<PAGE> 1
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
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
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
IVY INTERNATIONAL FUND
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth primarily through
investing in equity securities traded in European, Pacific Basin and Latin
American markets.
The following is an interview with Sheridan Reilly, Senior Vice President and
Chief Investment Officer of International Equities at Ivy Management, Inc.
Sheridan, who joined Ivy Funds on May 1st, was formerly head of the
institutional international equities team at Scudder Kemper Investments. He is
the lead portfolio manager for Ivy International Fund.
Q: SHERIDAN, HOW DID INTERNATIONAL MARKETS PERFORM DURING THE FIRST
HALF OF 2000?
A: Like the US market, the international markets had a "Jekyll and Hyde" sort
of personality. The first quarter was characterized by a large run-up in
growth-oriented technology, media and telecom stocks. The second quarter saw a
sell-off of these same stocks and a resurgence of more traditional value names.
In Europe, there was an enormous amount of corporate activity -- restructuring,
mergers and acquisitions, and more. In the second quarter, there was a comeback
of value sectors such as chemical companies, car companies and steel and oil.
Generally speaking, the first half of the year saw the most aggressive courting
of US business by European companies in history.
The euro, however, was weak during this period. It struggled against the
strength of the dollar and inconsistent messages provided to the market by the
European Central Bank. However, we do see some positive factors that should
bolster the performance of the euro as we move further into the year. One is
Europe's overall economic growth. Another is that Europe, in the near term, is
showing strong corporate earnings growth relative to the US. Both should help
the euro gain momentum against the dollar.
The Japanese market, after a very strong 1999, started the year weak and
remained relatively weak in most sectors for the first six months. And emerging
markets continued to demonstrate volatile behavior, with sharp swings up and
down in many markets and some currency weakness.
Q: HOW DID ALL OF THIS AFFECT THE FUND'S PERFORMANCE?
A: The Fund's strong value emphasis was a disadvantage during the first
quarter, as technology, media and telecommunication stocks outperformed all
other sectors, which caused the Fund to lag behind its relative benchmarks.
However, the Fund regained ground during the second quarter when value played
very well. During the first six months, the Fund was down less than the overall
market, primarily because of its underweighting in technology. It held up well
during the spring technology sell-off.
Q: WHAT IS YOUR OUTLOOK FOR THE SECOND HALF OF 2000?
A: We anticipate a more balanced global market for the rest of the year. In
Japan, we are expecting a host of opportunities
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IVY INTERNATIONAL FUND
as the country gets back on the track to economic growth and industry gets back
into the practice of restructuring and emphasizing profits. Japan has now
finished its contentious elections, and the ruling party has continued its
majority. As a result, we believe that fiscal monetary policy should be
favorable to economic growth in Japan, so we have increased the Fund's
weighting in Japan from 12% to 20%.
In Europe, we expect somewhat of a rebound in the technology sector,
particularly in telecommunications equipment. The Fund has considerable
positions in Nokia and Ericcson, which are the leading European producers in
this sector, as well as Philips, Siemens and STMicroelectronics. At the same
time, our research indicates that Europe is now in the midstream of economic
expansion, and we expect a host of "real economy" companies to do well. We're
committed to the oil industry, and the Fund also has positions in steel
companies, the automotive sector and select chemical companies. This year, we
believe that Europe could very well benefit from the best of both worlds: a
blossoming technology/telecommunications sector and an increased profitability
from more traditional sectors like oil, steel, cars and chemicals.
"WE BELIEVE THAT EUROPE COULD VERY WELL BENEFIT FROM THE BEST OF BOTH WORLDS:
A BLOSSOMING TECHNOLOGY/TELECOMMUNICATIONS SECTOR AND AN INCREASED
PROFITABILITY FROM MORE TRADITIONAL SECTORS LIKE OIL, STEEL,
CARS AND CHEMICALS."
Q: SHERIDAN, YOU'RE NEW TO IVY. CAN YOU DESCRIBE YOUR INVESTMENT STYLE AND HOW
IT WILL ALLOW YOU TO CAPTURE A BROAD BASE OF OPPORTUNITIES?
A: Previously, Ivy International Fund was managed with a strong emphasis on
value. Now, we're taking a more flexible approach, blending growth and value to
take advantage of more investment opportunities. We're using a process known as
Worldwide Footprint Analysis,(TM) which consists of three steps:
1. We study each company's annual reports for the last five years to
create a "scorecard." This scorecard assesses management's abilities
to set targets, deliver on promises, create new products, gain market
share and improve profitability.
2. We identify market anomalies -- periods of irrational behavior -- that
can create buy and sell opportunities.
3. Most importantly, we construct an "all-weather" portfolio from a
blueprint of ideal characteristics. Our goal is to build a portfolio
that captures the market's upside potential and that maintains more of
its value in down markets.
In today's international markets, we believe that returns are driven more by
stock selection and less by country allocation. Our bottom-up approach of
rolling up our sleeves and doing investigative work into each company's history
should allow us to identify promising international opportunities in their
early stages.
The goal is to construct a more balanced portfolio --among countries, among
sectors and among styles. The portfolio still retains an important value
component, particularly in Europe, where we see the economy blossoming, and in
Japan, which we believe will benefit from the themes we discussed earlier. At
the same time, we have added an important weighting in growth companies,
particularly in the technology and telecommunications sectors. These companies
are well distributed throughout the entire world. Regarding country allocation,
the portfolio has a significantly larger weighting in developed countries and a
significantly lower weighting in riskier emerging markets. The Fund's sector
allocation is also more diverse, because we want to buy return potential for
significantly less risk. The Fund will, we believe, be in a good position to
benefit from the themes occurring in international markets.
Q: WHAT SPECIFIC THEMES ARE YOU EXCITED ABOUT?
A: An important theme of this portfolio is to invest in sectors in which non-US
companies are the leading players. For example, there are pockets of technology
where the US is lagging, and where other countries offer strong opportunities.
As a result, we've added Sonera, a Finnish wireless communications leader, to
the portfolio. We've also added some of the big wireless operators such as
Vodafone AirTouch in the UK. We've added some Japanese pharmaceuticals as well.
Another theme we're seeing is that the international markets are becoming much
more dynamic. Years ago, the major international indexes were dominated by
banks and financial institutions. It was a static world controlled by big
players that were basically carrying out government policy. It was hard to
realize good returns. Today, however, many of the large firms have given way to
promising younger
2
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IVY INTERNATIONAL FUND
companies with great ideas and great technology. This change presents
opportunity for investors, because it provides the chance to buy companies that
may be on their way to leadership positions. That's why we're invested in
companies like Nokia and Ericsson that we feel are on their way to stock market
leadership. We also like a company called Marconi. It's a UK-based wireless
firm that has, we believe, a very good chance of becoming one of the world's
leaders in optical transmissions. But we're invested in some of the very
biggest companies as well -- the ones that we feel will maintain their
leadership and that will continue to demonstrate the type of profitability that
made them leaders in the first place.
Q: AND THE LONG-TERM OUTLOOK?
A: We believe that international markets are offering more and more
opportunity. As areas like Europe go through dynamic change, as countries like
Japan rebuild their corporate structure, and as non-US leaders come to the fore
in technology and other sectors, opportunity opens for US investors. We think
the outlook is bright for the years ahead. And we believe that the Ivy
International Fund is positioned to capture a broader set of opportunities than
ever before.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
3
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IVY INTERNATIONAL FUND
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4
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 97.3% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
AFRICA -- 0.0%
--------------------------------
SOUTH AFRICA -- 0.0%
Billiton plc ADR................. 112,400 $ 454,200
--------------
EUROPE -- 61.3%
--------------------------------
FINLAND -- 2.4%
Nokia Oyj........................ 580,549 29,745,347
Sonera Oyj....................... 249,296 11,410,932
--------------
41,156,279
--------------
FRANCE -- 15.1%
Accor SA......................... 418,759 17,232,865
Alcatel.......................... 265,074 17,456,465
Altadis, SA...................... 1,715,318 26,308,560
AXA-UAP.......................... 111,313 17,606,064
Carrefour SA..................... 204,002 14,001,672
Credit Lyonnais SA............... 290,039 13,845,804
Eurotunnel SA Warrants(a)........ 9,727,920 8,858,823
France Telecom SA................ 111,036 15,582,507
LVMH (Louis Vuitton Moet
Hennessy)...................... 33,566 13,896,814
Pechiney SA -- Class A........... 295,263 12,368,667
Rhone Poulenc SA................. 269,839 19,774,916
Schneider SA..................... 252,806 17,690,605
Scor SA.......................... 160,634 7,023,118
Societe Television Francaise 1... 108,437 7,588,096
STMicroelectronics NV............ 178,241 11,440,844
Suez Lyonnaise des Eaux.......... 93,694 16,480,876
TotalFinaElf -- B Shares......... 110,967 17,083,302
--------------
254,239,998
--------------
GERMANY -- 8.6%
Allianz AG -- Registered......... 47,782 17,405,254
Bayerische Motoren Werke (BMW)
AG............................. 356,345 10,794,193
Commerzbank AG................... 410,482 14,676,936
Deutsche Bank AG................. 330,000 27,331,290
Deutsche Lufthansa AG............ 568,094 13,341,932
Deutsche Telekom
AG -- Registered............... 188,257 10,755,481
Dresdner Bank AG................. 350,000 14,560,967
EM.TV & Merchandising AG......... 192,051 11,414,075
Epcos AG(a)...................... 86,577 8,747,332
Siemens AG....................... 101,891 15,383,276
--------------
144,410,736
--------------
ITALY -- 1.9%
Assicurazioni Generali........... 551,791 18,988,974
Mediaset SpA..................... 887,874 13,617,700
--------------
32,606,674
--------------
NETHERLANDS -- 6.8%
AKZO Nobel NV.................... 367,523 15,677,506
ASM Lithography Holding NV(a).... 500,000 21,577,838
Gucci Group NV................... 158,957 15,016,500
Koninklije (Royal) Philips
Electronics NV................. 264,973 12,547,610
KPN NV........................... 258,835 11,624,253
Royal Dutch Petroleum ADR........ 340,000 20,931,250
Royal Dutch Petroleum Company.... 269,636 16,826,404
--------------
114,201,361
--------------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
NORWAY -- 0.0%
Frontline Limited Warrants(a).... 804,393 $ --
--------------
SPAIN -- 1.6%
Grupo Prisa, S.A.(a)............. 75,000 1,747,029
Repsol-YPF, S.A.................. 1,257,396 25,131,047
--------------
26,878,076
--------------
SWEDEN -- 5.6%
LM Ericsson AB(a)................ 2,634,197 52,409,279
Svenska Cellulosa AB (SCA) --
Series B....................... 797,615 15,232,551
Swedish Match AB................. 8,535,775 26,471,367
--------------
94,113,197
--------------
SWITZERLAND -- 5.5%
ABB Ltd.......................... 139,549 16,756,367
Cie Financiere Michelin.......... 44,950 16,807,200
Cie Financiere Richemont AG...... 3,122 8,438,279
Holderbank Financiere Glaris
AG............................. 13,783 16,952,582
Nestle AG Registered............. 8,902 17,874,458
UBS AG -- Registered............. 114,671 16,854,412
--------------
93,683,298
--------------
UNITED KINGDOM -- 13.8%
BAE SYSTEMS plc.................. 2,228,167 13,889,242
Bank Of Scotland................. 1,505,249 14,071,568
BP Amoco plc..................... 1,770,000 16,988,683
Cable & Wireless plc............. 768,586 13,055,170
Carlton Communications plc....... 912,005 11,728,914
Corus Group plc(a)............... 10,133,613 14,765,979
Diageo plc....................... 1,934,794 17,325,536
Glaxo Wellcome plc............... 503,608 14,676,434
Invensys plc..................... 4,019,652 15,076,458
J Sainsbury plc.................. 2,858,580 12,939,537
Marconi plc...................... 969,834 12,604,769
Prudential plc................... 1,164,887 17,070,897
Rio Tinto plc.................... 1,080,880 17,705,245
SmithKline Beecham plc........... 1,085,595 14,265,426
Vodafone AirTouch plc............ 6,635,886 26,923,462
--------------
233,087,320
--------------
FAR EAST -- 31.6%
--------------------------------
AUSTRALIA -- 3.3%
Broken Hill Proprietary Company
Limited........................ 1,621,524 19,228,510
Cable & Wireless Optus
Limited(a)..................... 6,445,925 19,273,906
Woodside Petroleum Limited....... 2,201,531 17,183,962
--------------
55,686,378
--------------
CHINA -- 0.2%
China Unicom Limited(a).......... 1,458,000 3,095,548
--------------
HONG KONG -- 3.0%
Cheung Kong Holdings Ltd......... 1,103,000 12,204,406
China Telecom (Hong Kong)
Limited(a)..................... 2,119,559 18,693,915
Hutchison Whampoa Limited........ 910,000 11,440,619
New World Development Company
Ltd............................ 7,768,000 8,669,829
--------------
51,008,769
--------------
</TABLE>
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5
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
JAPAN -- 20.2%
Asahi Glass Company, Ltd.......... 1,677,000 $ 18,782,767
Bank Of Tokyo-Mitsubishi, Ltd..... 703,000 8,511,627
Canon Inc......................... 354,000 $ 17,666,289
East Japan Railway Company........ 2,437 14,188,758
Fujitsu Limited................... 562,000 19,494,430
Kyocera Corporation............... 104,100 17,700,684
Matsushita Electric Industrial
Co.............................. 683,000 17,752,583
Murata Manufacturing Company,
Ltd............................. 103,000 14,816,991
NEC Corporation................... 603,000 18,978,841
Nintendo Co., Ltd................. 88,200 15,438,949
Nissan Motor Co., Ltd(a).......... 3,175,000 18,755,640
Nomura Securities Co., Ltd.
(The)........................... 679,000 16,653,875
NTT DoCoMo, Inc................... 590 16,004,498
Sankyo Company, Limited........... 635,000 14,374,323
SMC Corporation................... 81,100 15,292,268
Sony Corporation.................. 176,300 16,496,646
Sumitomo Electric Industries,
Ltd............................. 1,032,000 17,732,980
Sumitomo Trust & Banking Co.,
Ltd............................. 1,324,000 9,448,070
Terumo Corporation................ 365,000 12,384,984
The Sanwa Bank, Limited........... 991,000 7,924,141
Tokyo Electron Limited............ 127,000 17,429,242
Yamanouchi Pharmaceutical Co.,
Ltd............................. 279,000 15,268,308
--------------
341,096,894
--------------
MALAYSIA -- 0.9%
Sime Darby Berhad................. 9,275,000 11,911,300
Telekom Malaysia Berhad........... 856,000 2,951,009
--------------
14,862,309
--------------
SINGAPORE -- 1.5%
Fraser & Neave Ltd. Ordinary...... 1,144,000 4,069,225
United Overseas Bank Ltd.......... 3,384,498 22,119,904
--------------
26,189,129
--------------
SOUTH KOREA -- 2.0%
Korea Telecom Corporation
Sponsored ADR................... 325,947 $ 15,767,686
Samsung Electronics............... 53,300 17,639,379
--------------
33,407,065
--------------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
TAIWAN -- 0.5%
Taiwan Semiconductor Manufacturing
Company Ltd. Sponsored ADR...... 231,000 $ 8,951,250
--------------
LATIN AMERICA -- 3.8%
---------------------------------
BRAZIL -- 2.6%
Cia Vale do Rio Doce --
Preferred A..................... 221,200 6,241,348
Petroleo Brasileiro S.A.
(Petrobras)..................... 1,228,370 37,110,876
--------------
43,352,224
--------------
MEXICO -- 1.2%
Telefonos de Mexico S.A. ADR --
Class L......................... 350,000 19,993,750
--------------
NORTH AMERICA -- 0.6%
---------------------------------
CANADA -- 0.6%
Canadian Pacific Limited.......... 362,200 9,387,030
--------------
TOTAL INVESTMENTS -- 97.3%
(Cost -- $1,520,924,794)(b)..... 1,641,861,485
OTHER ASSETS, LESS LIABILITIES --
2.7%............................ 45,036,107
--------------
NET ASSETS -- 100%................ $1,686,897,592
==============
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for
Federal income tax purposes
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............ $ 192,107,402
Gross unrealized depreciation............ (71,170,711)
--------------
Net unrealized appreciation.......... $ 120,936,691
==============
Purchases and sales of securities other than short-term
obligations aggregated $1,137,630,297 and $1,773,902,119,
respectively, for the period ended June 30, 2000.
