 206
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
to June 30, 1999. Brazil's devaluation of its currency, the real, has not led to
a surge in inflation as many analysts expected. As a result, Brazilian
companies, some of which are world-class competitors, have become very
competitive versus the rest of the world. Also, the new central bank governor,
Arminio Fraga, appears to be running a very effective monetary policy. Fiscal
policy still needs work and the Brazilian legislative process is incredibly
Byzantine, but that is one reason why Brazilian C bonds yield 9.5 percentage
points more than US treasuries.
The Fund holds a selection of BBB-rated and below investment grade
corporate bonds, each chosen carefully for their financial performance, business
strategy and quality of management. Among these are a broadcasting company, a
manufacturer of large off-road trucks for construction and mining, and a UK-
based provider of telecommunications services to Europe.
Currently, the Ivy International Strategic Bond Fund's only position in a
local developed market is in New Zealand. This investment is held on a
currency-hedged basis. The analysis that led us to hedge the currency has proven
correct. However, the bond market analysis has not borne out as well thus far.
Nonetheless, our overall stance on developed markets has served Fund investors
well.
Under more favorable circumstances, the Fund would have been fully
invested. We do not believe market timing is a viable investment strategy and
prefer instead to be fully invested. However, the Fund was launched during what
seemed like an inexorable downtrend in bond markets, such as was experienced in
1994.
IVY MANAGEMENT, INC.
2
<PAGE> 207
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
CORPORATE BONDS -- 25.69% PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
MEXICO -- 2.36%
Alestra 144A, 12.125%, 05/15/06(a)... $ 25,000 $ 23,688
-----------
UNITED KINGDOM -- 2.45%
RSL Communications, 10.50%,
11/15/08(a)........................ 25,000 24,625
-----------
UNITED STATES -- 20.88%
CBS Corp., 7.15%, 05/20/05........... 25,000 24,875
Freeport-McMoRan Copper & Gold, Inc.,
7.50%, 11/15/06(a)................. 25,000 18,625
International Knife & Saw, 11.375%,
11/15/06(a)........................ 25,000 24,625
Spieker Properties, 7.35%,
12/01/17........................... 25,000 23,063
TE Products Pipeline Co., 7.51%,
01/15/28........................... 25,000 23,063
Terex Corp., 8.875%, 04/01/08(a)..... 25,000 24,406
Tommy Hilfiger USA, 6.50%, 06/01/03.. 25,000 24,094
Trump Atlantic City Associates,
11.25%, 05/01/06(a)................ 25,000 22,625
Watson Pharmaceuticals, 7.125%,
05/15/08........................... 25,000 24,125
-----------
209,501
-----------
TOTAL CORPORATE BONDS
(Cost -- $259,804)................. 257,814
-----------
GOVERNMENT OBLIGATIONS -- 18.37%
- ------------------------------------
MEXICO -- 2.56%
Mexican Cetes, 20.75%, 07/22/99(a)... 245,680 25,699
-----------
NEW ZEALAND -- 8.37%
New Zealand Government, 8.00%,
04/15/04........................... 100,000 56,793
New Zealand Government, 7.00%,
07/15/09........................... 50,000 27,205
-----------
83,998
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
GOVERNMENT OBLIGATIONS PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
SOUTH AFRICA -- 4.95%
Republic of South Africa, 9.125%,
05/19/09........................... $ 50,000 $ 49,688
-----------
TURKEY -- 2.49%
Republic of Turkey, 12.00%,
12/15/08(a)........................ 25,000 25,029
-----------
TOTAL GOVERNMENT OBLIGATIONS
(Cost -- $190,712)................. 184,414
-----------
TOTAL INVESTMENTS -- 44.06%
(Cost -- $450,516)(b).............. 442,228
OTHER ASSETS, LESS LIABILITIES --
55.94%............................. 561,557
-----------
NET ASSETS -- 100%................... $ 1,003,785
===========
(a) Below investment grade security.
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 1999, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 1,155
Gross unrealized depreciation............... (9,443)
-----------
Net unrealized depreciation............. $ (8,288)
===========
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $450,516 and
$0, respectively, for the period ended June 30, 1999.