</TABLE>
Forward foreign currency exchange contracts at June 30, 2000 were:
<TABLE>
<CAPTION>
CONTRACTS TO BUY
--------------------------------------- UNREALIZED
CURRENCY EXPIRATION LOCAL VALUE IN EXCHANGE APPRECIATION
SOLD DATE CURRENCY IN U.S.$ FOR U.S.$ (DEPRECIATION)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
British Pound July 3, 2000 4,279,597 $6,420,808 $ 6,478,882 $ 58,074
British Pound July 5, 2000 1,962,523 2,979,031 2,971,063 (7,968)
---------
$ 50,106
---------
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS TO SELL
---------------------------------------
CURRENCY EXPIRATION LOCAL VALUE IN EXCHANGE UNREALIZED
SOLD DATE CURRENCY IN U.S.$ FOR U.S.$ DEPRECIATION
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
British Pound July 5, 2000 551,434 829,257 $ 834,815 $ (5,558)
Singapore Dollar July 3, 2000 874,700 504,237 505,906 (1,669)
Singapore Dollar July 5, 2000 1,488,632 858,915 860,989 (2,074)
Swedish Krona July 3, 2000 17,539,446 1,973,607 1,999,772 (26,165)
Swedish Krona July 5, 2000 25,785,791 2,915,362 2,939,984 (24,622)
Swiss Franc July 3, 2000 5,894,250 3,579,932 3,624,855 (44,923)
Swiss Franc July 5, 2000 5,904,316 3,605,159 3,631,046 (25,887)
----------- ---------
$(130,898)
---------
Net unrealized loss on forward foreign currency exchange contracts $ (80,792)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $1,520,924,794)... $1,641,861,485
Cash........................................................ 16,779,660
Receivables
Investments sold.......................................... 47,940,982
Fund shares sold.......................................... 166,882
Dividends and interest.................................... 6,206,632
Unrealized appreciation on open forward foreign currency
contracts................................................. 58,074
Other assets................................................ 45,562
--------------
Total assets............................................ 1,713,059,277
--------------
LIABILITIES
Payables
Investments purchased..................................... 21,577,884
Fund shares repurchased................................... 1,938,613
Management fee............................................ 1,441,686
12b-1 service and distribution fees....................... 148,106
Other payables to related parties......................... 402,947
Unrealized depreciation on open forward foreign currency
contracts................................................. 138,866
Accrued expenses............................................ 513,583
--------------
Total liabilities....................................... 26,161,685
--------------
NET ASSETS.................................................. $1,686,897,592
==============
CLASS A
Net asset value and redemption price per share
($1,046,240,678/25,451,619 shares outstanding)............ $ 41.11
==============
Maximum offering price per share ($41.11 X 100/94.25)*...... $ 43.62
==============
CLASS B
Net asset value, offering price and redemption price** per
share ($437,275,614/10,764,443 shares outstanding)........ $ 40.62
==============
CLASS C
Net asset value, offering price and redemption price*** per
share ($102,212,948/2,528,625 shares outstanding)......... $ 40.42
==============
CLASS I
Net asset value, offering price and redemption price per
share ($101,168,352/2,455,726 shares outstanding)......... $ 41.20
==============
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,128,703,970
Undistributed net realized gain on investments and foreign
currency transactions................................... 427,589,200
Undistributed net investment income....................... 9,522,197
Net unrealized appreciation on investments and foreign
currency transactions................................... 121,082,225
--------------
NET ASSETS.................................................. $1,686,897,592
==============
</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> 7
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7
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $3,013,405 foreign taxes withheld....... $ 26,617,978
Interest.................................................. 849,734
-------------
27,467,712
-------------
EXPENSES
Management fee............................................ $10,015,854
Transfer agent............................................ 1,709,691
Administrative services fee............................... 943,883
Custodian fees............................................ 1,005,300
Blue Sky fees............................................. 22,085
Auditing and accounting fees.............................. 60,430
Shareholder reports....................................... 259,658
Fund accounting........................................... 107,605
Trustees' fees............................................ 50,653
12b-1 service and distribution fees....................... 4,409,344
Legal..................................................... 23,610
Other..................................................... 230,456
-----------
Total expenses........................................ 18,838,569
-------------
NET INVESTMENT INCOME....................................... 8,629,143
-------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 586,663,107
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (689,019,920)
-------------
Net loss on investment transactions................... (102,356,813)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (93,727,670)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------- --------------
2000 1999
-------------- --------------
(UNAUDITED)
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income..................................... $ 8,629,143 $ 10,534,977
Net realized gain on investments and foreign currency
transactions............................................ 586,663,107 149,803,389
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (689,019,920) 286,502,925
-------------- --------------
Net (decrease) increase resulting from operations..... (93,727,670) 446,841,291
-------------- --------------
Class A distributions
Dividends from net investment income...................... -- (7,591,186)
Distributions from capital gain........................... (109,963,449) (79,453,345)
-------------- --------------
Total distributions to Class A shareholders........... (109,963,449) (87,044,531)
-------------- --------------
Class B distributions
Dividends in excess of net investment income.............. -- (28,805)
Distributions from capital gain........................... (43,254,463) (26,528,332)
-------------- --------------
Total distributions to Class B shareholders........... (43,254,463) (26,557,137)
-------------- --------------
Class C distributions
Dividends in excess of net investment income.............. -- (3,539)
Distributions from capital gain........................... (10,561,176) (7,061,141)
-------------- --------------
Total distributions to Class C shareholders........... (10,561,176) (7,064,680)
-------------- --------------
Class I distributions
Dividends from net investment income...................... -- (1,415,063)
Distributions from capital gain........................... (10,899,758) (8,540,450)
-------------- --------------
Total distributions to Class I shareholders........... (10,899,758) (9,955,513)
-------------- --------------
Fund share transactions (Note 4)
Class A................................................... (356,878,006) (246,372,544)
Class B................................................... (38,641,393) (71,889,837)
Class C................................................... (24,591,611) (29,745,075)
Class I................................................... (48,849,892) (12,118,396)
-------------- --------------
Net decrease resulting from Fund share transactions... (468,960,902) (360,125,852)
-------------- --------------
TOTAL DECREASE IN NET ASSETS................................ (737,367,418) (43,906,422)
NET ASSETS
Beginning of period....................................... 2,424,265,010 2,468,171,432
-------------- --------------
END OF PERIOD............................................. $1,686,897,592 $2,424,265,010
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 9,522,197 $ 893,054
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 9
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 47.09 $ 41.20 $ 39.03 $ 35.89 $ 30.67 $ 27.60
--------------------------------------------------------------------------------
(Loss) income from investment operations
Net investment income.................... .20 .30 .37 .24 .20 .25
Net (loss) gain on securities (both
realized and unrealized)............... (1.92) 8.31 2.50 3.47 5.85 3.22
--------------------------------------------------------------------------------
Total from investment operations......... (1.72) 8.61 2.87 3.71 6.05 3.47
--------------------------------------------------------------------------------
Less distributions
Dividends from net investment income..... -- .24 .35 .21 .19 .25
Distributions
From capital gain...................... 4.26 2.48 .22 .26 .64 .12
In excess of capital gain.............. -- -- .13 .10 -- .03
--------------------------------------------------------------------------------
Total distributions.................. 4.26 2.72 .70 .57 .83 .40
--------------------------------------------------------------------------------
Net asset value, end of period............. $ 41.11 $ 47.09 $ 41.20 $ 39.03 $ 35.89 $ 30.67
================================================================================
Total return(%)............................ (3.25)(a) 21.05(b) 7.34(b) 10.38(b) 19.72(b) 12.65(b)
RATIOS AND SUPPLEMENTAL DATA
Net asset value, beginning of period....... $1,046,241 $1,573,615 $1,613,797 $1,705,772 $989,254 $475,989
Ratio of expenses to average net
assets(%)................................ 1.67(c) 1.66 1.58 1.59 1.65 1.52
Ratio of net investment income to average
net assets(%)............................ 1.08(c) .63 .83 .68 .76 .97
Portfolio turnover rate(%)................. 57 7 15 8 14 6
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 46.78 $40.97 $38.82 $35.73 $30.67 $27.60
----------------------------------------------------------------------
(Loss) income from investment operations
Net investment income (loss)............ .05 (.06) -- (.06) (.01) .01
Net (loss) gain on securities (both
realized and unrealized).............. (1.95) 8.27 2.50 3.44 5.76 3.20
----------------------------------------------------------------------
Total from investment operations........ (1.90) 8.21 2.50 3.38 5.75 3.21
----------------------------------------------------------------------
Less distributions
Dividends
From net investment income............ -- -- -- -- -- .01
In excess of net investment income.... -- -- -- -- .05 --
Distributions
From capital gain..................... 4.26 2.40 .22 .21 .64 .10
In excess of capital gain............. -- -- .13 .08 -- .03
----------------------------------------------------------------------
Total distributions................. 4.26 2.40 .35 .29 .69 .14
----------------------------------------------------------------------
Net asset value, end of period............ $ 40.62 $46.78 $40.97 $38.82 $35.73 $30.67
======================================================================
Total return(%)........................... (3.66)(a) 20.15(b) 6.43(b) 9.46(b) 18.76(b) 11.62(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).............................. $437,276 $540,514 $542,997 $568,521 $312,161 $74,650
Ratio of expenses to average net
assets(%)............................... 2.48(c) 2.42 2.41 2.42 2.45 2.44
Ratio of net investment income (loss) to
average net assets(%)................... .26(c) (.13) (.01) (.15) (.04) .05
Portfolio turnover rate(%)................ 57 7 15 8 14 6
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 10
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 46.57 $ 40.79 $ 38.64 $ 35.58 $ 32.68
------------------------------------------------------------------------
(Loss) income from investment operations
Net investment income (loss)............ .05 (.05) -- (.05) --
Net (loss) gain on securities (both
realized and unrealized).............. (1.94) 8.23 2.50 3.42 3.74
------------------------------------------------------------------------
Total from investment operations........ (1.89) 8.18 2.50 3.37 3.74
------------------------------------------------------------------------
Less distributions
Dividends
From net investment income............ -- -- -- .01 --
In excess of net investment income.... -- -- -- -- .20
Distributions
From capital gain..................... 4.26 2.40 .22 .21 .64
In excess of capital gain............. -- -- .13 .09 --
------------------------------------------------------------------------
Total distributions................. 4.26 2.40 .35 .31 .84
------------------------------------------------------------------------
Net asset value, end of period............ $ 40.42 $ 46.57 $ 40.79 $ 38.64 $ 35.58
========================================================================
Total return(%)........................... (3.66)(a) 20.16(b) 6.46(b) 9.50(b) 11.45(a)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).............................. $102,213 $143,320 $154,378 $174,880 $44,450
Ratio of expenses to average net
assets(%)............................... 2.47(c) 2.42 2.40 2.41 2.44(c)
Ratio of net investment income (loss) to
average net assets(%)................... .27(c) (.13) .01 (.14) (.03)(c)
Portfolio turnover rate(%)................ 57 7 15 8 14
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS I (unaudited) for the year ended December 31,
--------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 47.09 $ 41.21 $ 39.06 $ 35.89 $ 30.67 $27.60
----------------------------------------------------------------------------
(Loss) income from investment operations
Net investment income..................... .28 .52 .55 .32 .27 .30
Net (loss) gain on securities (both
realized and unrealized)................ (1.91) 8.34 2.48 3.56 5.88 3.22
----------------------------------------------------------------------------
Total from investment operations.......... (1.63) 8.86 3.03 3.88 6.15 3.52
----------------------------------------------------------------------------
Less distributions
Dividends
From net investment income.............. -- .42 .53 .32 .27 .30
In excess of net investment income...... -- -- -- -- .02 --
Distributions
From capital gain....................... 4.26 2.56 .22 .28 .64 .12
In excess of capital gain............... -- -- .13 .11 -- .03
----------------------------------------------------------------------------
Total distributions................... 4.26 2.98 .88 .71 .93 .45
----------------------------------------------------------------------------
Net asset value, end of period.............. $ 41.20 $ 47.09 $ 41.21 $ 39.06 $ 35.89 $30.67
============================================================================
Total return(%)............................. (3.06)(a) 21.66(b) 7.75(b) 10.87(b) 20.06(b) 12.85(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $101,168 $166,816 $156,999 $115,046 $53,344 $13,020
Ratio of expenses to average net
assets(%)................................. 1.24(c) 1.18 1.18 1.18 1.25 1.35
Ratio of net investment income to average
net assets(%)............................. 1.50(c) 1.11 1.23 1.08 1.16 1.14
Portfolio turnover rate(%).................. 57 7 15 8 14 6
</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
The accompanying notes are an integral part of the financial statements.
<PAGE> 11
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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 on
foreign securities, 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, as
amended (the "Code"), 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
capital gain, if any, are normally declared in December. On June 1, 2000, the
Fund was reopened to new investors. Prior to the Fund reopening, a long-term
capital gain distribution was declared on May 31, 2000. If necessary to qualify
for tax treatment applicable to investment companies under the Code, the Fund
may declare an additional long-term capital gain distribution in December 2000.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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,
<PAGE> 12
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
--------------------------------------------------------------------------------
12
2000. 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.
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.
RECLASSIFICATIONS -- The timing and characterization of certain income and
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
("Northern Cross") served as sub-advisor to the Fund from July 1, 1990 through
May 15, 2000 under an agreement with IMI. For its services, Northern Cross
received a fee from IMI that was equal, on an annual basis, to 0.60% of the
first $1.5 billion in average net assets, 0.55% of the next $1 billion in
average net assets and 0.50% of the Fund's average net assets over $2.5 billion.
IMI, not the Fund, was obligated to compensate the sub-advisor.
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, 2000, the net amount of underwriting
discounts retained by IMDI was $9,266.
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 $1,447,337, $2,364,189 and $597,818, 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 $1,063,837, $493,287, $118,723 and $33,844, 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.
<PAGE> 13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13
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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 4,073,817 $ 177,231,301 6,826,244 $ 298,269,386
Issued on
reinvestment of
distributions....... 2,001,431 78,776,642 1,395,706 64,345,562
Repurchased.......... (14,038,873) (612,885,949) (13,975,871) (608,987,492)
----------- ------------- ----------- -------------
Net decrease......... (7,963,625) $(356,878,006) (5,753,921) $(246,372,544)
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 593,549 $ 23,912,843 581,682 $ 25,766,700
Issued on
reinvestment of
distributions....... 539,249 20,987,744 284,831 13,050,929
Repurchased.......... (1,922,748) (83,541,980) (2,564,193) (110,707,466)
----------- ------------- ----------- -------------
Net decrease......... (789,950) $ (38,641,393) (1,697,680) $ (71,889,837)
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 208,953 $ 8,377,313 222,501 $ 9,801,533
Issued on
reinvestment of
distributions....... 100,723 3,900,987 56,781 2,590,305
Repurchased.......... (858,555) (36,869,911) (986,391) (42,136,913)
----------- ------------- ----------- -------------
Net decrease......... (548,879) $ (24,591,611) (707,109) $ (29,745,075)
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 436,185 $ 19,406,125 913,209 $ 40,125,637
Issued on
reinvestment of
distributions....... 227,653 8,976,352 187,307 8,636,739
Repurchased.......... (1,750,856) (77,232,369) (1,367,227) (60,880,772)
----------- ------------- ----------- -------------
Net decrease......... (1,087,018) $ (48,849,892) (266,711) $ (12,118,396)
=========== ============= =========== =============
</TABLE>
From April 18, 1997 to June 1, 2000, the Fund suspended the offer of its shares
to new investors. Shares were available for purchase only by existing
shareholders of the Fund.
<PAGE> 14
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
14
<PAGE> 15
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
15
<PAGE> 16
03IIFX063000
<PAGE> 17
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
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
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
IVY GROWTH FUND
MARKET PERSPECTIVE
[PHOTO]
[PHOTO]
The Fund's goal: to provide long-term capital growth by investing in US
companies of any size.
Ivy Growth Fund uses a dual-manager approach. The core portion (50%) is managed
by Paul Baran and is invested primarily in large-cap US stocks. The US emerging
growth portion (50%) is managed by James W. Broadfoot III and is invested
primarily in small- and medium-sized US companies in the early stages of their
lifecycles.
CORE PORTION PERSPECTIVE
Q: PAUL, HOW DID THE US ECONOMY DO IN THE FIRST HALF OF 2000?
A: The big news in the first half of 2000 was interest rates. The Federal
Reserve Board increased interest rates a number of times in the last year in an
effort to head off inflation and to slow what some have perceived to be an
"overheated" economy.
Evidence does show that the economy, while strong, is beginning to slow. While
the US gross domestic product (GDP) rose at an annual rate of 7.3% in the last
quarter of 1999, it only rose 5.4% in the first quarter of 2000. Retail sales
declined 0.6% in April and 0.3% in May. Housing starts declined nearly 4% in
May, a typical response to rising mortgage rates. This data indicates that the
economy may indeed be slowing down, and that may influence the Federal Reserve
Board's future interest rate decisions.
We believe that the US economy and corporate earnings will continue to grow
without excessive inflationary pressures, largely due to technology spending
and the resulting gains in productivity. Slower -- but more sustainable --
economic growth should have a long-term healthy impact on the stock market. We
believe the US is still in the midst of the longest economic expansion in its
history.
Q: HOW DID THE US MARKET PERFORM DURING THIS PERIOD?
A: Over the last few months, the increase in interest rates drove stock prices
lower. In addition, uncertainty about the effect of higher interest rates on
future corporate profits caused an increase in market volatility.
In the first three months of the year, we saw the usual seasonal investment of
money into the stock market, driven by corporate pension and IRA funding. This
helped propel stock prices, particularly in the technology-heavy NASDAQ. But as
we moved into April and the end of IRA season, pension and IRA funding
decreased. Combined with concern over interest rates and the Federal Reserve
Board's actions, this stemmed the flow of investment into the market and
reduced volume to two-thirds of what it was in the first quarter.
Market leadership seems to be narrowing, with a focus on the often-volatile
technology sector. However, we do expect an eventual broadening of market
leadership that should lead to a more
<PAGE> 18
balanced environment -- one that is not overly dependent on one sector for its
performance.
Q: HOW DID THIS AFFECT THE CORE PORTION OF IVY GROWTH FUND?
A: The core portion benefited from the strong economy during the first half of
2000. It was invested primarily in high-quality, large-cap companies that hold
leading positions in their industries. Some of the core portion's holdings
include Intel, Cisco, Sun Microsystems, Morgan Stanley and General Electric,
which provides the Fund with diversified exposure to a number of sectors.
The performance of the core portion benefited from its exposure to the health
care sector, which was up 23% in the first half of the year. It also benefited
from its exposure to the energy sector, which was up 3.5%, and its exposure to
the technology sector, which -- despite all the volatility -- was up 2.9% in
the first half of 2000. Underperformance by the capital goods sector (companies
that supply tools, equipment and other materials to businesses) and the
consumer cyclicals sector (automotive companies, retailers and other businesses
that depend on consumer spending) had a negative impact on Fund performance.
"WE BELIEVE THAT THE US ECONOMY AND CORPORATE EARNINGS WILL CONTINUE TO
GROW WITHOUT EXCESSIVE INFLATIONARY PRESSURES, LARGELY DUE TO
TECHNOLOGY SPENDING AND THE RESULTING GAINS IN PRODUCTIVITY. "
Q: HOW DOES YOUR INVESTMENT PROCESS HELP YOU TARGET OPPORTUNITIES IN THIS
MARKET?
A: Typically, we ignore short-term market volatility, and we make no attempt to
time the market. Instead, we employ a disciplined philosophy based on stock
selection.
When selecting companies for the core portfolio, we divide the stock market
into eight broad economic sectors, and the weightings approximate the weighting
of each sector within the market, as represented by the S&P 500 Index. We use
an equity style that blends growth and value stocks, but we favor growth
stocks. The focus is on companies that, in our judgement, have a proven and
consistent record of earnings profitability, but whose prices do not adequately
reflect their underlying profitability. In addition, we also consider financial
strength, trading liquidity and technical readings.
This is a consistent investment approach that is not affected by emotion or
short-term market trends. In the domestic large-cap market, we believe that
remaining fully invested and ignoring normal fluctuations is the key to
realizing good long-term equity returns.
US EMERGING GROWTH PORTION PERSPECTIVE
Q: JIM, CAN YOU COMMENT ON THE EMERGING GROWTH MARKET IN THE FIRST HALF OF THE
YEAR?
A: The emerging growth market experienced a great deal of volatility in the
first half of 2000. The market -- driven by technology stocks -- experienced a
great two and a half months during the first quarter, but saw a sharp sell-off
in March. In retrospect, technology stocks were chased to unsustainable levels,
partly by the influx of day traders and the market's enthusiasm over
technology. Since the sell-off, we've had a relatively strong rebound off those
lows.
One of the issues that investors have been grappling with since the technology
sell-off is valuation. In other words, how do you accurately value these
companies, given the fact that many of them don't yet have earnings? Investors
have increasingly accepted the notion that technology stocks should be valued
based on revenues rather than earnings. However, paying high share prices for
companies without earnings or cash flow carries strong risk.
We believe it is earnings that ultimately count.
The extremely high growth rate of many technology companies has also made
valuation difficult. Today, many technology companies are growing 30%, 40% or
50% on a sequential quarterly basis. Not too long ago, that was considered a
strong growth rate on an annual basis. So we're seeing young companies that are
doubling in size in three quarters, when previously that would have taken three
years. All of this has made it difficult for investors to value these stocks,
and as a result, many of them became highly overvalued before the sell-off.
As for interest rates, we may not have seen the end of increases by the Federal
Reserve. But if the Federal Reserve does limit future rate hikes, it could be
good news for high-valuation growth stocks, such as the majority of technology
stocks. Investment opportunities with a large potential return in the future
are generally worth more as interest rates decline.
2
<PAGE> 19
Q: DID THE VOLATILITY IN TECHNOLOGY STOCKS CAUSE YOU TO MAKE ANY MAJOR CHANGES
TO THE FUND?
A: We focus more on solid fundamentals and strong earnings than market
behavior, so we didn't make any dramatic changes to the US emerging growth part
of the Fund. In general, we look for companies with strong balance sheets that
may help them weather market overreactions. And because we find that companies
don't have access to funding through the stock market the way they did a few
months ago, we do a thorough review process to ensure that all of the companies
in which the emerging growth portfolio is invested can execute their business
plans without being overreliant on the capital markets.
Q: WHAT SECTORS DOES YOUR RESEARCH INDICATE LOOK PROMISING AS WE MOVE AHEAD?
A: One area we're focusing on is broadcast stocks. We added a number of these
to the Fund's portfolio during the first quarter. In the short term, we see a
robust advertising environment. Over the long-term, we believe it will be a
good area because of consolidation and new Federal Communications Commission
rules on ownership. As of June 30, the Fund's US emerging growth portion has
approximately 4% of its portfolio in broadcast stocks.
Another area we're excited about is oil services. We've increased our part of
the Fund's weighting in this area to 10%. Oil and natural gas prices have
increased dramatically. That means the oil industry has more of an incentive to
drill for new reserves. As a result of higher prices, they also have higher
cash flows and greater resources. And because the industry went through a tough
time prior to this, oil companies have reduced cost structures, so as business
picks up, they should see a leveraged impact on earnings. Of course, this is a
very cyclical business, so the outlook may change as we move ahead.
Q: AND TECHNOLOGY?
A: Technology stocks make up approximately 48% of
the emerging growth portion of the Ivy Growth Fund, and this large weighting
was a positive contributor to the Fund's performance in the first half of 2000.
We believe there are a number of opportunities in this sector as we move into
the second half of the year.
For example, we're continuing our focus on companies involved with Internet
infrastructure. Many businesses worldwide -- from the largest Fortune 500 and
Global 2000 companies to the smaller telecommunications firms, Internet service
providers and "dot-coms"-- are investing heavily in Internet-related hardware
and software, and we believe that companies that deliver these products and
services are well positioned. The Fund is invested in CacheFlow, which is
improving the performance of the Internet by "caching," or storing data closer
to the users that request it, and VeriSign, which provides electronic security.
The latter area is becoming increasingly important as e-commerce grows and
organizations attach internal networks to the Internet.
In the wireless area, we're particularly interested in what we call "real
estate companies for the new economy." These are companies such as Crown Castle
that rent space on communications towers to cellular providers or other
communications companies. We believe that this is a highly leveraged business
model that will benefit greatly from the continued growth in wireless usage,
particularly wireless Internet access.
Q: WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A: Over the last few years, there has been a boom in venture capital funding,
which helped bring new emerging growth companies to market. Valuations are
currently below average and future earnings growth looks strong. We believe the
outlook for emerging growth companies is very positive. In the technology
sector, we think volatility will continue, but not at the levels we saw in the
second quarter of this year. Longer term, we're very bullish on technology and
the Internet. The percentage of US investment dedicated to technology has
increased steadily over the last several years. We believe this trend will
continue for some time since many of the recent investments companies have made
in Internet infrastructure and e-commerce have had very high and measurable
results. In our view, we're just at the beginning of a revolution in Internet
and wireless technology, and we believe that this offers a lot of opportunity
for long-term investors.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
3
<PAGE> 20
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GROWTH FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 98.0% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES -- 1.9%
AppNet, Inc.(a)........................ 18,700 $ 673,200
Dendrite International, Inc.(a)........ 73,500 2,448,469
Diamond Technology Partners
Incorporated(a)...................... 8,400 739,200
FactSet Research Systems Inc........... 35,200 994,400
Forrester Research, Inc.(a)............ 18,500 1,347,032
ProBusiness Services, Inc.(a).......... 16,300 432,969
QRS Corporation(a)..................... 27,100 665,644
Razorfish Inc.(a)...................... 6,700 107,619
-----------
7,408,533
-----------
CAPITAL GOODS -- 2.3%
FedEx Corp.(a)......................... 25,000 950,000
General Electric Company............... 150,000 7,950,000
-----------
8,900,000
-----------
COMMUNICATION TOWERS -- 1.7%
Crown Castle International Corp.(a).... 73,000 2,664,500
Pinnacle Holdings Inc.(a).............. 34,400 1,857,600
SBA Communications Corp.(a)............ 40,800 2,119,050
-----------
6,641,150
-----------
COMPUTER EQUIPMENT & STORAGE -- 8.0%
Apple Computer, Inc.(a)................ 75,000 3,928,125
Dell Computer Corporation(a)........... 75,000 3,698,437
EMC Corporation........................ 45,000 3,462,187
Hewlett-Packard Company................ 25,000 3,121,875
International Business Machines
Corp.................................. 27,500 3,012,969
Microchip Technology(a)................ 50,000 2,913,282
Network Appliance, Inc.(a)............. 24,400 1,964,200
Sun Microsystems, Inc.(a).............. 96,200 8,748,188
-----------
30,849,263
-----------
CONSUMER CYCLICAL -- 3.9%
Best Buy Co., Inc.(a).................. 55,000 3,478,750
Dollar Tree Stores, Inc.(a)............ 53,100 2,100,769
Gap, Inc. (The)........................ 60,000 1,875,000
Home Depot, Inc........................ 57,500 2,871,407
Lowe's Companies, Inc.................. 60,000 2,463,750
Wal-Mart Stores, Inc................... 40,000 2,305,000
-----------
15,094,676
-----------
CONSUMER SERVICES -- 0.4%
SmartForce Public Limited Company
Sponsored ADR(a)(b)................... 33,100 1,588,800
-----------
CONSUMER STAPLES -- 3.5%
Anheuser-Busch Companies, Inc.......... 25,000 1,867,187
Colgate-Palmolive Company.............. 47,500 2,844,062
Heinz (H.J.) Company................... 50,000 2,187,500
Kimberly-Clark Corporation............. 45,000 2,581,875
PepsiCo, Inc........................... 55,000 2,444,062
Wrigley (Wm.) Jr. Company.............. 22,500 1,804,219
-----------
13,728,905
-----------
ELECTRONICS -- 2.0%
Agilent Technologies, Inc.(a).......... 20,000 1,475,000
Flextronics International Ltd.(a)(b)... 44,400 3,049,725
Jabil Circuit, Inc.(a)................. 30,800 1,528,450
Sanmina Corporation(a)................. 17,800 1,521,900
-----------
7,575,075
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
ENERGY -- 10.1%
BJ Services Company(a)................. 42,000 $ 2,625,000
BP Amoco plc Sponsored ADR(b).......... 41,000 2,319,062
Chevron Corporation.................... 25,000 2,120,312
Core Laboratories NV(a)(b)............. 98,900 2,868,100
Cross Timbers Oil Company.............. 45,000 995,625
Devon Energy Corporation............... 16,000 899,000
ENSCO International Incorporated....... 20,000 716,250
EOG Resources, Inc..................... 28,000 938,000
Exxon Mobil Corporation................ 40,000 3,140,000
Global Marine Inc.(a).................. 45,100 1,271,257
Grant Prideco, Inc.(a)................. 55,800 1,395,000
Hanover Compressor Company(a).......... 92,800 3,526,400
Key Energy Services, Inc.(a)........... 200,700 1,931,737
Louis Dreyfus Natural Gas Corp.(a)..... 41,900 1,311,994
Marine Drilling Companies, Inc.(a)..... 16,000 448,000
Nabors Industries, Inc.(a)............. 34,200 1,421,437
Noble Drilling Corporation(a).......... 85,900 3,538,007
Patterson Energy, Inc.(a).............. 44,800 1,276,800
Rowan Companies, Inc.(a)............... 19,600 595,350
Swift Energy Company(a)................ 39,100 1,109,462
Texaco Inc............................. 42,500 2,263,125
Weatherford International, Inc.(a)..... 58,100 2,313,107
-----------
39,023,025
-----------
ENTERTAINMENT -- 1.7%
Beasley Broadcast Group, Inc.(a)....... 98,700 1,344,787
Emmis Communications Corporation(a).... 24,600 1,017,825
Hispanic Broadcasting Corporation(a)... 18,000 596,250
Premier Parks, Inc.(a)................. 54,500 1,239,875
Radio One, Inc. -- Class D(a).......... 41,000 904,562
Radio One, Inc.(a)..................... 20,500 606,032
Regent Communications, Inc.(a)......... 121,700 1,045,860
-----------
6,755,191
-----------
FINANCIAL SERVICES -- 7.5%
Bank of America Corporation............ 45,000 1,935,000
Chase Manhattan Corporation (The)...... 65,000 2,994,062
Citigroup Inc.......................... 50,000 3,012,500
Concord EFS, Inc(a).................... 51,000 1,326,000
Federal Agricultural Mortgage Corp. --
Class C(a)........................... 24,000 349,500
Legg Mason, Inc........................ 50,000 2,500,000
Mellon Financial Corporation........... 60,000 2,186,250
Merrill Lynch & Co., Inc............... 35,000 4,025,000
Morgan Stanley Dean Witter & Co........ 65,000 5,411,250
Nava Finance Public Company Limited --
Foreign Registered(a)(b)(c).......... 40,000 --
Paine Webber Group Inc................. 55,000 2,502,500
State Street Corporation............... 25,000 2,651,562
-----------
28,893,624
-----------
HEALTHCARE -- 8.1%
Alkermes, Inc.(a)...................... 19,900 937,787
Bristol-Myers Squibb Company........... 55,000 3,203,750
Cytyc Corporation(a)................... 31,000 1,654,625
Eli Lilly and Company.................. 42,500 4,244,687
Emisphere Technologies, Inc............ 30,700 1,308,108
Johnson & Johnson...................... 32,500 3,310,937
Medicis Pharmaceutical Corporation --
Class A(a)........................... 43,600 2,485,200
MedQuist Inc.(a)....................... 26,000 884,000
Medtronic, Inc......................... 55,000 2,739,687
Merck & Co, Inc........................ 42,500 3,256,562
MiniMed Inc.(a)........................ 12,300 1,451,400
Pfizer Inc............................. 20,000 960,000
Renal Care Group, Inc.(a).............. 57,500 1,406,055
Schering-Plough Corporation............ 70,000 3,535,000
-----------
31,377,798
-----------
</TABLE>
<PAGE> 21
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
INTERNET & ELECTRONIC COMMERCE -- 8.2%
About.com, Inc.(a).................... 25,000 $ 787,500
Accrue Software(a).................... 20,100 713,550
Akamai Technologies, Inc.(a).......... 11,461 1,360,815
Alloy Online, Inc.(a)................. 52,000 585,000
Art Technology Group, Inc.(a)......... 30,600 3,088,687
Commerce One, Inc.(a)................. 9,600 435,750
Critical Path, Inc.(a)................ 24,500 1,428,657
Digex, Inc.(a)........................ 11,000 747,312
E.piphany, Inc.(a).................... 14,200 1,522,062
Entrust Technologies Inc.(a).......... 19,500 1,613,625
InfoSpace.com, Inc.(a)................ 21,600 1,193,400
Keynote Systems, Inc.(a).............. 37,900 2,674,319
Macromedia, Inc.(a)................... 16,100 1,556,669
McAfee.com Corporation(a)............. 12,000 312,750
Micromuse Inc.(a)..................... 22,600 3,739,947
Net Perceptions, Inc.(a).............. 10,000 158,750
Packeteer, Inc.(a).................... 45,500 1,325,187
Portal Software, Inc.(a).............. 13,600 868,700
Radware Ltd.(a)....................... 26,700 707,550
Stamps.com Inc.(a).................... 24,200 176,962
VeriSign, Inc.(a)..................... 22,845 4,032,142
Vignette Corporation(a)............... 19,000 988,297
WebTrends Corporation(a).............. 50,300 1,945,982
------------
31,963,613
------------
NETWORK EQUIPMENT & SOFTWARE -- 7.3%
American Power Conversion
Corporation(a)...................... 70,000 2,856,875
Cisco Systems, Inc.(a)................ 331,600 21,077,325
Clarent Corporation(a)................ 26,700 1,909,050
Concord Communications, Inc.(a)....... 24,200 964,975
Extreme Networks, Inc.(a)............. 14,000 1,477,000
Visual Networks, Inc.(a).............. 7,200 205,200
------------
28,490,425
------------
SEMICONDUCTOR EQUIPMENT -- 2.8%
Applied Materials, Inc.(a)............ 35,000 3,171,875
ASM Lithography Holding NV(a)(b)...... 17,400 767,775
KLA-Tencor Corporation(a)............. 27,400 1,604,612
Lam Research Corporation(a)........... 21,400 802,500
Novellus Systems, Inc.(a)............. 54,300 3,071,344
Photronics, Inc.(a)................... 13,700 388,737
Teradyne, Inc.(a)..................... 14,800 1,087,800
------------
10,894,643
------------
SEMICONDUCTORS -- 11.2%
Altera Corporation(a)................. 25,000 2,548,437
Analog Devices, Inc.(a)............... 42,500 3,230,000
Applied Micro Circuits
Corporation(a)...................... 8,200 809,750
Integrated Device Technology,
Inc.(a)............................. 35,800 2,143,525
Intel Corporation..................... 90,000 12,031,875
Lattice Semiconductor
Corporation(a)...................... 35,000 2,419,375
Linear Technology Corporation......... 32,000 2,046,000
LSI Logic Corporation(a).............. 70,000 3,788,750
Maxim Integrated Products, Inc.(a).... 16,100 1,093,794
PMC-Sierra, Inc.(a)(b)................ 7,600 1,350,425
RF Micro Devices, Inc.(a)............. 10,200 893,775
Texas Instruments Inc................. 60,000 4,121,250
Virata Corporation(a)................. 17,900 1,067,287
Vitesse Semiconductor
Corporation(a)...................... 35,000 2,574,687
Xilinx, Inc.(a)....................... 40,000 3,302,500
------------
43,421,430
------------
SOFTWARE -- 4.6%
Actuate Software Corporation(a)....... 17,100 912,712
Adobe Systems Incorporated............ 25,000 3,250,000
Mercury Interactive Corporation(a).... 14,300 1,383,525
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Microsoft Corporation(a).............. 122,600 $ 9,808,000
NetIQ Corporation(a).................. 12,895 768,865
Peregrine Systems, Inc.(a)............ 27,700 960,844
Symantec Corporation(a)............... 17,300 933,119
------------
18,017,065
------------
TELECOMMUNICATIONS EQUIPMENT -- 5.6%
Advanced Fibre Communications,
Inc.(a)............................. 31,500 1,427,344
Avanex Corporation(a)................. 7,500 716,250
Aware, Inc.(a)........................ 29,600 1,513,300
CacheFlow Inc.(a)..................... 20,300 1,249,719
Comverse Technology, Inc.(a).......... 31,300 2,910,900
Ditech Communications
Corporation(a)...................... 25,300 2,392,432
JDS Uniphase Corporation(a)........... 35,000 4,195,625
Netopia, Inc.(a)...................... 11,200 450,800
Nortel Networks Corporation(b)........ 60,000 4,095,000
PC-Tel, Inc.(a)....................... 13,300 505,400
Tut Systems, Inc.(a).................. 37,200 2,134,350
------------
21,591,120
------------
TELECOMMUNICATIONS SERVICES -- 6.6%
Allegiance Telecom, Inc.(a)........... 15,200 972,800
ALLTEL Corporation.................... 50,000 3,096,875
AT&T Corporation...................... 50,000 1,581,250
Bell Atlantic Corporation............. 20,000 1,016,250
BellSouth Corporation................. 65,000 2,770,625
Cypress Communications, Inc.(a)....... 46,800 339,300
Global Crossing Ltd.(a)(b)............ 16,292 428,684
ITXC Corp.(a)......................... 15,000 531,094
McLeodUSA Incorporated(a)............. 92,800 1,919,800
Metromedia Fiber Network, Inc.(a)..... 38,800 1,539,875
Nextel Communications, Inc.(a)........ 43,200 2,643,300
NEXTLINK Communications, Inc.(a)...... 37,300 1,415,069
Pac-West Telecomm, Inc.(a)............ 60,000 1,200,000
PSINet Inc.(a)........................ 46,970 1,180,122
SBC Communications Inc................ 40,000 1,730,000
WinStar Communications, Inc.(a)....... 31,100 1,053,512
WorldCom, Inc.(a)..................... 50,000 2,293,750
------------
25,712,306
------------
UTILITIES -- 0.6%
Montana Power Company (The)........... 65,000 2,295,312
------- ------------
TOTAL INVESTMENTS -- 98.0%
(Cost -- $261,394,853)(d)........... 380,221,954
OTHER ASSETS, LESS
LIABILITIES -- 2.0%................. 7,752,938
------------
NET ASSETS -- 100%.................... $387,974,892
============
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Foreign security
(c) Security 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, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is
as follows:
Gross unrealized appreciation.............. $129,499,055
Gross unrealized depreciation.............. (10,671,954)
------------
Net unrealized appreciation............ $118,827,101
============
Purchases and sales of securities other than short-term
obligations aggregated $234,120,732 and $216,243,807,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 22
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GROWTH FUND
--------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $261,394,853)..... $380,221,954
Cash........................................................ 8,765,418
Receivables
Investments sold.......................................... 2,015,286
Fund shares sold.......................................... 4,960
Dividends and interest.................................... 103,268
Other assets................................................ 45,296
------------
Total assets.............................................. 391,156,182
------------
LIABILITIES
Payables
Investments purchased..................................... 2,724,910
Fund shares repurchased................................... 48,343
Management fee............................................ 262,663
12b-1 service and distribution fees....................... 6,273
Other payables to related parties......................... 100,277
Accrued expenses............................................ 38,824
------------
Total liabilities......................................... 3,181,290
------------
NET ASSETS.................................................. $387,974,892
============
CLASS A
Net asset value and redemption price per share
($375,994,825/16,134,701 shares outstanding).............. $ 23.30
============
Maximum offering price per share ($23.30 X 100/94.25)*...... $ 24.72
============
CLASS B
Net asset value, offering price and redemption price** per
share ($10,409,710/457,801 shares outstanding)............ $ 22.74
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,055,975/47,390 shares outstanding).............. $ 22.28
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($514,382/22,051 shares outstanding)................ $ 23.33
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $224,347,033
Undistributed net realized gain on investments............ 46,461,946
Accumulated net investment loss........................... (1,660,341)
Net unrealized appreciation on investments................ 118,826,254
------------
NET ASSETS.................................................. $387,974,892
============
* 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> 23
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 817,670
Interest.................................................. 424,531
------------
1,242,201
------------
EXPENSES
Management fee............................................ $1,590,574
Transfer agent............................................ 374,984
Administrative services fee............................... 188,973
Custodian fees............................................ 77,397
Blue Sky fees............................................. 17,338
Auditing and accounting fees.............................. 35,878
Shareholder reports....................................... 60,534
Fund accounting........................................... 58,829
Trustees' fees............................................ 10,176
12b-1 service and distribution fees....................... 154,208
Legal..................................................... 18,559
Other..................................................... 11,186
------------
Total expenses........................................ 2,598,636
------------
NET INVESTMENT LOSS......................................... (1,356,435)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 46,332,132
Net change in unrealized appreciation on investments...... (25,688,505)
------------
Net gain on investment transactions................... 20,643,627
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 19,287,192
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 24
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--------------------------------------------------------------------------------
IVY GROWTH FUND
--------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-----------------------------
2000 1999
-----------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (1,356,435) $ (488,428)
Net realized gain on investments.......................... 46,332,132 58,569,033
Net change in unrealized appreciation on investments...... (25,688,505) 34,926,244
------------ ------------
Net increase resulting from operations................ 19,287,192 93,006,849
------------ ------------
Distributions to shareholders from capital gain
Class A................................................... -- (56,548,027)
Class B................................................... -- (1,211,582)
Class C................................................... -- (54,912)
Advisor Class............................................. -- (66,750)
------------ ------------
Total distributions to shareholders................... -- (57,881,271)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (6,588,256) 10,824,381
Class B................................................... 1,922,305 2,569,837
Class C................................................... 495,398 291,220
Advisor Class............................................. 51,131 53,759
------------ ------------
Net (decrease) increase resulting from Fund share
transactions......................................... (4,119,422) 13,739,197
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 15,167,770 48,864,775
NET ASSETS
Beginning of period....................................... 372,807,122 323,942,347
------------ ------------
END OF PERIOD............................................. $387,974,892 $372,807,122
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 25
9
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
----------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 22.15 $ 19.88 $ 17.80 $ 17.76 $ 16.75 $ 13.91
----------------------------------------------------------------------------
Income from investment operations
Net investment (loss) income.......... (.08) (.32) .01 .02 .02(a) .05(a)
Net gain on securities (both realized
and unrealized)..................... 1.23 6.61 2.49 1.98 2.86 3.73
----------------------------------------------------------------------------
Total from investment operations...... 1.15 6.29 2.50 2.00 2.88 3.78
----------------------------------------------------------------------------
Less distributions
Dividends
From net investment income.......... -- -- .02 .02 .02 .02
In excess of net investment
income............................ -- -- -- .13 .11 --
Distributions
From capital gain................... -- 4.02 .40 1.81 1.74 .89
In excess of capital gain........... -- -- -- -- -- .03
----------------------------------------------------------------------------
Total distributions................. -- 4.02 .42 1.96 1.87 .94
----------------------------------------------------------------------------
Net asset value, end of period.......... $ 23.30 $ 22.15 $ 19.88 $ 17.80 $ 17.76 $ 16.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total return(%)......................... 5.19(b) 31.87(c) 14.05(c) 11.69(c) 17.22(c) 27.33(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $375,995 $363,723 $318,444 $320,000 $314,908 $289,954
Ratio of expenses to average net assets
With expense reimbursement(%)......... -- -- -- -- 1.45 1.59
Without expense reimbursement(%)...... 1.35(d) 1.38 1.38 1.38 1.45 1.60
Ratio of net investment (loss) income to
average net assets(%)................. (.69)(d) (.13) .03 .13 .13(a) .32(a)
Portfolio turnover rate(%).............. 60 51 59 39 72 41
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
----------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 21.72 $ 19.60 $ 17.72 $ 17.69 $ 16.75 $ 13.91
----------------------------------------------------------------------------
Income from investment operations
Net investment loss................... (.18) (.21) (.16) (.14) (.13)(a) (.08)(a)
Net gain on securities (both realized
and unrealized)..................... 1.20 6.17 2.46 1.96 2.81 3.71
----------------------------------------------------------------------------
Total from investment operations...... 1.02 5.96 2.30 1.82 2.68 3.63
----------------------------------------------------------------------------
Less distributions
Dividends
From net investment income.......... -- -- .02 -- -- --
In excess of net investment
income............................ -- -- -- .07 -- --
Distributions
From capital gain................... -- 3.84 .40 1.72 1.74 .73
In excess of capital gain........... -- -- -- -- -- .06
----------------------------------------------------------------------------
Total distributions................. -- 3.84 .42 1.79 1.74 .79
----------------------------------------------------------------------------
Net asset value, end of period.......... $ 22.74 $ 21.72 $ 19.60 $ 17.72 $ 17.69 $ 16.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total return(%)......................... 4.70(b) 30.63(c) 12.99(c) 10.69(c) 16.02(c) 26.13(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $ 10,410 $ 8,070 $ 4,889 $ 4,433 $ 3,850 $ 2,669
Ratio of expenses to average net assets
With expense reimbursement(%)......... -- -- -- -- 2.37 2.55
Without expense reimbursement(%)...... 2.30(d) 2.34 2.32 2.30 2.37 2.56
Ratio of net investment loss to average
net assets(%)......................... (1.65)(d) (1.09) (.90) (.79) (.79)(a) (.64)(a)
Portfolio turnover rate(%).............. 60 51 59 39 72 41
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 26
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
-----------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $21.28 $19.27 $17.47 $17.59 $18.46
------------------------------------------------------------------
Income from investment operations
Net investment loss.............................. (.18) (.25) (.16) (.07) (.06)(a)
Net gain on securities (both realized and
unrealized).................................... 1.18 6.08 2.38 1.86 1.02
------------------------------------------------------------------
Total from investment operations................. 1.00 5.83 2.22 1.79 .96
------------------------------------------------------------------
Less distributions
Dividends
From net investment income..................... -- -- .02 -- --
In excess of net investment income............. -- -- -- .13 .09
Distributions from capital gain.................. -- 3.82 .40 1.78 1.74
------------------------------------------------------------------
Total distributions............................ -- 3.82 .42 1.91 1.83
------------------------------------------------------------------
Net asset value, end of period..................... $22.28 $21.28 $19.27 $17.47 $17.59
------------------------------------------------------------------
------------------------------------------------------------------
Total return(%).................................... 4.70(b) 30.43(c) 12.72(c) 10.58(c) 5.20(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $1,056 $ 576 $ 263 $ 400 $ 90
Ratio of expenses to average net assets
With expense reimbursement(%).................... -- -- -- -- 2.44(d)
Without expense reimbursement(%)................. 2.32(d) 2.47 2.53 2.33 2.44(d)
Ratio of net investment loss to average net
assets(%)........................................ (1.66)(d) (1.22) (1.11) (.82) (.86)(a)(d)
Portfolio turnover rate(%)......................... 60 51 59 39 72
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year April 30, 1998
June 30, ended (commencement)
ADVISOR CLASS (unaudited) December 31, to December 31,
-------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............ $22.18 $19.91 $20.36
-----------------------------------------------------
Income (loss) from investment operations
Net investment (loss) income.................. (.09) (.04) .03
Net gain (loss) on securities (both realized
and unrealized)............................. 1.24 6.33 (.06)
-----------------------------------------------------
Total from investment operations.............. 1.15 6.29 (.03)
-----------------------------------------------------
Less distributions
Dividends from net investment income.......... -- -- .02
Distributions from capital gain............... -- 4.02 .40
-----------------------------------------------------
Total distributions......................... -- 4.02 .42
-----------------------------------------------------
Net asset value, end of period.................. $23.33 $22.18 $19.91
-----------------------------------------------------
-----------------------------------------------------
Total return(%)................................. 5.18(b) 31.78(c) (.14)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........ $ 514 $ 438 $ 347
Ratio of expenses to average net assets(%)...... 1.42(d) 1.42 1.18(d)
Ratio of net investment (loss) income to average
net assets(%)................................. (.76)(d) (.17) .24(d)
Portfolio turnover rate(%)...................... 60 51 59
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total return does not reflect a sales charge.