</TABLE>
Forward foreign currency exchange contracts at June 30, 1999 were:
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER
----------------------------------
CURRENCY EXPIRATION LOCAL VALUE IN EXCHANGE UNREALIZED
BOUGHT DATE CURRENCY IN US $ FOR US $ APPRECIATION
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New Zealand Dollar August 1999 166,000 $90,470 $(88,060) $2,410
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 208
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $450,516)......... $ 442,228
Cash........................................................ 558,876
Receivables
Net unrealized appreciation on forward foreign
currencies.............................................. 2,410
Dividends and Interest.................................... 6,330
Manager for expense reimbursement......................... 17,432
Deferred offering costs..................................... 46,430
----------
Total assets................................................ 1,073,706
----------
LIABILITIES
Payables
Management fee............................................ 616
Other payables to related parties......................... 53,314
Accrued expenses............................................ 15,991
----------
Total liabilities......................................... 69,921
----------
NET ASSETS.................................................. $1,003,785
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($1,003,785/100,771 shares outstanding)............. $ 9.96
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,007,674
Accumulated net realized gain on investments.............. 1,880
Undistributed net investment income....................... 161
Net unrealized depreciation on investments and foreign
currency transactions................................... (5,930)
----------
NET ASSETS.................................................. $1,003,785
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 209
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 3, 1999 (COMMENCEMENT) TO
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 9,923
--------
EXPENSES
Management fee............................................ $ 1,253
Transfer agent............................................ 43
Administrative services fee............................... 167
Custodian fees............................................ 10,000
Amortization of deferred offering costs................... 5,363
Fund accounting........................................... 1,405
Trustees' fees............................................ 421
Legal..................................................... 5,992
--------
24,644
Expenses reimbursed by Manager............................ (22,555)
--------
Net expenses............................................ 2,089
--------
NET INVESTMENT INCOME....................................... 7,834
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investments.......................... 1,880
Net change in unrealized depreciation on investments and
foreign currency transactions........................... (5,930)
--------
Net loss on investment transactions..................... (4,050)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 3,784
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 3, 1999 (COMMENCEMENT) TO
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 7,834
Net realized gain on investments.......................... 1,880
Net change in unrealized depreciation on investments and
foreign currency transactions........................... (5,930)
----------
Net increase resulting from operations.................. 3,784
----------
Advisor Class dividends from net investment income.......... (7,673)
----------
Fund share transactions (Note 4)
Advisor Class............................................. 1,007,674
----------
Net increase resulting from Fund share transactions..... 1,007,674
----------
TOTAL INCREASE IN NET ASSETS................................ 1,003,785
NET ASSETS
Beginning of period....................................... --
----------
END OF PERIOD............................................. $1,003,785
==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 161
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 210
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT)
TO JUNE 30,
--------------
ADVISOR CLASS 1999
- ------------- --------------
<S> <C>
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $10.01
------
Income from investment operations
Net investment income(a).................................. .08
Net losses on securities (both realized and unrealized)... (.05)
------
Total from investment operations.......................... .03
------
Less distributions from net investment income............. .08
------
Net asset value, end of period.............................. $ 9.96
======
Total return (%)(b)......................................... .27
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,004
Ratio of expenses to average net assets (c)
With expense reimbursement (%)............................ 1.25
Without expense reimbursement (%)......................... 14.75
Ratio of net investment income (loss) to average net assets
(%)(a)(c)................................................. 4.69
Portfolio turnover rate (%)................................. 0
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Annualized
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Strategic 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, Class I 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 -- 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, or on the basis of dealer quotes. 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,
1999, there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
Corporate actions are recorded on the ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At June 30,
1999, the interest rate was 4.25%.
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 are
declared monthly. Distributions from 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.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
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 are
agreements to exchange one currency for another at a future date and at a
specified price. The Fund may use forward foreign currency contracts to
facilitate transactions in foreign securities and to manage the Fund's foreign
currency exposure. The U.S. dollar market value, contract value and the foreign
currencies the Fund has committed to buy or sell are shown in the Portfolio of
Investments. These amounts represent the aggregate exposure to each foreign
currency the Fund has acquired or hedged through forward foreign currency
contracts at June 30, 1999. Forward foreign currency contracts are reflected as
both a forward foreign currency contract to buy and a forward foreign currency
contract to sell. Forward foreign currency contracts to buy generally are used
to acquire exposure to foreign currencies, while forward foreign currency
contracts to sell are used to hedge the Fund's investments against currency
fluctuations. Also, a forward foreign currency contract to buy or sell can
offset a previously acquired opposite forward foreign currency contract.
Forward foreign currency contracts are marked-to-market daily. The change in a
contract's market value is recorded by the Fund as an unrealized gain or loss.
When the contract is closed or delivery is taken, 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.
7
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[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. These forward foreign currency
contracts involve market risk in excess of the unrealized
appreciation/(depreciation) of forward foreign currency contracts reflected in
the Fund's Statements of Assets and Liabilities. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Fund could be exposed to risks if the counterparties to the contracts are unable
to meet the terms of their contracts.
DEFERRED OFFERING COSTS -- Offering costs are being amortized over a one year
period beginning May 3, 1999, the date the Fund commenced operations. Offering
costs have been paid by Mackenzie Investment Management Inc. (MIMI) and will be
reimbursed by the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .75% of the
Fund's average net assets. Currently, IMI 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 1.25% of its average net assets. For each of the following nine
years, IMI will limit these expenses to 1.75% of the Fund's average net assets.
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. At June 30, 1999 MIMI owned 100% of
the Fund's shares outstanding.
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, 1999, the net amount of underwriting
discount retained by IMDI was $0.
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. For the six months
ended June 30, 1999, no such fees were incurred by the Fund.
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 $43 for Advisor Class shares 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, Class I and Advisor Class
were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 9, 1999
(COMMENCEMENT) TO
JUNE 30, 1999
- ----------------------------------------------------------------
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................................... 1 $ 10
Repurchased.............................. (1) (10)
------- ----------
Net change............................... -- $ --
======= ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
JUNE 30, 1999
- ----------------------------------------------------------------
CLASS B SHARES AMOUNT
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................................... 1 $ 10
Repurchased.............................. (1) (10)
------- ----------
Net change............................... -- $ --
======= ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
JUNE 30, 1999
- ----------------------------------------------------------------
CLASS C SHARES AMOUNT
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................................... 1 $ 10
Repurchased.............................. (1) (10)
------- ----------
Net change............................... -- $ --
======= ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
JUNE 30, 1999
- ----------------------------------------------------------------
CLASS I SHARES AMOUNT
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................................... 1 $ 10
Repurchased.............................. (1) (10)
------- ----------
Net change............................... -- $ --
======= ==========
</TABLE>
8
<PAGE> 213
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
JUNE 30, 1999
- ----------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................................... 100,000 $1,000,000
Issued on reinvestment of
distributions........................... 771 7,674
------- ----------
Net increase............................. 100,771 $1,007,674
======= ==========
</TABLE>
9
<PAGE> 214
03IISBF063099