(d) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 27
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, the exchange reflecting the last quoted sale will be
used. Otherwise, the security is valued at the calculated mean between the last
bid and asked price on the exchange on which the security is traded most
extensively. 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, 2000, a
security was determined to have no value by the Valuation Committee and has been
noted as such in the Portfolio of Investments.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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
capital gain, if any, are declared in December.
RECLASSIFICATIONS -- The timing and characterization of certain income and
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 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 .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, 2000, the net amount of underwriting
discount retained by IMDI was $9,269.
Under Service and Distribution Plans, the Fund reimburses IMDI for service fee
payments made to brokers at an annual rate not to exceed .25% of its average net
assets of shares issued after December 31, 1991, excluding Advisor Class. Class
B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net assets of Class B and Class C. IMDI may
use such distribution fee for purposes
<PAGE> 28
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GROWTH FUND
--------------------------------------------------------------------------------
12
of advertising and marketing shares of the Fund. Such fees of $102,989, $47,223
and $3,996, 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 $363,519, $9,836, $879 and $750, 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 661,355 $ 14,923,127 767,960 $ 16,672,824
Issued on
reinvestment of
distribution........ -- -- 2,388,070 52,346,427
Repurchased.......... (947,203) (21,511,383) (2,750,549) (58,194,870)
-------- ------------ ---------- ------------
Net (decrease)/
increase............ (285,848) $ (6,588,256) 405,481 $ 10,824,381
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 185,877 $ 4,141,231 183,614 $ 3,834,229
Issued on
reinvestment of
distributions....... -- -- 47,990 1,031,781
Repurchased.......... (99,712) (2,218,926) (109,427) (2,296,173)
-------- ------------ ---------- ------------
Net increase......... 86,165 $ 1,922,305 122,177 $ 2,569,837
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 66,923 $ 1,480,315 16,764 $ 356,582
Issued on
reinvestment of
distributions....... -- -- 1,881 39,625
Repurchased.......... (46,578) (984,917) (5,236) (104,987)
-------- ------------ ---------- ------------
Net increase......... 20,345 $ 495,398 13,409 $ 291,220
======== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 5,316 $ 121,276 4,549 $ 98,336
Issued on
reinvestment of
distributions....... -- -- 3,041 66,750
Repurchased.......... (3,016) (70,145) (5,250) (111,327)
-------- ------------ ---------- ------------
Net increase......... 2,300 $ 51,131 2,340 $ 53,759
======== ============ ========== ============
</TABLE>
03IGFX063000
<PAGE> 29
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
IVY INTERNATIONAL FUND II
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth primarily by investing in
large-cap equity securities traded in European, Pacific Basin and Latin
American markets.
An interview with Moira McLachlan, Vice President at Ivy Management, Inc. and
member of the Ivy International Fund II portfolio management team.
Q: MOIRA, CAN YOU GIVE US AN OVERVIEW OF THE PERFORMANCE OF INTERNATIONAL
MARKETS IN THE FIRST HALF OF 2000?
A: In Europe, where the Fund has 71% of its assets, the weakness in the euro
made headlines earlier in the year. This caused a drop in investor and consumer
confidence, although a weak euro was actually quite positive for the European
export sector. As we move ahead, we believe that the euro will recover against
other major currencies as the European economy continues its structural and
productivity growth.
Stock market performance in Europe has not been very strong, and we believe
that was largely due to interest rate worries. We have seen a number of
interest rate hikes in Europe this year. This affected the price of financial
stocks, and we took the opportunity of adding some attractive financial
companies to the Fund that our research previously indicated were too
expensive. We don't expect to see the end of interest rate hikes until later in
the year, as is the case, we believe, in the US. However, inflation in Europe
continues to be very low. We believe that interest rates in Europe will
continue to hover below US interest rates and that they will not hinder
economic activity in Europe.
A number of changes in Europe are also underway as a result of the European
Monetary Union. In our view, increased competition and the larger European
marketplace have contributed to consolidation. Merger and acquisition activity
has increased in virtually every industry in Europe. Companies are focusing on
their core business, and they are eliminating less profitable assets. In
Germany, we believe that changes in the tax law could lead to an acceleration
in German restructuring and corporate activity. At the beginning of the year we
took advantage of this trend and added to the Fund's German holdings.
Changes in Japan are also opening opportunities for investors. A great deal of
corporate restructuring is taking place, and Japan's economy seems to be
turning in the right direction. As a result, we have added significantly to the
Fund's Japanese holdings, and we've broadened its Japanese sector
diversification.
Driven by technology stocks, emerging markets did relatively well in the first
quarter of the year. However, they suffered from a sell-off of these same
stocks in the second quarter. Latin America, particularly Mexico, Argentina and
Venezuela, benefited from higher commodity prices, as primary materials make up
a large portion of that region's output. Growth in Asia was driven by improved
domestic demand, and Far East production has returned to pre-crisis levels.
Many businesses in Asia are restructuring, which
<PAGE> 30
IVY INTERNATIONAL FUND II
should allow for higher profitability. We took advantage of volatility by
adding a number of Hong Kong blue chips to the portfolio.
Overall, emerging market performance has been weak this year, but we believe
that this was a function of the markets rather than economic fundamentals. Most
of the emerging markets have very strong fundamentals, and as they recover from
the 1997 and 1998 crises, we believe there will be an upward trend. There may,
however, be continued volatility. The Fund has approximately 9.4% of its assets
in emerging markets.
"WHEN MARKETS OVERREACT ON THE DOWNSIDE, AS WE BELIEVE THEY DID IN
MARCH AND APRIL, IT CREATES EXCELLENT OPPORTUNITIES FOR VALUE INVESTORS."
Q: HOW DID ALL OF THIS AFFECT THE FUND'S PERFORMANCE?
A: The Fund's technology underweighting was a disadvantage as the "new economy"
technology, media and telecommunications stocks outperformed during most of the
first quarter. However, after the sell-off of those same stocks in March, the
Fund performed well. It held up better than the overall market because it was
not exposed to the most vulnerable stocks.
When markets overreact on the downside, as we believe they did in March and
April, it creates excellent opportunities for value investors. Strategically, we
took advantage of the sell-off in technology to add high-quality names to the
Fund that, in our opinion, were previously overvalued. We also reduced the
Fund's exposure to emerging Asia in favor of more developed markets, such as
Japan. And when the "old economy" stocks -- we prefer to call them "real
economy" stocks -- came back into favor and began to outperform in the second
quarter, the Fund benefited from its strong position in those companies.
Q: WILL YOU MAINTAIN THE SAME STRATEGY?
A: The Fund will continue to use a disciplined approach to target investment
opportunities in high-quality, large-cap companies around the world. The goal
is to identify international stocks that are selling at prices lower than we
think the stocks are worth. We concentrate on finding companies that, in our
opinion, will rebound and that will provide potentially high returns. Through
our research, we look at a company's fundamentals and try to determine a
reasonable price to pay for a company's future earnings. The goal is to
purchase undervalued stocks, not just low-priced ones. We also consider
political and social stability, foreign trade relationships, central bank
policies and currency issues.
Q: WHAT IS YOUR OUTLOOK FOR THE REST OF 2000?
A: During the first half of the year, we believe that uncertain performance in
markets around the world was related to nervousness about the Federal Reserve
Board and US interest rates. If the Federal Reserve winds down its tightening
of the US economy, it is our belief that investors worldwide are going to focus
back on the fundamentals of particular regions. We should see a renewed focus
on the increase in Japan's gross domestic product, which is positive for both
Japan and other markets that export to Asia, and on the positive economic
growth and corporate changes -- consolidation, restructuring and more -- taking
place in Europe. In Latin America, and in emerging markets in general, there
are improving economic fundamentals and a strong recovery from the bottom of
the cycle. We're seeing this improved economic growth translate into higher
earnings, and valuations that are lower than those in the United States. If
investors stop watching the Federal Reserve, they may refocus on the factors
that are driving corporate profitability all over the world. As a result, we
anticipate a much healthier international market for the rest of the year.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
2
<PAGE> 31
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 99.8% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
EUROPE -- 70.5%
-------------------------------
DENMARK -- 1.1%
Den Danske Bank Group........... 13,462 $ 1,626,064
------------
FINLAND -- 2.5%
Metso Oyj....................... 79,182 956,378
Nokia Oyj Sponsored ADR......... 42,400 2,117,350
Stora Enso Oyj -- R Shares...... 88,958 814,368
------------
3,888,096
------------
FRANCE -- 15.6%
Alcatel......................... 48,000 3,161,043
Banque Nationale de Paris....... 36,119 3,490,026
Cie Generale des Etablissements
Michelin -- Class B........... 40,000 1,288,727
Groupe Danone................... 9,800 1,305,790
Pernod-Ricard................... 28,100 1,535,372
Peugeot Citroen................. 6,122 1,233,555
Schneider SA.................... 18,709 1,309,200
Scor SA......................... 39,000 1,705,129
Societe Generale................ 52,400 3,164,494
Suez Lyonnaise des Eaux......... 9,664 1,699,908
TotalFinaElf -- B Shares........ 16,321 2,512,608
TotalFinaElf ADR................ 25,100 1,927,994
------------
24,333,846
------------
GERMANY -- 7.1%
Adidas-Salomon AG............... 19,600 1,085,966
Bayer AG........................ 42,200 1,650,460
DaimlerChrysler AG.............. 20,467 1,078,088
Deutsche Lufthansa AG........... 40,000 939,417
Hornbach Holding
AG -- Preferred............... 32,994 1,198,689
Merck KGaA...................... 49,555 1,510,592
Siemens AG...................... 16,700 2,521,329
Volkswagen AG................... 26,040 998,466
------------
10,983,007
------------
IRELAND -- 0.7%
Bank of Ireland................. 167,152 1,053,513
------------
ITALY -- 1.2%
Banca Popolare di Milano........ 250,000 1,809,337
------------
NETHERLANDS -- 7.1%
AKZO Nobel NV................... 41,002 1,749,031
Fortis (NL) NV.................. 52,910 1,546,421
ING Groep NV.................... 28,800 1,954,601
Koninklije (Royal) Philips
Electronics NV................ 87,900 4,162,443
KPN NV.......................... 37,790 1,697,145
------------
11,109,641
------------
NORWAY -- 0.7%
Norsk Hydro A.S. Sponsored
ADR........................... 27,000 1,135,688
------------
PORTUGAL -- 1.6%
Portugal Telecom S.A. Sponsored
ADR........................... 224,500 2,525,625
------------
SPAIN -- 3.6%
Endesa S.A. Sponsored ADR....... 64,900 1,265,550
Repsol-YPF, S.A. Sponsored
ADR........................... 57,000 1,129,312
Telefonica S.A. Sponsored
ADR(a)........................ 49,865 3,194,465
------------
5,589,327
------------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
SWEDEN -- 3.4%
Electrolux AB................... 95,585 $ 1,487,603
Investor AB..................... 191,765 2,634,638
Volvo AB -- B Free Shares....... 51,483 1,124,080
------------
5,246,321
------------
SWITZERLAND -- 6.8%
Cie Financiere Richemont AG..... 1,060 2,865,015
Holderbank Financiere Glaris
AG............................ 927 1,140,176
Nestle AG Registered............ 668 1,341,287
Novartis AG Registered.......... 1,895 3,011,368
UBS AG -- Registered............ 15,200 2,234,105
------------
10,591,951
------------
UNITED KINGDOM -- 19.1%
Allied Zurich plc............... 187,000 2,206,759
Barclay's Bank ORD.............. 78,125 1,939,684
Bass plc........................ 172,000 1,924,288
Billiton plc.................... 247,039 998,560
British Airways plc............. 343,000 1,974,515
British Telecommunications
plc........................... 108,000 1,396,300
Cadbury Schweppes plc........... 165,270 1,086,503
Diageo plc...................... 156,463 1,401,082
Gallaher Group plc.............. 359,000 1,960,641
Hanson plc Sponsored ADR........ 46,900 1,653,225
Hilton Group plc................ 644,000 2,252,138
Imperial Chemical Industries
plc........................... 126,660 1,000,938
Pilkington plc.................. 1,504,320 2,129,360
PowerGen plc.................... 132,305 1,137,684
Rio Tinto plc................... 36,912 604,633
Rolls-Royce plc................. 250,000 894,147
Royal & Sun Alliance Insurance
Group plc..................... 255,000 1,649,375
Shell Transport & Trading Co.
plc........................... 220,539 1,856,339
Unilever plc.................... 277,000 1,670,063
------------
29,736,234
------------
FAR EAST -- 25.3%
-------------------------------
AUSTRALIA -- 3.7%
Australia & New Zealand Banking
Group Ltd..................... 201,700 1,551,351
Broken Hill Proprietary Company
Limited....................... 108,200 1,283,068
National Australia Bank Ltd..... 104,123 1,744,114
Westpac Banking Corp. Ltd....... 164,000 1,186,550
------------
5,765,083
------------
HONG KONG -- 1.9%
Cheung Kong Holdings Ltd........ 204,000 2,257,207
HSBC Holdings plc............... 66,200 755,840
------------
3,013,047
------------
JAPAN -- 15.9%
Bank Of Tokyo-Mitsubishi,
Ltd........................... 82,000 992,821
Canon Inc....................... 62,000 3,094,096
Daiwa Securities Group Inc...... 66,000 873,334
Fuji Photo Film Ordinary........ 49,000 2,009,990
Matsushita Electric Industrial
Co............................ 87,000 2,261,310
NEC Corporation................. 91,000 2,864,137
Nintendo Co., Ltd............... 9,700 1,697,934
Nomura Securities Co.,
Ltd.(The)..................... 95,000 2,330,071
Sankyo Company, Limited......... 94,000 2,127,853
Sharp Corporation............... 134,000 2,374,730
</TABLE>
<PAGE> 32
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
--------------------------------------------------------------------------------
4
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
Sony Corporation................ 24,400 $ 2,283,143
Sumitomo Electric Industries,
Ltd........................... 107,000 1,838,594
------------
24,748,013
------------
MALAYSIA -- 0.2%
Sime Darby Berhad............... 263,000 337,754
------------
NEW ZEALAND -- 1.9%
Telecom Corporation of New
Zealand Limited............... 420,000 1,472,992
Tourism Holdings Limited........ 1,344,652 1,550,854
------------
3,023,846
------------
PHILIPPINES -- 0.1%
Benpres Holdings Corporation
Sponsored GDR(a).............. 91,500 177,281
------------
SINGAPORE -- 1.6%
DBS Land Ltd.................... 305,000 395,147
Overseas Union Bank Ltd......... 373,205 1,446,215
Singapore Press Holdings Ltd.... 38,000 593,414
------------
2,434,776
------------
THAILAND -- 0.0%
Nava Finance Public Company
Limited -- Foreign
Registered(a)(b).............. 7,300 --
------------
LATIN AMERICA -- 4.0%
-------------------------------
ARGENTINA -- 0.4%
Telefonica de Argentina S.A.
Sponsored ADR................. 18,600 590,550
------------
BRAZIL -- 3.1%
Cia Vale do Rio Doce --
Preferred A................... 53,000 1,495,441
Petroleo Brasileiro S.A.
(Petrobras)................... 40,000 1,208,459
Telecomunicacoes Brasileiras
S.A. (Telebras) Sponsored
ADR -- Preferred Block........ 18,300 1,777,387
Telecomunicacoes de Sao Paulo
S.A. (Telesp) Sponsored ADR... 18,300 338,550
------------
4,819,837
------------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
MEXICO -- 0.5%
Panamerican Beverages Inc....... 50,700 $ 757,331
------------
TOTAL INVESTMENTS -- 99.8%
(Cost -- $131,995,871)........ 155,296,168
(Cost on Federal income tax
basis -- $132,968,318)
OTHER ASSETS, LESS LIABILITIES -- 0.2% 254,946
------------
NET ASSETS -- 100%.............. $155,551,114
============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Security valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note I to the Financial
Statements.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation.............. $ 32,805,034
Gross unrealized depreciation.............. (9,504,737)
------------
Net unrealized appreciation for
financial statement purposes......... 23,300,297
Less: tax basis adjustments................ (972,447)
------------
Net unrealized appreciation for Federal
income tax purposes.................. $ 22,327,850
============
Purchases and sales of securities other than short-term
obligations aggregated $32,848,789 and $37,366,972,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 33
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $131,995,871)..... $155,296,168
Receivables
Investments sold.......................................... 1,519,866
Fund shares sold.......................................... 32,503
Dividends and interest.................................... 718,875
Manager for expense reimbursement......................... 23,074
Deferred organization expenses.............................. 23,301
Other assets................................................ 25,380
------------
Total assets.............................................. 157,639,167
------------
LIABILITIES
Payables
Fund shares repurchased................................... 175,293
Management fee............................................ 130,845
12b-1 service and distribution fees....................... 24,753
Other payables to related parties......................... 56,402
Due to custodian............................................ 1,651,555
Accrued expenses............................................ 49,205
------------
Total liabilities......................................... 2,088,053
------------
NET ASSETS.................................................. $155,551,114
============
CLASS A
Net asset value and redemption price per share
($31,697,040/2,756,858 shares outstanding)................ $ 11.50
============
Maximum offering price per share ($11.50 X 100/94.25)*...... $ 12.20
============
CLASS B
Net asset value, offering price and redemption price** per
share ($86,698,362/7,617,194 shares outstanding).......... $ 11.38
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($36,371,233/3,194,940 shares outstanding).......... $ 11.38
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($784,479/68,009 shares outstanding)................ $ 11.53
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $137,309,901
Accumulated net realized loss on investments and foreign
currency transactions................................... (5,949,687)
Undistributed net investment income....................... 860,979
Net unrealized appreciation on investments and foreign
currency transactions................................... 23,329,921
------------
NET ASSETS.................................................. $155,551,114
============
</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> 34
IVY LEAF LOGO
--------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
--------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $268,481 foreign taxes withheld......... $ 2,909,932
Interest.................................................. 179,344
-----------
3,089,276
-----------
EXPENSES
Management fee............................................ $814,361
Transfer agent............................................ 213,882
Administrative services fee............................... 81,436
Custodian fees............................................ 72,628
Blue Sky fees............................................. 17,884
Auditing and accounting fees.............................. 16,115
Shareholder reports....................................... 32,656
Amortization of organization expenses..................... 6,650
Fund accounting........................................... 52,516
Trustees' fees............................................ 6,085
12b-1 service and distribution fees....................... 678,552
Legal..................................................... 14,776
Other..................................................... 6,944
-----------
2,014,485
Expenses reimbursed by Manager.............................. (113,332)
-----------
Net expenses.......................................... 1,901,153
-----------
NET INVESTMENT INCOME....................................... 1,188,123
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (2,530,446)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (6,249,322)
-----------
Net loss on investment transactions................... (8,779,768)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(7,591,645)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 35
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------------
2000 1999
---------------------------
(UNAUDITED)
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 1,188,123 $ 433,456
Net realized (loss) gain on investments and foreign
currency transactions................................... (2,530,446) 2,938,637
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (6,249,322) 34,240,270
------------ ------------
Net (decrease) increase resulting from operations..... (7,591,645) 37,612,363
------------ ------------
Class A distributions
Dividends from net investment income...................... -- (277,354)
Distributions from capital gain........................... -- (66,770)
------------ ------------
Total distributions to Class A shareholders........... -- (344,124)
------------ ------------
Class B distributions
Dividends from net investment income...................... -- (88,102)
Distributions from capital gain........................... -- (188,377)
------------ ------------
Total distributions to Class B shareholders........... -- (276,479)
------------ ------------
Class C distributions
Dividends from net investment income...................... -- (36,951)
Distributions from capital gain........................... -- (86,889)
------------ ------------
Total distributions to Class C shareholders........... -- (123,840)
------------ ------------
Advisor Class distributions
Dividends from net investment income...................... -- (44,386)
Distributions from capital gain........................... -- (7,240)
------------ ------------
Total distributions to Advisor Class shareholders..... -- (51,626)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... 340,624 814,377
Class B................................................... (4,289,140) (5,763,951)
Class C................................................... (5,551,036) (5,870,687)
Advisor Class............................................. (2,087,468) 1,884,475
------------ ------------
Net decrease resulting from Fund share transactions... (11,587,020) (8,935,786)
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (19,178,665) 27,880,508
NET ASSETS
Beginning of period....................................... 174,729,779 146,849,271
------------ ------------
END OF PERIOD............................................. $155,551,114 $174,729,779
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 860,979 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 36
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six for the period
months ended May 13, 1997
June 30, for the year ended (commencement)
CLASS A (unaudited) December 31, to December 31,
----------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 11.99 $ 9.48 $ 8.98 $ 10.01
------------------------------------------------------------
(Loss) income from investment operations
Net investment income(a).................. .12 .09 .08 -- (b)
Net (loss) gain on securities (both
realized and unrealized)................ (.61) 2.54 .52 (1.03)(b)
------------------------------------------------------------
Total from investment operations............ (.49) 2.63 .60 (1.03)
------------------------------------------------------------
Less distributions
Dividends from net investment income...... -- .10 .08 --
Distributions from capital gain........... -- .02 .02 --
------------------------------------------------------------
Total distributions....................... -- .12 .10 --
------------------------------------------------------------
Net asset value, end of period.............. $ 11.50 $ 11.99 $ 9.48 $ 8.98
------------------------------------------------------------
------------------------------------------------------------
Total return(%)............................. (4.09)(c) 27.79(d) 6.63(d) (10.29)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $31,697 $32,624 $24,993 $16,202
Ratio of expenses to average net assets
With expense reimbursement(%)............. 1.73(e) 1.72 1.74 1.80 (e)
Without expense reimbursement(%).......... 1.87(e) 1.87 1.88 2.11 (e)
Ratio of net investment income to average
net assets(%)(a).......................... 2.06(e) .92 .80 .12 (e)
Portfolio turnover rate(%).................. 21 21 16 10
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six for the period
months ended May 13, 1997
June 30, for the year ended (commencement)
CLASS B (unaudited) December 31, to December 31,
----------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 11.91 $ 9.42 $ 8.93 $ 10.01
------------------------------------------------------------
(Loss) income from investment operations
Net investment income (loss)(a)........... .07 .01 .01 (.02)(b)
Net (loss) gain on securities (both
realized and unrealized)................ (.60) 2.51 .51 (1.06)(b)
------------------------------------------------------------
Total from investment operations.......... (.53) 2.52 .52 (1.08)
------------------------------------------------------------
Less distributions
Dividends from net investment income...... -- .01 .01 --
Distributions from capital gain........... -- .02 .02 --
------------------------------------------------------------
Total distributions..................... -- .03 .03 --
------------------------------------------------------------
Net asset value, end of period.............. $ 11.38 $ 11.91 $ 9.42 $ 8.93
------------------------------------------------------------
------------------------------------------------------------
Total return(%)............................. (4.45)(c) 26.81(d) 5.84(d) (10.29)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).... $86,698 $95,363 $80,938 $53,652
Ratio of expenses to average net assets
With expense reimbursement(%)............. 2.51(e) 2.51 2.49 2.63 (e)
Without expense reimbursement(%).......... 2.65(e) 2.66 2.63 2.94 (e)
Ratio of net investment income (loss) to
average net assets(%)(a).................. 1.29(e) .12 .05 (.71)(e)
Portfolio turnover rate(%).................. 21 21 16 10
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 37
9
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six for the period
months ended May 13, 1997
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
-------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA --------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 11.92 $ 9.42 $ 8.93 $ 10.01
------------------------------------------------------
(Loss) income from investment operations
Net investment income (loss)(a)............ .07 .02 .01 (.02)(b)
Net (loss) gain on securities (both
realized and unrealized)................. (.61) 2.51 .51 (1.06)(b)
------------------------------------------------------
Total from investment operations........... (.54) 2.53 .52 (1.08)
------------------------------------------------------
Less distributions
Dividends from net investment income....... -- .01 .01 --
Distributions from capital gain............ -- .02 .02 --
------------------------------------------------------
Total distributions...................... -- .03 .03 --
------------------------------------------------------
Net asset value, end of period............... $ 11.38 $ 11.92 $ 9.42 $ 8.93
======================================================
Total return(%).............................. (4.53)(c) 26.91(d) 5.79(d) (10.79)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..... $36,371 $43,995 $40,408 $27,074
Ratio of expenses to average net assets
With expense reimbursement(%).............. 2.52(e) 2.49 2.52 2.63(e)
Without expense reimbursement(%)........... 2.66(e) 2.64 2.66 2.94(e)
Ratio of net investment income (loss) to
average net assets(%)(a)................... 1.28(e) .14 .03 (.71)(e)
Portfolio turnover rate(%)................... 21 21 16 10
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year February 23, 1998
June 30, ended (commencement)
ADVISOR CLASS (unaudited) December 31, to December 31,
-----------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA ----------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period..... $11.99 $ 9.48 $ 9.63
----------------------------------------------------
(Loss) income from investment
operations
Net investment income(a)............... .14 .04 .11
Net (loss) gain on securities (both
realized and unrealized)............. (.60) 2.64 (.13)
----------------------------------------------------
Total from investment operations....... (.46) 2.68 (.02)
----------------------------------------------------
Less distributions
Dividends from net investment income... -- .10 .11
Distributions from capital gain........ -- .07 .02
----------------------------------------------------
Total distributions.................. -- .17 .13
----------------------------------------------------
Net asset value, end of period........... $11.53 $11.99 $ 9.48
====================================================
Total return(%).......................... (3.84)(c) 28.30(d) (.15)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $ 784 $2,748 $ 510
Ratio of expenses to average net assets
With expense reimbursement(%).......... 1.34(e) 1.38 1.32(e)
Without expense reimbursement(%)....... 1.48(e) 1.53 1.45(e)
Ratio of net investment income to average
net assets(%)(a)....................... 2.46(e) 1.25 1.23(e)
Portfolio turnover rate(%)............... 21 21 16
</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
The accompanying notes are an integral part of the financial statements.
<PAGE> 38
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
--------------------------------------------------------------------------------
10
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000, the
security valued by the Valuation Committee had no value and has 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 on
foreign securities, 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, as
amended (the "Code"), 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 carryover of approximately $3,103,000
as of December 31, 1999, 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 carryover expires in 2006.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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
capital gain distributions are determined annually in accordance with Federal
tax regulations
<PAGE> 39
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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 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 12b-1 fees and certain other expenses) to an annual rate of
1.50% 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, 2000, the net amount of underwriting
discount retained by IMDI was $3,111.
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
$40,779, $442,818 and $194,955, 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 $39,299, $119,359, $53,877 and $1,347, 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 2,418,747 $ 27,368,063 7,059,211 $ 73,053,749
Issued on
reinvestment of
distributions....... -- -- 17,489 204,448
Repurchased.......... (2,383,640) (27,027,439) (6,992,250) (72,443,820)
---------- ------------ ---------- ------------
Net increase......... 35,107 $ 340,624 84,450 $ 814,377
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 854,936 $ 9,615,382 1,600,633 $ 16,532,012
Issued on
reinvestment of
distributions....... -- -- 8,847 102,806
Repurchased.......... (1,241,571) (13,904,522) (2,197,427) (22,398,769)
---------- ------------ ---------- ------------
Net decrease......... (386,635) $ (4,289,140) (587,947) $ (5,763,951)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 284,004 $ 3,201,403 1,054,307 $ 10,931,588
Issued on
reinvestment of
distributions....... -- -- 3,301 38,360
Repurchased.......... (781,000) (8,752,439) (1,655,685) (16,840,635)
---------- ------------ ---------- ------------
Net decrease......... (496,996) $ (5,551,036) (598,077) $ (5,870,687)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 4,039,881 $ 45,538,734 648,709 $ 7,198,030
Issued on
reinvestment of
distributions....... -- -- 4,023 47,030
Repurchased.......... (4,201,010) (47,626,202) (477,410) (5,360,585)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (161,129) $ (2,087,468) 175,322 $ 1,884,475
========== ============ ========== ============
</TABLE>
<PAGE> 40
03IIF2063000
<PAGE> 41
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
IVY US EMERGING GROWTH FUND
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth through investment in the
common stocks of small- and medium-sized companies that are in the early stages
of their lifecycles and that have the potential for rapid growth.
The following is an interview with James W. Broadfoot III, portfolio manager of
Ivy US Emerging Growth Fund. He is the President of Ivy Management, Inc. and
author of the recently republished Investing in Emerging Growth Stocks.
Q: JIM, CAN YOU COMMENT ON THE EMERGING GROWTH MARKET IN THE FIRST HALF OF THE
YEAR?
A: The emerging growth market experienced a great deal of volatility in the
first half of 2000. The market -- driven by technology stocks -- experienced a
great two and a half months during the first quarter, but saw a sharp sell-off
in March. In retrospect, technology stocks were chased to unsustainable levels,
partly by the influx of day traders and the market's enthusiasm over
technology. Since the sell-off, we've had a relatively strong rebound off those
lows.
One of the issues that investors have been grappling with since the technology
sell-off is valuation. In other words, how do you accurately value these
companies, given the fact that many of them don't yet have earnings? Investors
have increasingly accepted the notion that technology stocks should be valued
based on revenues rather than earnings. However, paying high share prices for
companies without earnings or cash flow carries strong risk.
We believe it is earnings that ultimately count.
The extremely high growth rate of many technology companies has also made
valuation difficult. Today, many technology companies are growing 30%, 40% or
50% on a sequential quarterly basis. Not too long ago, that was considered a
strong growth rate on an annual basis. So we're seeing young companies that are
doubling in size in three quarters, when previously that would have taken three
years. All of this has made it difficult for investors to value these stocks,
and as a result, many of them became highly overvalued before the sell-off.
As for interest rates, we may not have seen the end of increases by the Federal
Reserve. But if the Federal Reserve does limit future interest rate hikes, it
could be good news for high-valuation growth stocks, such as the majority of
technology stocks. Investment opportunities with a large potential return in
the future are generally worth more as interest rates decline.
Q: DID THE VOLATILITY IN TECHNOLOGY STOCKS CAUSE YOU TO MAKE ANY MAJOR CHANGES
TO THE FUND?
A: We focus more on solid fundamentals and strong earnings than market
behavior, so we didn't make any dramatic changes to the Fund. In general, we
look for companies with strong balance sheets that may help them weather market
overreactions. And because we find that
<PAGE> 42
IVY US EMERGING GROWTH FUND
companies don't have access to funding through the stock market the way they
did a few months ago, we do a thorough review process to ensure that all of the
companies in which the Fund is invested can execute their business plans
without being overreliant on the capital markets.
Q: WHAT SECTORS DOES YOUR RESEARCH INDICATE LOOK PROMISING AS WE MOVE AHEAD?
A: One area we're focusing on is broadcast stocks. We added a number of these
to the Fund during the first quarter. In the short term, we see a robust
advertising environment. Over the long-term, we believe it will be a good area
because of consolidation. The Federal Communications Commission recently
changed the rules on ownership, so we believe there will be fewer, larger
companies controlling those assets. As of June 30, the Fund has approximately
4% of the portfolio in broadcast stocks.
"WE'RE CONTINUING OUR FOCUS ON COMPANIES INVOLVED WITH INTERNET
INFRASTRUCTURE. MANY BUSINESSES WORLDWIDE ARE INVESTING HEAVILY
IN INTERNET-RELATED HARDWARE AND SOFTWARE, AND WE BELIEVE THAT
COMPANIES THAT DELIVER THESE PRODUCTS AND SERVICES ARE WELL POSITIONED."
Another area we're excited about is energy. We've increased the Fund's
weighting in this area to 15%. Oil and natural gas prices have increased
dramatically. That means the oil industry has more of an incentive to drill for
new reserves. As a result of higher prices, they also have higher cash flows
and greater resources. And because the industry went through a tough time prior
to this, oil companies have reduced cost structures, so as business picks up,
they should see a leveraged impact on earnings. Of course, this is a very
cyclical business, so the outlook may change as we move ahead.
Q: AND TECHNOLOGY?
A: Technology stocks make up approximately 47% of the Ivy US Emerging Growth
Fund, and we believe there are a number of opportunities as we move into the
second quarter.
For example, we're continuing our focus on companies involved with Internet
infrastructure. Many businesses worldwide -- from the largest Fortune 500 and
Global 2000 companies to the smaller telecommunications firms, Internet service
providers and "dot-coms" -- are investing heavily in Internet-related hardware
and software, and we believe that companies that deliver these products and
services are well positioned. The Fund is invested in CacheFlow, which is
improving the performance of the Internet by "caching," or storing data closer
to the users that request it, and VeriSign, which provides electronic security.
The latter area is becoming increasingly important as e-commerce grows and
organizations attach internal networks to the Internet. We also think that
components suppliers -- particularly photonics firms specializing in optical
components for fiber optic communications backbones -- and companies that
provide high-speed communications semiconductors are well positioned to benefit
from the increased spending on Internet infrastructure.
In the wireless area, we're particularly interested in what we call "real
estate companies for the new economy." These are companies such as Crown Castle
that rent space on communications towers to cellular providers or other
communications companies. We believe that this is a highly leveraged business
model that will benefit greatly from the continued growth in wireless usage,
particularly wireless Internet access.
Q: HOW DOES YOUR INVESTMENT PROCESS HELP YOU TARGET OPPORTUNITIES IN THE
EMERGING GROWTH SECTOR?
A: First of all, we think it's important to focus on "fertile" areas, or
sectors of the economy that will support high rates of growth. We want to find
large markets that are undergoing change. As a result, technology is an
important component of the Fund. Another area that we like is services,
particularly business services, which comprises about 15% of the Fund. Another
important area is health care, which represents about 8.4% of the Fund, and
consumer goods and services, which represents about 7% of the Fund. All of
these are what we consider fertile areas.
Second, we prefer companies that have good visibility -- companies that either
operate in a steady, predictable business environment or those that are "early"
in terms of their product lifecycle. Companies with good visibility generally
don't need a management genius at the helm to keep the company on track. This
helps a great deal because small companies do occasionally stumble, and good
visibility helps to compensate for problems in management or other areas.
2
<PAGE> 43
IVY US EMERGING GROWTH FUND
A third and somewhat related point is that we like companies that have what we
call bulletproof earnings. We don't mind paying a premium for these companies.
We feel that the real risk with the emerging growth style of investing is much
more in the fundamental strength of a company and its ability to generate high
earnings than it is in valuation. If you pay too high a price going into a
small growth stock and the earnings come through, it won't take all that long
for the strong earnings to compensate you for the high price of the stock. On
the other hand, if the earnings don't come through, it will be tough to realize
good returns, no matter how inexpensive the stock may have seemed going in. If
you just go after the lowest multiple stocks that meet your growth criteria,
inevitably you'll end up with a lot of "junk" in the portfolio.
The fourth point is that when the stock starts to look questionable, we take a
hard-nosed attitude toward keeping it in the portfolio. We like to say that we
consider stocks guilty until proven innocent. This is because turnarounds with
small companies sometimes take longer than expected, and sometimes they don't
occur at all. There is a real risk associated with letting these stocks remain
in the portfolio while waiting for the turnaround to happen.
The fifth and final point is that diversification is extremely important with
this style of investing, so we keep a lot of stocks in the portfolio --
typically 135 or 140 names. We think this is important because with small
companies you often have company-specific events -- things that just come out
of left field. We don't want to have too much tied up in any one holding when
and if this happens. Also, keeping a lot of names in the portfolio helps
somewhat with liquidity, and that can be an issue with smaller-cap stocks.
Q: WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A: Over the last few years, there has been a boom in venture capital funding,
which helped bring new emerging growth companies to market. Valuations are
currently below average and future earnings growth looks strong. We believe the
outlook for emerging growth companies is very positive. In the technology
sector, we think volatility will continue, but not at the levels we saw in the
second quarter of this year. Longer term, we're very bullish on technology and
the Internet. In the US, over half of all capital spending now goes toward
technology goods. The percentage of US investment dedicated to technology has
increased steadily over the last several years. We believe this trend will
continue for some time since many of the recent investments companies have made
in Internet infrastructure and e-commerce have had very high and measurable
results. In our view, we're just at the beginning of a revolution in Internet
and wireless technology, and we believe that this offers a lot of opportunity
for long-term investors.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
3
<PAGE> 44
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 92.9% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
CONSUMER -- 7.2%
-------------------------------------
EDUCATIONAL SERVICES -- 1.6%
HealthStream, Inc.(a)................. 92,200 $ 507,100
ProsoftTraining.com(a)................ 60,800 1,022,200
SmartForce Public Limited Company
Sponsored ADR(a)(b)................. 39,600 1,900,800
------------
3,430,100
------------
ENTERTAINMENT -- 3.6%
Beasley Broadcast Group, Inc.(a)...... 112,900 1,538,263
Emmis Communications Corporation(a)... 27,800 1,150,225
Hispanic Broadcasting
Corporation(a)...................... 21,000 695,625
Premier Parks, Inc.(a)................ 68,300 1,553,825
Radio One, Inc. -- Class D(a)......... 46,400 1,023,700
Radio One, Inc.(a).................... 23,200 685,850
Regent Communications, Inc.(a)........ 136,000 1,168,750
------------
7,816,238
------------
RESTAURANTS -- 0.6%
P.F. Chang's China Bistro, Inc.(a).... 40,900 1,306,244
------------
SPECIALTY RETAIL -- 1.4%
Dollar Tree Stores, Inc.(a)........... 65,363 2,585,904
Hibbet Sporting Goods, Inc.(a)........ 20,600 484,100
------------
3,070,004
------------
ENERGY -- 15.0%
-------------------------------------
OIL & GAS PRODUCERS -- 2.8%
Cross Timbers Oil Company............. 51,200 1,132,800
Devon Energy Corporation.............. 18,100 1,016,994
EOG Resources, Inc.................... 31,800 1,065,300
Louis Dreyfus Natural Gas Corp.(a).... 48,300 1,512,394
Swift Energy Company(a)............... 44,800 1,271,200
------------
5,998,688
------------
OIL SERVICES -- 12.2%
BJ Services Company(a)................ 50,200 3,137,500
Core Laboratories NV(a)(b)............ 109,800 3,184,200
ENSCO International Incorporated...... 22,700 812,944
Global Marine Inc.(a)................. 51,100 1,440,381
Grant Prideco, Inc.(a)................ 62,800 1,570,000
Hanover Compressor Company(a)......... 110,600 4,202,800
Helmerich & Payne, Inc................ 23,300 870,837
Key Energy Services, Inc.(a).......... 231,000 2,223,375
Marine Drilling Companies, Inc.(a).... 19,100 534,800
Nabors Industries, Inc.(a)............ 38,710 1,608,884
Noble Drilling Corporation(a)......... 51,200 2,108,800
Patterson Energy, Inc.(a)............. 49,900 1,422,150
Rowan Companies, Inc.(a).............. 25,300 768,488
Weatherford International, Inc.(a).... 64,800 2,579,850
------------
26,465,009
------------
HEALTHCARE -- 8.4%
-------------------------------------
HEALTHCARE INFORMATION SYSTEMS -- 0.9%
Allscripts, Inc.(a)................... 37,400 860,200
MedQuist Inc.(a)...................... 28,400 965,600
------------
1,825,800
------------
HEALTHCARE SERVICES -- 1.0%
Renal Care Group, Inc.(a)............. 91,200 2,230,125
------------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
MEDICAL DEVICES & INSTRUMENTS -- 1.9%
Cytyc Corporation(a).................. 35,300 $ 1,884,138
MiniMed Inc.(a)....................... 18,900 2,230,200
------------
4,114,338
------------
PHARMACEUTICALS & BIOTECHNOLOGY -- 4.6%
Alkermes, Inc.(a)..................... 22,600 1,065,025
Allos Therapeutics Inc.(a)............ 73,000 711,750
Anesta Corp.(a)....................... 35,800 890,525
Emisphere Technologies, Inc........... 33,700 1,435,936
Medicis Pharmaceutical Corporation --
Class A(a).......................... 49,100 2,798,700
Shire Pharmaceuticals Group plc
ADR(a)(b)........................... 59,400 3,081,375
------------
9,983,311
------------
SERVICES -- 15.0%
-------------------------------------
BUSINESS SERVICES -- 1.5%
Concord EFS, Inc(a)................... 55,900 1,453,400
ProBusiness Services, Inc.(a)......... 17,700 470,156
TMP Worldwide Inc.(a)................. 19,300 1,424,581
------------
3,348,137
------------
COMMUNICATION TOWERS -- 3.7%
Crown Castle International Corp.(a)... 82,100 2,996,650
Pinnacle Holdings Inc.(a)............. 42,500 2,295,000
SBA Communications Corp.(a)........... 50,700 2,633,231
------------
7,924,881
------------
FINANCIAL SERVICES -- 0.2%
Federal Agricultural Mortgage Corp. --
Class C(a).......................... 28,050 408,478
------------
INFORMATION SERVICES -- 3.5%
Dendrite International, Inc.(a)....... 92,600 3,084,737
FactSet Research Systems Inc.......... 39,100 1,104,575
Forrester Research, Inc.(a)........... 21,100 1,536,344
Meta Group, Inc.(a)................... 41,900 806,575
PEC Solutions, Inc.(a)................ 132,500 1,076,563
------------
7,608,794
------------
SOCIAL SERVICES -- 0.5%
Maximus, Inc.(a)...................... 52,100 1,152,713
------------
TELECOMMUNICATION SERVICES -- 5.6%
Allegiance Telecom, Inc.(a)........... 17,400 1,113,600
Cypress Communications, Inc.(a)....... 53,500 387,875
ITXC Corp.(a)......................... 31,000 1,097,594
McLeodUSA Incorporated(a)............. 102,900 2,128,744
Metromedia Fiber Network, Inc.(a)..... 44,000 1,746,250
NEXTLINK Communications, Inc.(a)...... 43,000 1,631,312
Pac-West Telecomm, Inc.(a)............ 98,200 1,964,000
PSINet Inc.(a)........................ 36,102 907,063
WinStar Communications, Inc.(a)....... 35,750 1,211,031
------------
12,187,469
------------
TECHNOLOGY -- 47.3%
-------------------------------------
COMPUTER EQUIPMENT & STORAGE -- 1.4%
Network Appliance, Inc.(a)............ 28,000 2,254,000
PC-Tel, Inc.(a)....................... 19,100 725,800
------------
2,979,800
------------
</TABLE>
<PAGE> 45
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
ELECTRONIC COMMERCE -- 1.4%
Entrust Technologies Inc.(a).......... 22,000 $ 1,820,500
Pegasus Systems, Inc.(a).............. 50,400 548,100
QRS Corporation(a).................... 27,100 665,644
------------
3,034,244
------------
ELECTRONIC MANUFACTURING SERVICES -- 2.9%
Flextronics International
Ltd.(a)(b).......................... 46,800 3,214,575
Jabil Circuit, Inc.(a)................ 27,900 1,384,538
Sanmina Corporation(a)................ 20,200 1,727,100
------------
6,326,213
------------
INTERNET -- 12.4%
About.com, Inc.(a).................... 28,500 897,750
Accrue Software(a).................... 22,900 812,950
Akamai Technologies, Inc.(a).......... 13,048 1,549,246
Alloy Online, Inc.(a)................. 89,600 1,008,000
Art Technology Group, Inc.(a)......... 33,600 3,391,500
Critical Path, Inc.(a)................ 27,900 1,626,919
Digex, Inc.(a)........................ 12,100 822,044
Digital Insight Corporation(a)........ 19,665 668,610
Exodus Communications, Inc.(a)........ 33,800 1,556,912
InfoSpace.com, Inc.(a)................ 22,600 1,248,650
Keynote Systems, Inc.(a).............. 42,100 2,970,681
McAfee.com Corporation(a)............. 13,800 359,662
Net Perceptions, Inc.(a).............. 19,900 315,912
Portal Software, Inc.(a).............. 15,400 983,675
RADWARE Ltd.(a)....................... 30,100 797,650
Stamps.com Inc.(a).................... 26,600 194,512
VeriSign, Inc.(a)..................... 28,615 5,050,548
Vignette Corporation(a)............... 21,400 1,113,134
WebTrends Corporation(a).............. 38,400 1,485,600
------------
26,853,955
------------
MISCELLANEOUS TECHNOLOGY -- 0.8%
Gemstar International Group Ltd.(a)... 28,200 1,732,978
------------
NETWORK EQUIPMENT & SOFTWARE -- 6.0%
CacheFlow Inc.(a)..................... 23,200 1,428,250
Clarent Corporation(a)................ 30,300 2,166,450
Concord Communications, Inc.(a)....... 23,900 953,013
Extreme Networks, Inc.(a)............. 14,200 1,498,100
Micromuse Inc.(a)..................... 25,200 4,170,206
Packeteer, Inc.(a).................... 51,400 1,497,025
SonicWall, Inc.(a).................... 13,600 1,197,650
Visual Networks, Inc.(a).............. 300 8,550
------------
12,919,244
------------
OPERATIONAL SUPPORT SYSTEMS -- 0.7%
DSET Corporation(a)................... 51,100 1,552,163
------------
SEMICONDUCTOR EQUIPMENT -- 4.0%
ASM Lithography Holding NV(a)(b)...... 51,000 2,250,375
KLA-Tencor Corporation(a)............. 30,400 1,780,300
Lam Research Corporation(a)........... 23,800 892,500
Novellus Systems, Inc.(a)............. 12,300 695,719
Photronics, Inc.(a)................... 26,300 746,263
PRI Automation, Inc.(a)............... 15,300 1,000,476
Teradyne, Inc.(a)..................... 19,000 1,396,500
------------
8,762,133
------------
SEMICONDUCTORS -- 7.0%
Applied Micro Circuits
Corporation(a)...................... 16,100 1,589,875
Integrated Circuit Systems, Inc.(a)... 140,500 2,406,062
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Integrated Device Technology,
Inc.(a)............................. 40,400 $ 2,418,950
Maxim Integrated Products, Inc.(a).... 18,300 1,243,256
NETsilicon, Inc.(a)................... 54,100 1,771,775
Oak Technology, Inc.(a)............... 91,100 1,964,344
PMC-Sierra, Inc.(a)(b)................ 8,700 1,545,881
RF Micro Devices, Inc.(a)............. 11,100 972,638
Virata Corporation(a)................. 20,200 1,204,425
------------
15,117,206
------------
SOFTWARE -- 3.5%
Actuate Software Corporation(a)....... 19,200 1,024,800
Interact Commerce Corporation(a)...... 29,100 343,744
Macromedia, Inc.(a)................... 18,300 1,769,381
Mercury Interactive Corporation(a).... 16,200 1,567,350
NetIQ Corporation(a).................. 13,931 830,636
Peregrine Systems, Inc.(a)............ 31,900 1,106,531
Symantec Corporation(a)............... 19,500 1,051,781
------------
7,694,223
------------
SYSTEM INTEGRATORS -- 0.4%
Diamond Technology Partners
Incorporated(a)..................... 9,700 853,600
Razorfish Inc.(a)..................... 6,626 106,430
------------
960,030
------------
TELECOMMUNICATION EQUIPMENT -- 6.8%
Advanced Fibre Communications,
Inc.(a)............................. 35,200 1,595,000
Avanex Corporation(a)................. 11,700 1,117,350
Aware, Inc.(a)........................ 33,100 1,692,237
C-COR.net Corp.(a).................... 30,600 826,200
Comverse Technology, Inc.(a).......... 30,700 2,855,100
Ditech Communications
Corporation(a)...................... 29,200 2,761,225
Netopia, Inc.(a)...................... 21,000 845,250
Next Level Communications, Inc.(a).... 7,800 668,850
Tut Systems, Inc.(a).................. 41,900 2,404,013
------------
14,765,225
------------
TOTAL INVESTMENTS -- 92.9%
(Cost -- $126,728,842)(c)........... 201,567,743
OTHER ASSETS, LESS
LIABILITIES -- 7.1%................. 15,337,821
------------
NET ASSETS -- 100%.................... $216,905,564
============
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, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation.............. $ 80,010,663
Gross unrealized depreciation.............. (5,171,762)
------------
Net unrealized appreciation............ $ 74,838,901
============
Purchases and sales of securities other than short-term
obligations aggregated $95,677,620 and $100,265,959,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 46
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
--------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $126,728,842)..... $201,567,743
Cash........................................................ 15,124,115
Receivables
Investments sold.......................................... 2,245,572
Fund shares sold.......................................... 172,740
Other assets................................................ 20,447
------------
Total assets............................................ 219,130,617
------------
LIABILITIES
Payables
Investments purchased..................................... 1,692,918
Fund shares repurchased................................... 283,491
Management fee............................................ 143,886
12b-1 service and distribution fees....................... 23,720
Other payables to related parties......................... 55,022
Accrued expenses............................................ 26,016
------------
Total liabilities....................................... 2,225,053
------------
NET ASSETS.................................................. $216,905,564
============
CLASS A
Net asset value and redemption price per share
($115,464,923/2,347,829 shares outstanding)............... $ 49.18
============
Maximum offering price per share ($49.18 X 100/94.25)*...... $ 52.18
============
CLASS B
Net asset value, offering price and redemption price** per
share ($83,395,306/1,749,571 shares outstanding).......... $ 47.67
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($15,779,938/331,232 shares outstanding)............ $ 47.64
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($2,265,397/45,750 shares outstanding).............. $ 49.52
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $110,524,614
Undistributed net realized gain on investments............ 33,197,533
Accumulated net investment loss........................... (1,655,484)
Net unrealized appreciation on investments................ 74,838,901
------------
NET ASSETS.................................................. $216,905,564
============
</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> 47
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 8,251
Interest.................................................. 342,621
------------
350,872
------------
EXPENSES
Management fee............................................ $892,676
Transfer agent............................................ 190,643
Administrative services fee............................... 105,021
Custodian fees............................................ 34,386
Blue Sky fees............................................. 17,464
Auditing and accounting fees.............................. 17,540
Shareholder reports....................................... 30,931
Fund accounting........................................... 53,819
Trustees' fees............................................ 6,650
12b-1 service and distribution fees....................... 636,597
Legal..................................................... 15,444
Other..................................................... 5,185
------------
Total expenses.......................................... 2,006,356
------------
NET INVESTMENT LOSS......................................... (1,655,484)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 32,540,694
Net change in unrealized appreciation on investments...... (23,185,032)
------------
Net gain on investment transactions................... 9,355,662
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 7,700,178
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 48
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
--------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (1,655,484) $ (2,390,778)
Net realized gain on investments.......................... 32,540,694 26,371,155
Net change in unrealized appreciation on investments...... (23,185,032) 52,034,319
------------ ------------
Net increase resulting from operations................ 7,700,178 76,014,696
------------ ------------
Distributions to shareholders from capital gain
Class A................................................... -- (10,775,090)
Class B................................................... -- (8,243,868)
Class C................................................... -- (1,616,149)
Advisor Class............................................. -- (141,969)
------------ ------------
Total distributions to shareholders................... -- (20,777,076)
------------ ------------
Fund share transactions (Note 5)
Class A................................................... 9,308,481 10,324,776
Class B................................................... 915,720 4,662,639
Class C................................................... (250,830) 1,477,323
Advisor Class............................................. 905,482 319,095
------------ ------------
Net increase resulting from Fund share transactions... 10,878,853 16,783,833
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 18,579,031 72,021,453
NET ASSETS
Beginning of period....................................... 198,326,533 126,305,080
------------ ------------
END OF PERIOD............................................. $216,905,564 $198,326,533
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 49
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 47.29 $ 32.65 $ 27.67 $ 26.54 $ 24.12 $ 18.38
------------------------------------------------------------------------------------
Income from investment operations
Net investment loss...................... (.30) (.49) (.44)(a) (.41)(a) (.35) (.24)
Net gain on securities (both realized and
unrealized)............................ 2.19 20.70 5.42(a) 1.54(a) 4.84 7.90
------------------------------------------------------------------------------------
Total from investment operations......... 1.89 20.21 4.98 1.13 4.49 7.66
------------------------------------------------------------------------------------
Less distributions
Distributions from capital gain.......... -- 5.57 -- -- 2.07 1.92
------------------------------------------------------------------------------------
Total distributions.................... -- 5.57 -- -- 2.07 1.92
------------------------------------------------------------------------------------
Net asset value, end of period............. $ 49.18 $ 47.29 $ 32.65 $ 27.67 $26.54 $ 24.12
====================================================================================
Total return(%)............................ 4.00(b) 62.47(c) 18.00(c) 4.26(c) 18.52(c) 42.07(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $115,465 $101,798 $62,961 $64,910 $55,944 $39,456
Ratio of expenses to average net
assets(%)................................ 1.55(d) 1.69 1.70 1.67 1.76 1.95
Ratio of net investment loss to average net
assets(%)................................ (1.22)(d) (1.53) (1.48) (1.37) (1.31) (1.39)
Portfolio turnover rate(%)................. 49 107 67 65 68 86
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 46.01 $ 31.93 $ 27.26 $ 26.33 $ 24.12 $ 18.38
------------------------------------------------------------------------------------
Income from investment operations
Net investment loss...................... (.47) (.77) (.65)(a) (.33)(a) (.40) (.35)
Net gain on securities (both realized and
unrealized)............................ 2.13 20.15 5.32(a) 1.26(a) 4.68 7.85
------------------------------------------------------------------------------------
Total from investment operations......... 1.66 19.38 4.67 .93 4.28 7.50
------------------------------------------------------------------------------------
Less distributions
Distributions from capital gain.......... -- 5.30 -- -- 2.07 1.76
------------------------------------------------------------------------------------
Total distributions.................... -- 5.30 -- -- 2.07 1.76
------------------------------------------------------------------------------------
Net asset value, end of period............. $ 47.67 $ 46.01 $ 31.93 $ 27.26 $ 26.33 $ 24.12
====================================================================================
Total return(%)............................ 3.61(b) 61.27(c) 17.13(c) 3.53(c) 17.65(c) 41.03(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)... $ 83,395 $79,659 $52,940 $47,789 $35,321 $13,985
Ratio of expenses to average net
assets(%)................................ 2.31(d) 2.43 2.45 2.43 2.52 2.70
Ratio of net investment loss to average net
assets(%)................................ (1.97)(d) (2.27) (2.23) (2.13) (2.07) (2.14)
Portfolio turnover rate(%)................. 49 107 67 65 68 86
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 50
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 45.98 $ 31.91 $ 27.23 $ 26.29 $ 29.69
----------------------------------------------------------------------------
Income (loss) from investment operations
Net investment loss............................. (.47) (.80) (.63)(a) (.34)(a) (.14)
Net gain (loss) on securities (both realized and
unrealized)................................... 2.13 20.19 5.31(a) 1.28(a) (1.19)
----------------------------------------------------------------------------
Total from investment operations................ 1.66 19.39 4.68 .94 (1.33)
----------------------------------------------------------------------------
Less distributions
Distributions from capital gain................. -- 5.32 -- -- 2.07
----------------------------------------------------------------------------
Total distributions........................... -- 5.32 -- -- 2.07
----------------------------------------------------------------------------
Net asset value, end of period.................... $ 47.64 $ 45.98 $ 31.91 $ 27.23 $ 26.29
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total return(%)................................... 3.61(b) 61.32(c) 17.19(c) 3.58(c) (4.48)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......... $15,780 $ 15,438 $ 9,664 $ 9,484 $ 4,018
Ratio of expenses to average net assets(%)........ 2.29(d) 2.39 2.40 2.39 2.52 (d
Ratio of net investment loss to average net
assets(%)....................................... (1.95)(d) (2.23) (2.18) (2.09) (2.07)(d)
Portfolio turnover rate(%)........................ 49 107 67 65 68
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year April 30,1998
June 30, ended (commencement)
ADVISOR CLASS (unaudited) December 31, to December 31,
----------------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............ $47.57 $32.79 $28.82
------------------------------------------------------------
Income from investment operations
Net investment loss........................... (.26) (.44) (.23)(a)
Net gain on securities (both realized and
unrealized)................................. 2.21 20.85 4.20(a)
------------------------------------------------------------
Total from investment operations.............. 1.95 20.41 3.97
------------------------------------------------------------
Less distributions
Distributions from capital gain............... -- 5.63 --
------------------------------------------------------------
Total distributions......................... -- 5.63 --
------------------------------------------------------------
Net asset value, end of period.................. $49.52 $47.57 $32.79
------------------------------------------------------------
------------------------------------------------------------
Total return(%)................................. 4.10(b) 62.85(c) 13.78(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........ $2,265 $1,432 $ 740
Ratio of expenses to average net assets(%)...... 1.37(d) 1.46 1.22(d)
Ratio of net investment loss to average net
assets(%)..................................... (1.03)(d) (1.30) (1.00)(d)
Portfolio turnover rate(%)...................... 49 107 67
</TABLE>
(a) Based on average shares outstanding.
(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
The accompanying notes are an integral part of the financial statements.
<PAGE> 51
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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 on
foreign securities, 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,
2000, the interest rate was 6.0%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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
capital gain, if any, are declared in December.
RECLASSIFICATIONS -- The timing and characterization of certain income and
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 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 .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, 2000, the net amount of underwriting
discount retained by IMDI was $23,468.
Under Service and Distribution Plans, the Fund reimburses IMDI for service fee
payments made to brokers at
<PAGE> 52
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
--------------------------------------------------------------------------------
12
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 $134,424, $421,870 and $80,303, 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 $97,222, $77,564, $13,333 and $2,524 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 September 28, 1999, the shareholders of the Fund approved
an Agreement and Plan of Reorganization (the "Reorganization") which provided
for the transfer into the Fund of all or substantially all of the assets of
Hudson Capital Appreciation Fund. On September 28, 1999, the date of the
consummation of the Reorganization, the Fund acquired all or substantially all
of the assets of Hudson Capital Appreciation Fund. The transaction was
structured for tax purposes to qualify as a tax-free reorganization under the
Code. Hudson Capital Appreciation Fund shareholders contributed net assets
having an aggregate value of $20,055,887 (including $613,088 of unrealized
appreciation). Upon completion of the merger the combined net assets were
$136,344,216.
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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 540,272 $ 26,999,223 458,475 $ 15,397,779
Issued on
reinvestment of
distributions....... -- -- 216,321 9,890,187
Repurchased.......... (345,023) (17,690,742) (978,798) (33,152,346)
Issued on acquisition
of Hudson Capital
Appreciation Fund... -- -- 528,447 18,189,156
-------- ------------ -------- ------------
Net increase......... 195,249 $ 9,308,481 224,445 $ 10,324,776
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 172,903 $ 8,591,689 301,757 $ 10,453,142
Issued on
reinvestment of
distributions....... -- -- 136,162 6,058,721
Repurchased.......... (154,709) (7,675,969) (420,088) (13,715,955)
Issued on acquisition
of Hudson Capital
Appreciation Fund... -- -- 55,773 1,866,731
-------- ------------ -------- ------------
Net increase......... 18,194 $ 915,720 73,604 $ 4,662,639
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 36,495 $ 1,803,897 92,998 $ 3,191,755
Issued on
reinvestment of
distributions....... -- -- 22,335 993,253
Repurchased.......... (40,988) (2,054,727) (82,462) (2,707,685)
-------- ------------ -------- ------------
Net (decrease)/
increase............ (4,493) $ (250,830) 32,871 $ 1,477,323
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 53,278 $ 2,660,841 12,808 $ 448,645
Issued on
reinvestment of
distributions....... -- -- 3,086 141,967
Repurchased.......... (37,621) (1,755,359) (8,362) (271,517)
-------- ------------ -------- ------------
Net increase......... 15,657 $ 905,482 7,532 $ 319,095
======== ============ ======== ============
</TABLE>
03IEGF063000
<PAGE> 53
IVY FUNDS
Embracing the world
[LOGO]
IVY BOND FUND
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide a high level of current income by investing at least
65% of the Fund's total assets in bonds rated in the four highest ratings
categories used by Moody's Investor Services and Standard and Poor's
Corporation.
An interview with Richard Gluck, Senior Vice President and head of Ivy
Management, Inc.'s fixed-income team.
Q: RICHARD, WHAT HAPPENED IN THE DOMESTIC FIXED-INCOME MARKET IN THE FIRST HALF
OF 2000?
A: The big theme during the first half of the year was the improving fiscal
position of the US government and other governments around the world. The US
government has a budget surplus that keeps growing, and we believe there will be
a diminishing supply of government debt going forward. As a result, government
debt instruments, such as the treasury bond, have performed well, while
corporate debt instruments have performed relatively poorly. We've seen an
increasing "spread" between government and corporate bond yields, and that's
negative for corporate bond investors. It shows that investors are demanding a
higher risk premium to hold corporate bonds.
In the first half of the year, we've seen underperformance by not only corporate
bonds, but also by what we call "spread product" - anything other than
government bonds - in general. The total return of government debt is up
approximately 4.5% year-to-date, whereas the total return of corporate debt is
up approximately 2.1%.
Within the corporate debt category, the higher-grade bonds -- those rated A, AA
and AAA -- have performed reasonably uniformly, showing a total return of 2.3%
to 2.75%. Performance has varied among the rest. Our specialty, BBB-rated
corporate bonds, is up approximately 1.3% year-to-date, but high-yield bonds
have shown negative total returns. There has also been an increase in corporate
default rates, and this has caused certain individual bonds to perform poorly
during the year.
Q: WHAT EFFECT DID THE FEDERAL RESERVE BOARD'S INTEREST RATE INCREASES HAVE ON
THE BOND MARKETS?
A: Higher interest rates increase the cost of doing business for corporations,
which can cause deterioration in bond credit quality. The recent interest rate
increases have affected smaller companies with a high degree of financial
leverage more than they have affected the larger, more-established firms. In the
first half of 2000, the perception was that many companies were over-leveraged,
issuing a great deal of debt to buy back shares as they tried to improve return
to shareholders.
When the Federal Reserve Board met at the end of June, it did exactly what the
market expected it to do: it announced no change in rates, but gave a statement
that it would be vigilant in its effort to prevent inflation from increasing.
What matters now is the inflationary implications of the economic data that we
receive. At some point, we may get a run
<PAGE> 54
of data that looks stronger than what we've just seen. For example, oil prices
have tripled from their lows, and they may continue to increase. This could feed
into inflation, because when oil prices are high, many businesses -- trucking,
airline, power and manufacturing companies, to name but a few -experience an
increase in costs. This affects profit margins and could lead to higher consumer
prices. The Federal Reserve Board may not want to accommodate a situation that
could lead to inflation, so it may continue its tightening policy by raising
rates again.
Q: HOW DID MARKET DEVELOPMENTS AFFECT IVY BOND FUND?
A: The Fund's performance during the first half of this year was impacted by its
concentration in the underperforming BBB and BB sectors of the market. As a
result, we are reevaluating the credit quality of the bonds that the Fund owns
and moving toward the higher quality bonds within those sectors. Our target now
is 80% investment-grade bonds, which is up from our stated goal of 65%. We are
also continuing our focus on holding bonds that are more senior in the capital
structure -- identifying large, liquid, visible issues that are easier and less
expensive to trade.
"OUR GOAL IS TO BUY BONDS FROM COMPANIES WITH STRONG FUNDAMENTALS AND
SOLID OR IMPROVING CREDITWORTHINESS, BUT TO DO SO INEXPENSIVELY."
Q: HOW DO YOU TYPICALLY SELECT BONDS FOR THE PORTFOLIO, AND WILL THAT CHANGE?
A: The Fund's philosophy is to capitalize on "relative value in corporate
bonds," and that will remain the same. Our goal is to buy bonds from companies
with strong fundamentals and solid or improving creditworthiness, but to do so
inexpensively.
When selecting securities for the portfolio, we look at the bond relative to its
peer group, industry group and credit rating group to determine if the price is
reasonable. Then we evaluate the credit quality, based on the fundamental
characteristics of the company issuing the bond: its financial condition, its
business strategy, and its management. We attempt to limit risk by diversifying
among a variety of industries -- cable and media, retail, telecommunications,
industrials, finance, energy, transportation, utilities and more -- as well as
issuers within those industries. We maintain an intermediate sensitivity to
interest rate changes (duration) because we're focused on credit risk, not
interest-rate risk.
Q: WHAT'S YOUR OUTLOOK FOR THE SECOND HALF OF 2000?
A: If the Federal Reserve Board ends its cycle of interest rate increases and
interest rates stabilize, corporate credit quality will benefit. Of course,
there will still be individual cases of declining creditworthiness, and that's
why we are combing through the Fund's portfolio to solidify its stance. As I
mentioned, the Fund will have a renewed emphasis on quality in the sectors in
which it invests.
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
2
<PAGE> 55
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
U.S. CORPORATE BONDS -- 84.3% PRINCIPAL VALUE
--------------------------------------------------------------
<S> <C> <C>
Allied Waste North America Inc.,
7.625%, 01/01/06(a)............... $ 500,000 $ 437,500
American Standard Inc., 7.375%,
04/15/05(a)....................... 480,000 449,400
BRE Properties, 7.125%, 2/15/13..... 2,000,000 1,732,500
Burlington Industries, 7.25%,
08/01/27 (a)...................... 1,000,000 720,000
Calpine Corporation, 7.75%, 04/15/09
(a)............................... 900,000 848,250
CBS Corp., 7.125%, 11/01/23......... 1,000,000 870,000
CBS Corp., 7.15%, 05/20/05.......... 900,000 885,375
Circus Circus Enterprises, 7.625%,
07/15/13(a)....................... 1,000,000 820,000
Continental Airlines, 6.545%,
02/02/19.......................... 1,460,833 1,283,707
Cyprus Amax Minerals, 8.375%,
02/01/23.......................... 1,575,000 1,573,031
Darden Restaurants Inc., 7.125%,
02/01/16.......................... 1,250,000 1,151,562
Dell Computer Corporation, 6.55%,
04/15/08.......................... 500,000 466,250
Delphi Financial Group Inc., 8.00%,
10/01/03.......................... 2,500,000 2,428,125
Delta Air Lines, 9.30%, 01/02/11.... 1,000,000 1,062,500
Delta Air Lines, 9.59%, 01/12/17.... 1,500,000 1,653,735
Developers Diversified Realty Corp.,
6.625%, 01/15/08.................. 1,000,000 873,750
Farmers Insurance Exchange, 8.625%,
05/01/24.......................... 2,000,000 1,917,500
Fort James Corporation, 6.875%,
09/15/07.......................... 1,356,000 1,264,470
Indianapolis Life Ins. Co. 144A,
8.66%, 04/01/11................... 2,000,000 2,020,000
Indiantown Cogeneration, 9.77%,
12/15/20.......................... 1,500,000 1,560,000
International Paper Company, 7.625%,
01/15/07.......................... 1,000,000 970,000
Jackson National Life Ins. Co. 144A,
8.15%, 03/15/27................... 1,000,000 923,750
K-Mart Corporation, 8.375%, 12/01/04
(a)............................... 600,000 573,000
Leucadia National Corp., 7.75%,
08/15/13.......................... 2,200,000 2,024,000
Lumbermens Mutual Casualty 144A,
9.15%, 07/01/26................... 2,000,000 1,785,000
McDermott Inc., 8.75%, 05/19/23..... 2,000,000 1,392,500
Meritor Automotive, 6.80%,
02/15/09.......................... 1,000,000 856,250
News America Holdings, 7.70%,
10/30/25.......................... 2,000,000 1,817,500
News America Holdings, 7.75%,
01/20/24.......................... 1,000,000 893,750
Northrop Grumman Corp., 9.375%,
10/15/24.......................... 2,000,000 2,032,500
Pegasus Media & Communications 144A,
12.50%, 07/01/05(a)............... 1,000,000 1,065,000
Praxair Inc., 8.70%, 07/15/22....... 2,500,000 2,543,750
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
U.S. CORPORATE BONDS PRINCIPAL VALUE
<S> <C> <C>
Protection One, 7.375%,
08/15/05(a)....................... $1,000,000 $ 745,000
Pulte Corp., 7.625%, 10/15/17....... 1,500,000 1,201,875
R&B Falcon Corporation, 6.50%,
04/15/03(a)....................... 530,000 490,250
RJ Reynolds Tobacco Holdings Inc.,
7.375%, 05/15/03.................. 2,000,000 1,865,000
Royal Caribbean Cruises, 7.50%,
10/15/27.......................... 2,000,000 1,597,500
Safeway Inc., 7.00%, 09/15/07....... 1,000,000 951,250
Servicemaster Company, 7.25%,
03/01/38.......................... 2,500,000 1,978,125
Spieker Properties, 7.35%,
12/01/17.......................... 1,975,000 1,715,781
Storage USA Partnership L.P., 8.20%,
06/01/17.......................... 2,240,000 2,027,200
TE Products Pipeline Co., 7.51%,
01/15/28.......................... 1,975,000 1,789,844
Tele Communications Inc., 9.25%,
01/15/23.......................... 2,000,000 2,132,500
Tenet Healthcare Corp., 8.00%,
01/15/05(a)....................... 507,000 486,720
Time Warner Inc., 9.125%,
01/15/13.......................... 1,500,000 1,644,375
Time Warner Inc., 9.15%, 02/01/23... 1,000,000 1,085,000
Tommy Hilfiger USA, 6.50%,
06/01/03.......................... 1,925,000 1,467,812
Torchmark Corporation, 7.875%,
05/15/23.......................... 2,000,000 1,762,500
Unisys Corporation, 7.875%, 04/01/08
(a)............................... 480,000 448,800
Wal-mart Stores, Inc., 6.55%,
08/10/04.......................... 2,000,000 1,972,500
Watson Pharmaceuticals, 7.125%,
05/15/08.......................... 1,875,000 1,673,438
-----------
TOTAL U.S. CORPORATE BONDS
(Cost $74,417,113)................ 67,930,125
-----------
U.S. DOLLAR DENOMINATED FOREIGN
CORPORATE BONDS -- 8.4%
Abitibi Consolidated Inc., 7.50%,
04/01/28.......................... 1,950,000 1,577,062
Alestra S.A., 12.125%,
05/15/06(a)....................... 600,000 562,500
Cemex S.A., 12.75%, 07/15/07(a)..... 725,000 806,563
Cia Brasileira de Petroleo Ipiranga
S.A. 144A, 10.625%, 02/25/03(a)... 1,000,000 1,022,500
Equimar Shipholdings Ltd., 9.875%,
07/01/07(a)....................... 1,050,000 294,000
Grupo Industrial Durango S.A.
(GIDUSA), 12.625%, 08/01/03(a).... 950,000 952,375
Polysindo International Finance Co.
BV, 11.375%, 06/15/06(a)(b)(c).... 1,000,000 160,000
Telekomunikacja Polska S.A. Finance
BV (TPSA) 144A, 7.75%, 12/10/08... 1,500,000 1,381,875
-----------
TOTAL U.S. DOLLAR DENOMINATED
FOREIGN CORPORATE BONDS
(Cost $8,904,737)................. 6,756,875
-----------
</TABLE>
<PAGE> 56
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY BOND FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
RIGHTS AND WARRANTS(C) -- 0.1%
Gothic Energy Restricted Warrants.... 4,767 $ --
Gothic Energy Warrants............... 6,941 --
Gothic Energy 144A Warrants.......... 14,000 --
McCaw International Ltd. Warrants.... 2,000 6,000
RSL Communications Ltd. 144A
Warrants........................... 1,000 48,000
Terex Corp. -- Appreciation Rights... 4,000 56,000
-----------
TOTAL RIGHTS AND WARRANTS
(Cost $0).......................... 110,000
-----------
TOTAL INVESTMENTS -- 92.8%
(Cost $83,321,850)................. 74,797,000
OTHER ASSETS, LESS
LIABILITIES -- 7.2%................ 5,757,231
-----------
NET ASSETS -- 100%................... $80,554,231
===========
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
<S> <C> <C>
(a) Below investment grade security
(b) Issuer is in default on interest payments
(c) Non-income producing security
OTHER INFORMATION:
At June 30, 2000, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 760,451
Gross unrealized depreciation............... (9,285,301)
-----------
Net unrealized depreciation............. $(8,524,850)
===========
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $3,995,908
and $24,215,572, respectively, for the period ended June 30,
2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 57
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $83,321,850)...... $ 74,797,000
Cash........................................................ 3,842,839
Receivables
Fund shares sold.......................................... 301,596
Interest.................................................. 1,977,723
Other assets................................................ 22,496
-------------
Total assets............................................ 80,941,654
-------------
LIABILITIES
Payables
Distributions to shareholders............................. 213,870
Fund shares repurchased................................... 47,832
Management fee............................................ 49,997
12b-1 service and distribution fees....................... 7,307
Other payables to related parties......................... 30,797
Accrued expenses............................................ 37,620
-------------
Total liabilities....................................... 387,423
-------------
NET ASSETS.................................................. $ 80,554,231
=============
CLASS A
Net asset value and redemption price per share
($57,131,076/7,229,926 shares outstanding)................ $ 7.90
=============
Maximum offering price per share ($7.90 X 100/95.25)*....... $ 8.29
=============
CLASS B
Net asset value, offering price and redemption price** per
share ($20,248,812/2,564,716 shares outstanding).......... $ 7.90
=============
CLASS C
Net asset value, offering price and redemption price*** per
share ($2,928,988/369,944 shares outstanding)............. $ 7.92
=============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($245,355/31,040 shares outstanding)................ $ 7.90
=============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 111,347,083
Accumulated net realized loss on investments.............. (22,049,723)
Accumulated net investment loss........................... (218,279)
Net unrealized depreciation on investments................ (8,524,850)
-------------
NET ASSETS.................................................. $ 80,554,231
=============
</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> 58
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY BOND FUND
--------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 3,773,726
-----------
EXPENSES
Management fee............................................ $333,086
Transfer agent............................................ 118,014
Administrative services fee............................... 44,417
Custodian fees............................................ 38,090
Blue Sky fees............................................. 18,349
Auditing and accounting fees.............................. 29,780
Shareholder reports....................................... 19,842
Fund accounting........................................... 37,439
Trustees' fees............................................ 4,570
12b-1 service and distribution fees....................... 212,029
Legal..................................................... 14,098
Other..................................................... 4,786
-----------
Total expenses........................................ 874,500
-----------
NET INVESTMENT INCOME....................................... 2,899,226
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments.......................... (4,529,991)
Net change in unrealized depreciation on investments...... 439,027
-----------
Net loss on investment transactions................... (4,090,964)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(1,191,738)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 59
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income..................................... $ 2,899,226 $ 9,369,182
Net realized loss on investments.......................... (4,529,991) (14,598,790)
Net change in unrealized depreciation on investments...... 439,027 (3,705,523)
------------ ------------
Net decrease resulting from operations................ (1,191,738) (8,935,131)
------------ ------------
Class A distributions
Dividends
From net investment income................................ (2,082,180) (6,523,088)
In excess of net investment income........................ (2,085) (106,066)
------------ ------------
Total distributions to Class A shareholders........... (2,084,265) (6,629,154)
------------ ------------
Class B distributions
Dividends
From net investment income................................ (701,550) (2,391,825)
In excess of net investment income........................ -- (38,891)
------------ ------------
Total distributions to Class B shareholders........... (701,550) (2,430,716)
------------ ------------
Class C distributions
Dividends
From net investment income................................ (98,438) (433,785)
In excess of net investment income........................ -- (7,053)
------------ ------------
Total distributions to Class C shareholders........... (98,438) (440,838)
------------ ------------
Advisor Class distributions
Dividends
From net investment income................................ (9,873) (21,268)
In excess of net investment income........................ -- (346)
------------ ------------
Total distributions to Advisor Class shareholders..... (9,873) (21,614)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (9,318,473) (27,828,111)
Class B................................................... (6,194,264) (9,560,939)
Class C................................................... (832,220) (6,392,927)
Advisor Class............................................. (73,945) 25,495
------------ ------------
Net decrease resulting from Fund share transactions... (16,418,902) (43,756,482)
------------ ------------
TOTAL DECREASE IN NET ASSETS................................ (20,504,766) (62,213,935)
NET ASSETS
Beginning of period....................................... 101,058,997 163,272,932
------------ ------------
END OF PERIOD............................................. $ 80,554,231 $101,058,997
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 60
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
----------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 8.29 $ 9.54 $ 10.22 $ 9.80 $ 9.78 $ 9.01
---------------------------------------------------------------------------
(Loss) income from investment
operations
Net investment income.................. .28 .67 .69 .80 .72 .67(a)
Net (loss) gain on securities (both
realized and unrealized)............. (.39) (1.24) (.69) .42 .03 .84
---------------------------------------------------------------------------
Total from investment operations....... (.11) (.57) -- 1.22 .75 1.51
---------------------------------------------------------------------------
Less distributions
Dividends
From net investment income........... .28 .67 .68 .80 .72 .63
In excess of net investment income... -- .01 -- -- .01 --
Returns of capital..................... -- -- -- -- -- .11
---------------------------------------------------------------------------
Total distributions.................. .28 .68 .68 .80 .73 .74
---------------------------------------------------------------------------
Net asset value, end of period........... $ 7.90 $ 8.29 $ 9.54 $ 10.22 $ 9.80 $ 9.78
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total return(%).......................... (1.36)(b) (6.17)(c) .00(c) 11.87(c) 8.06(c) 17.41(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $57,131 $69,249 $109,445 $106,497 $97,881 $108,840
Ratio of expenses to average net assets
With expense reimbursement(%).......... -- -- -- -- -- 1.54
Without expense reimbursement(%)....... 1.73(d) 1.52 1.39 1.47 1.56 1.54
Ratio of net investment income to average
net assets(%).......................... 6.77(d) 7.40 6.88 7.08 7.36 7.09(a)
Portfolio turnover rate(%)............... 5 28 43 71 90 93
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
----------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 8.28 $ 9.53 $ 10.22 $ 9.80 $ 9.78 $ 9.01
---------------------------------------------------------------------------
(Loss) income from investment
operations
Net investment income.................. .25 .59 .59 .68 .64 .60(a)
Net (loss) gain on securities (both
realized and unrealized)............. (.38) (1.24) (.67) .46 .04 .84
---------------------------------------------------------------------------
Total from investment operations....... (.13) (.65) (.08) 1.14 .68 1.44
---------------------------------------------------------------------------
Less distributions
Dividends
From net investment income........... .25 .59 .59 .72 .64 .56
In excess of net investment income... -- .01 .02 -- .02 --
Returns of capital..................... -- -- -- -- -- .11
---------------------------------------------------------------------------
Total distributions.................. .25 .60 .61 .72 .66 .67
---------------------------------------------------------------------------
Net asset value, end of period........... $ 7.90 $ 8.28 $ 9.53 $ 10.22 $ 9.80 $ 9.78
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total return(%).......................... (1.65)(b) (6.97)(c) (.81)(c) 11.12(c) 7.25(c) 16.54(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................. $20,249 $27,550 $42,166 $18,499 $5,300 $5,184
Ratio of expenses to average net assets
With expense reimbursement(%).......... -- -- -- -- -- 2.29
Without expense reimbursement(%)....... 2.53(d) 2.36 2.13 2.21 2.29 2.29
Ratio of net investment income to average
net assets(%).......................... 5.97(d) 6.55 6.13 6.35 6.62 6.34(a)
Portfolio turnover rate(%)............... 5 28 43 71 90 93
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 61
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 8.31 $9.55 $10.24 $9.82 $9.44
-------------------------------------------------------------------
(Loss) income from investment operations
Net investment income.............................. .25 .62 .60 .64 .39
Net (loss) gain on securities (both realized and
unrealized)...................................... (.39) (1.25) (.68) .48 .43
-------------------------------------------------------------------
Total from investment operations............. (.14) (.63) (.08) 1.12 .82
-------------------------------------------------------------------
Less distributions
Dividends
From net investment income....................... .25 .61 .60 .70 .39
In excess of net investment income............... -- -- .01 -- .05
-------------------------------------------------------------------
Total distributions.............................. .25 .61 .61 .70 .44
-------------------------------------------------------------------
Net asset value, end of period....................... $ 7.92 $8.31 $ 9.55 $10.24 $9.82
-------------------------------------------------------------------
-------------------------------------------------------------------
Total return(%)...................................... (1.76)(b) (6.81)(c) (.81)(c) 11.11(c) 8.81(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $2,929 $3,928 $11,266 $6,580 $ 618
Ratio of expenses to average net assets(%)........... 2.51(d) 2.26 2.12 2.20 2.35(d)
Ratio of net investment income to average net
assets(%).......................................... 5.99(d) 6.65 6.15 6.35 6.56(d)
Portfolio turnover rate(%)........................... 5 28 43 71 90
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
for the six for the year for the period
months ended ended January 20, 1998
June 30, December (commencement)
ADVISOR CLASS (unaudited) 31, to December 31,
-----------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 8.28 $ 9.54 $10.28
------------------------------------------------------
Loss from investment operations
Net investment income............................ .29 .67 .69
Net loss on securities (both realized and
unrealized).................................... (.38) (1.24) (.72)
------------------------------------------------------
Total from investment operations................. (.09) (.57) (.03)
------------------------------------------------------
Less distributions
Dividends
From net investment income..................... .29 .67 .69
In excess of net investment income............. -- .02 .02
------------------------------------------------------
Total distributions............................ .29 .69 .71
------------------------------------------------------
Net asset value, end of period..................... $ 7.90 $ 8.28 $ 9.54
------------------------------------------------------
------------------------------------------------------
Total return(%).................................... (1.15)(b) (6.21)(c) (.30)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 245 $ 332 $ 347
Ratio of expenses to average net assets(%)......... 1.55(d) 1.43 1.11(d)
Ratio of net investment income to average net
assets(%)........................................ 6.95(d) 7.49 7.16(d)
Portfolio turnover rate(%)......................... 5 28 43
</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
The accompanying notes are an integral part of the financial statements.
<PAGE> 62
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY BOND FUND
--------------------------------------------------------------------------------
10
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,
2000, 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 on foreign securities are recorded on the ex date. If such
information is not available on the ex 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,
2000, the interest rate was 6.0%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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 carryover of approximately $14,806,000
as of December 31, 1999 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 carryover expires $2,215,000 in 2003, $365,000
in 2006 and $12,226,000 in 2007.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared monthly. Distributions from capital gain, if any, are declared in
December.
RECLASSIFICATIONS -- The timing and characterization of certain income and
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. 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, 2000, the net amount of underwriting
discount retained by IMDI was $3,334.
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 $76,897,
$118,446, and $16,686, for Class A, Class B and Class C, respectively, are
reflected as
<PAGE> 63
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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 $77,184, $35,616, $4,749 and $465, 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 2,284,548 $ 18,264,079 3,068,442 $ 27,762,931
Issued on
reinvestment of
distributions....... 149,420 1,209,838 443,025 3,925,441
Repurchased.......... (3,559,013) (28,792,390) (6,632,340) (59,516,483)
---------- ------------ ---------- ------------
Net decrease......... (1,125,045) $ (9,318,473) (3,120,873) $(27,828,111)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 240,605 $ 1,963,692 1,149,199 $ 10,430,940
Issued on
reinvestment of
distributions....... 31,470 254,809 106,758 944,576
Repurchased.......... (1,034,607) (8,412,765) (2,352,740) (20,936,455)
---------- ------------ ---------- ------------
Net decrease......... (762,532) $ (6,194,264) (1,096,783) $ (9,560,939)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 144,317 $ 1,187,358 147,492 $ 1,322,066
Issued on
reinvestment of
distributions....... 3,596 29,204 13,078 116,032
Repurchased.......... (250,937) (2,048,782) (866,732) (7,831,025)
---------- ------------ ---------- ------------
Net decrease......... (103,024) $ (832,220) (706,162) $ (6,392,927)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 6,492 $ 52,202 31,292 $ 277,077
Issued on
reinvestment of
distributions....... 903 7,320 1,794 15,700
Repurchased.......... (16,473) (133,467) (29,292) (267,282)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (9,078) $ (73,945) 3,794 $ 25,495
========== ============ ========== ============
</TABLE>
<PAGE> 64
03IBFX063000
<PAGE> 65
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
IVY CHINA REGION FUND
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth by investing in the equity
securities of companies and countries that are expected to benefit from the
economic development and growth of the China Region.
Ivy China Region Fund is managed by Ivy's International Equity team. The
following is an interview with team member and Asian equity specialist Michelle
Chan.
Q: MICHELLE, HOW WAS THE PERFORMANCE OF THE CHINA REGION IN THE FIRST HALF OF
2000?
A: Supported by an underlying economic recovery, the China region markets
-- Hong Kong, China, Taiwan and Korea -- continued an upward trend during the
first half of 2000, although volatility did increase. As in the rest of the
world, technology, media and telecommunication (TMT) stocks in the region
performed well for most of the first quarter, but experienced a sell-off in
March. The Hong Kong market, where the Fund has 62% of its assets, has become
very correlated with the technology-heavy NASDAQ. When the stocks in that index
declined in the spring, Hong Kong TMT stocks quickly followed. After the
"high-tech fever" cooled down, however, the Hong Kong market was dominated more
by concern over continuing interest rate increases in the US. Hong Kong's
currency is pegged to the dollar, and an interest rate increase in the US is
inevitably followed by an interest rate increase in Hong Kong. The Taiwanese
market experienced quite a bit of volatility prior to its recent presidential
elections. Political issues during the presidential campaign and controversy on
the mainland led to substantial nervousness and a sell-off in the Taiwanese
market. The new government, however, seems to be conciliatory on issues that
affect Mainland China, which we believe is a good sign.
Q: WHAT'S BEEN HAPPENING IN MAINLAND CHINA?
A: Although it places restrictions on foreign investors, Mainland China has
been the fastest growing market in Asia. It is up approximately 40% year to
date. Our research shows strong economic data coming out of China -- favorable
export growth, a trade surplus and a recovery in domestic consumption.
Other factors are also positive. The Chinese government seems committed
to accelerating reforms and reducing the role of the state-owned sector in the
economy. As a result, it is privatizing many companies and opening them to
foreign investment. Currently, the state-owned sector is less than 40% of the
total economy. Of course, revitalizing the state-owned sector will take time.
But in the coastal regions -- where most of the wealth is centered -- China has
already done a fantastic job of encouraging an entrepreneurial spirit, which
bodes well for the rest of the country.
The normalization of China's trade relationship with the US and China's
imminent entry into the World Trade Organization should greatly benefit the
entire region. Mainland China could benefit because current trade quotas --
which
<PAGE> 66
IVY CHINA REGION FUND
limit China's textile exports to the US -- may be lifted. If China's external
trading activity increases dramatically, and we believe that it will, it should
directly benefit Hong Kong, since Hong Kong has always been a conduit between
China and the rest of the world for trade and financial activity. Taiwan is now
playing a major manufacturing role for multinational electronic companies, so
it too should benefit if it outsources its lower-end manufacturing to China and
takes advantage of China's cheaper labor market. We believe that all these
factors should be positive for equity markets in this region.
Q: ARE THERE ANY OTHER EXCITING DEVELOPMENTS OCCURRING IN THE REGION?
A: Yes. Hong Kong is now going through a structural change, expanding from its
role as service provider for mainland importers and exporters to a more
information-based economy. Throughout Hong Kong, many companies are either
implementing the latest technology or diversifying into new high-tech areas.
Hong Kong is still an international center of finance, but it is also growing
into the information services center for all of Asia. It has skilled labor, an
educated labor force and China's huge consumer market right in its backyard.
"THE COMBINATION OF HONG KONG'S STATUS AS A REGIONAL
TRADING AND FINANCIAL CENTER, TAIWAN'S FOCUS ON HIGH-TECH
MANUFACTURING AND CHINA'S LOW-COST LABOR AND CONSUMER
MARKET COULD SUSTAIN A VERY DYNAMIC REGIONAL ECONOMY."
Outside of Japan, the largest concentration of electronics companies is now in
Taiwan and Korea. Taiwan is continuing its role as Asia's high-tech
manufacturing center, and it is continually enhancing its value in this area.
In fact, Japan is now starting to outsource more of its manufacturing of
electronics products to Taiwan. While Taiwan tends to have smaller companies,
Korea is dominated more by large conglomerates, many of which are now
restructuring. Korean companies are working hard to eliminate debt and attract
foreign investors. There is also a new focus on shareholder value and
bottom-line profitability, which we believe is positive for the markets.
Q: HOW WAS IVY CHINA REGION FUND POSITIONED TO BENEFIT FROM THESE TRENDS?
A: As we mentioned, this region, particularly Taiwan, has many world-class
electronics companies. In our view, the short-term political uncertainty in
Taiwan made the prices of these stocks -- which are already trading at low
valuations compared with their global peers -- even more attractive, so we
increased the Fund's holdings in this sector. We have also been restructuring
the Fund's Hong Kong holdings, divesting financial stocks that are very
sensitive to interest rates. Because the interest rate outlook in the US is
still uncertain, and Hong Kong's market is so closely tied to US interest
rates, we're trying to limit the Fund's exposure to these stocks in favor of
ones with less interest rate sensitivity.
We also took advantage of lower share prices after the global technology
sell-off to add stocks to the Fund that we believe offer good value, such as
China Mobile and Korea's SK Telecom.
Q: IN THE PAST, THE FUND WAS MANAGED IN A VALUE STYLE. WILL THAT CHANGE?
A: Yes. We're now taking a more flexible approach, blending growth and value to
take advantage of more investment opportunities. This strategy allows us to
target the more growth-oriented technology and telecommunications stocks.
That's important, because in this region we see a lot of opportunity coming
from these sectors.
Q: WHAT IS YOUR LONG-TERM OUTLOOK FOR THE CHINA REGION MARKETS?
A: We think the stellar growth in the China region will continue to offer very
good investment opportunities. The combination of Hong Kong's status as a
regional trading and financial center, Taiwan's focus on manufacturing
high-tech products and China's low-cost labor and consumer market could sustain
a very dynamic regional economy. Although we expect bumps in the road due to
political events and the region's sensitivity to external factors (such as US
interest rates), we are very positive on the China region market and its strong
economic recovery.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
2
<PAGE> 67
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 95.8% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
CHINA -- 12.9%
China Unicom Limited(a).............. 366,000 $ 777,072
Nanjing Panda Electronics Co.,
Ltd.(a)............................ 1,222,000 438,946
Qingling Motors Company -- H
Shares............................. 3,614,000 417,266
Shanghai Worldbest Co., Ltd.......... 1,246,800 381,521
Shenzhen Konka Electronics Group
Ltd. -- Class B.................... 312,000 321,405
-----------
2,336,210
-----------
HONG KONG -- 61.9%
Asia Satellite Telecommunications
Holdings Ltd....................... 4,000 137,000
Asia Satellite Telecommunications
Holdings Ltd. ADR.................. 100,000 341,884
Automated Systems Holdings Ltd....... 560,000 287,362
Cathay Pacific Airways............... 283,000 524,610
Cheung Kong Holdings Ltd............. 100,000 1,106,474
China Southern Airlines Company
Limited............................ 1,458,000 347,899
China Telecom (Hong Kong)
Limited(a)......................... 110,000 970,169
Citic Pacific Ltd.................... 150,000 785,115
Cosco Pacific Limited................ 326,000 257,202
Dah Sing Financial Group............. 112,000 451,159
Guangdong Kelon Electrical Holdings
Co. Ltd. -- H. Shares.............. 523,000 283,472
Hang Seng Bank....................... 20,900 198,408
Hong Kong & China Gas Company Ltd.... 188,179 211,233
HSBC Holdings plc.................... 75,600 863,165
Hutchison Whampoa Limited............ 78,000 980,625
Li & Fung Ltd........................ 199,600 998,636
Orient Overseas International Ltd.... 353,000 177,745
Sun Hung Kai Properties Ltd.......... 64,800 465,527
Swire Pacific Ltd.................... 65,500 383,167
VTech Holdings Limited(a)............ 108,000 408,722
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Wharf Holdings Ltd................... 278,000 $ 497,509
Wing Hang Bank Limited............... 205,000 510,197
-----------
11,187,280
-----------
SOUTH KOREA -- 13.5%
Hyundai Motor Company Ltd............ 14,181 181,875
Pohang Iron & Steel Company Ltd...... 2,000 176,475
Samsung Electronics.................. 2,564 848,544
Shinhan Bank......................... 26,840 252,756
SK Telecom Co., Ltd.................. 2,981 975,853
-----------
2,435,503
-----------
TAIWAN -- 7.5%
Compal Electronics Inc............... 172,998 424,084
Hon Hai Precision Industry Co.,
Ltd................................ 49,000 442,287
Taiwan Semiconductor Manufacturing
Company............................ 104,064 493,306
-----------
1,359,677
-----------
TOTAL INVESTMENTS -- 95.8%
(Cost -- $13,207,493)(b)........... 17,318,670
OTHER ASSETS, LESS
LIABILITIES -- 4.2%................ 749,047
-----------
NET ASSETS -- 100%................... $18,067,717
===========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 4,809,744
Gross unrealized depreciation............... (698,567)
-----------
Net unrealized appreciation............. $ 4,111,177
===========
Purchases and sales of securities other than short-term
obligations aggregated $7,566,185 and $8,891,822,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 68
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY CHINA REGION FUND
--------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $13,207,493)...... $17,318,670
Cash........................................................ 645,819
Receivables
Investments sold.......................................... 35,305
Fund shares sold.......................................... 7,148
Dividends and interest.................................... 84,208
Manager for expense reimbursement......................... 22,352
Other assets................................................ 10,129
-----------
Total assets............................................ 18,123,631
-----------
LIABILITIES
Payables
Management fee............................................ 15,157
12b-1 service and distribution fees....................... 1,889
Other payables to related parties......................... 11,132
Accrued expenses............................................ 27,736
-----------
Total liabilities....................................... 55,914
-----------
NET ASSETS.................................................. $18,067,717
===========
CLASS A
Net asset value and redemption price per share
($10,841,779/1,175,768 shares outstanding)................ $ 9.22
===========
Maximum offering price per share ($9.22 X 100/94.25)*....... $ 9.78
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($6,424,669/707,616 shares outstanding)............. $ 9.08
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($737,041/80,950 shares outstanding)................ $ 9.10
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($64,228/7,039 shares outstanding).................. $ 9.12
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $22,036,841
Accumulated net investment loss on investments and foreign
currency transactions................................... (8,217,281)
Undistributed net investment income....................... 136,990
Net unrealized appreciation on investments and foreign
currency transactions................................... 4,111,167
-----------
NET ASSETS.................................................. $18,067,717
===========
</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> 69
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $9,396 of foreign taxes withheld........ $ 348,443
Interest.................................................. 24,720
-----------
373,163
-----------
EXPENSES
Management fee............................................ $94,662
Transfer agent............................................ 45,935
Administrative services fee............................... 9,466
Custodian fees............................................ 33,451
Blue Sky fees............................................. 15,613
Auditing and accounting fees.............................. 13,084
Shareholder reports....................................... 9,805
Fund accounting........................................... 18,556
Trustees' fees............................................ 2,976
12b-1 service and distribution fees....................... 51,594
Legal..................................................... 13,881
Other..................................................... 1,862
-----------
310,885
Expenses reimbursed by Manager............................ (74,712)
-----------
Net expenses.......................................... 236,173
-----------
NET INVESTMENT INCOME....................................... 136,990
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (1,432,326)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 1,539,889
-----------
Net gain on investments............................... 107,563
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 244,553
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 70
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY CHINA REGION FUND
--------------------------------------------------------------------------------
6
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 136,990 $ 135,562
Net realized (loss) gain on investments and foreign
currency transactions................................... (1,432,326) 924,189
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 1,539,889 6,328,151
----------- -----------
Net increase resulting from operations................ 244,553 7,387,902
----------- -----------
Class A distributions
Dividends from net investment income...................... -- (116,226)
Distributions from capital gain........................... -- (9,904)
----------- -----------
Total distributions to Class A shareholders........... -- (126,130)
----------- -----------
Class B distributions
Dividends from net investment income...................... -- (17,335)
Distributions from capital gain........................... -- (6,000)
----------- -----------
Total distributions to Class B shareholders........... -- (23,335)
----------- -----------
Class C distributions
Dividends from net investment income...................... -- (944)
Distributions from capital gain........................... -- (623)
----------- -----------
Total distributions to Class C shareholders........... -- (1,567)
----------- -----------
Advisor Class distributions
Dividends from net investment income...................... -- (4,321)
Distributions from capital gain........................... -- (236)
----------- -----------
Total distributions to Advisor Class shareholders..... -- (4,557)
----------- -----------
Fund share transactions (Note 5)
Class A................................................... (2,126,567) (759,913)
Class B................................................... (1,093,553) (1,087,549)
Class C................................................... (44,666) (217,633)
Advisor Class............................................. (247,663) 313,989
----------- -----------
Net decrease resulting from Fund share transactions... (3,512,449) (1,751,106)
----------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (3,267,896) 5,481,207
NET ASSETS
Beginning of period....................................... 21,335,613 15,854,406
----------- -----------
END OF PERIOD............................................. $18,067,717 $21,335,613
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 136,990 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 71
7
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 9.15 $ 6.30 $ 8.04 $ 10.30 $ 8.58 $ 8.61
---------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income(a).......................... .04 .08 .13 .02(f) .03 .14
Net gain (loss) on securities (both realized and
unrealized)..................................... .03 2.86 (1.78) (2.28)(f) 1.74 (.01)
---------------------------------------------------------------------------
Total from investment operations.................. .07 2.94 (1.65) (2.26) 1.77 .13
---------------------------------------------------------------------------
Less distributions
Dividends
From net investment income...................... -- .08 .09 -- .03 .14
In excess of net investment income.............. -- -- -- -- .02 --
Distributions
From capital gain............................... -- .01 -- -- -- --
In excess of capital gain....................... -- -- -- -- -- .02
---------------------------------------------------------------------------
Total distributions............................. -- .09 .09 -- .05 .16
---------------------------------------------------------------------------
Net asset value, end of period...................... $ 9.22 $ 9.15 $ 6.30 $ 8.04 $ 10.30 $ 8.58
===========================================================================
Total return(%)..................................... .77(b) 46.72(c) (20.56)(c) (21.94)(c) 20.50(c) 1.59(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $10,842 $12,738 $ 9,061 $12,020 $15,290 $12,855
Ratio of expenses to average net assets(d)
With expense reimbursement(%)..................... 2.19(e) 2.19 2.30 2.44 2.20 2.20
Without expense reimbursement(%).................. 2.98(e) 2.84 2.86 2.51 2.48 2.73
Ratio of net investment income to average net
assets(%)(a)...................................... 1.75(e) 1.01 1.60 .28 .32 1.61
Portfolio turnover rate(%).......................... 42 23 56 20 22 25
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 9.04 $ 6.24 $ 7.96 $10.28 $ 8.58 $ 8.61
-----------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)................... .02 .02 .05 (.04)(f) (.04) .08
Net gain (loss) on securities (both realized and
unrealized)..................................... .02 2.81 (1.73) (2.28)(f) 1.74 (.02)
-----------------------------------------------------------------------
Total from investment operations.................. .04 2.83 (1.68) (2.32) 1.70 .06
-----------------------------------------------------------------------
Less distributions
Dividends
From net investment income...................... -- .02 .04 -- -- .08
In excess of net investment income.............. -- -- -- -- -- .01
Distributions from capital gain................... -- .01 -- -- -- --
-----------------------------------------------------------------------
Total distributions............................. -- .03 .04 -- -- .09
-----------------------------------------------------------------------
Net asset value, end of period...................... $ 9.08 $ 9.04 $ 6.24 $ 7.96 $10.28 $ 8.58
=======================================================================
Total return(%)..................................... .44(b) 45.33(c) (21.04)(c) (22.57)(c) 19.67(c) .83(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 6,425 $7,508 $6,080 $7,893 $8,995 $6,905
Ratio of expenses to average net assets(d)
With expense reimbursement(%)..................... 2.96(e) 2.97 3.08 3.17 2.95 2.95
Without expense reimbursement(%).................. 3.75(e) 3.62 3.64 3.24 3.23 3.48
Ratio of net investment income (loss) to average net
assets(%)(a)...................................... .99(e) .24 .82 (.45) (.43) .86
Portfolio turnover rate(%).......................... 42 23 56 20 22 25
</TABLE>
The accompanying notes are an integral part of the financial statement.
<PAGE> 72
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 9.07 $ 6.25 $ 7.94 $ 10.24 $ 9.44
---------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)................... .01 .02 .08 (.03)(f) --
Net gain (loss) on securities (both realized and
unrealized)..................................... .02 2.82 (1.75) (2.27)(f) .89
---------------------------------------------------------------------------
Total from investment operations.................. .03 2.84 (1.67) (2.30) .89
---------------------------------------------------------------------------
Less distributions
Dividends
From net investment income...................... -- .01 .02 -- --
In excess of net investment income.............. -- -- -- -- .09
Distributions from capital gain................... -- .01 -- -- --
---------------------------------------------------------------------------
Total distributions............................. -- .02 .02 -- .09
---------------------------------------------------------------------------
Net asset value, end of period...................... $ 9.10 $ 9.07 $ 6.25 $ 7.94 $10.24
===========================================================================
Total return(%)..................................... .33(b) 45.41(c) (21.02)(c) (22.46)(c) 9.39(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 737 $ 776 $ 704 $ 1,129 $ 449
Ratio of expenses to average net assets(d)
With expense reimbursement(%)..................... 3.16(e) 3.03 2.98 3.05 2.71(e)
Without expense reimbursement(%).................. 3.95(e) 3.68 3.54 3.12 2.99(e)
Ratio of net investment income (loss) to average net
assets(%)(a)...................................... .79(e) .18 .92 (.33) (.19)(e)
Portfolio turnover rate(%).......................... 42 23 56 20 22
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year February 10,1998
June 30, ended (commencement)
ADVISOR CLASS (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 9.03 $ 6.27 $ 7.89
-------------------------------------------------------
Income (loss) from investment operations
Net investment income(a)........................... .06 .04 .08
Net gain (loss) on securities (both realized and
unrealized)...................................... .03 2.86 (1.62)
-------------------------------------------------------
Total from investment operations................... .09 2.90 (1.54)
-------------------------------------------------------
Less distributions
Dividends from net investment income............... -- .13 .08
Distributions from capital gain.................... -- .01 --
-------------------------------------------------------
Total distributions.............................. -- .14 .08
-------------------------------------------------------
Net asset value, end of period....................... $ 9.12 $ 9.03 $ 6.27
=======================================================
Total return(%)...................................... 1.00(b) 46.29(c) (19.56)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 64 $ 313 $ 10
Ratio of expenses to average net assets(d)
With expense reimbursement(%)...................... 1.72(e) 1.79 2.92(e)
Without expense reimbursement(%)................... 2.51(e) 2.44 3.48(e)
Ratio of net investment income to average net
assets(%)(a)....................................... 2.22(e) 1.42 .98(e)
Portfolio turnover rate(%)........................... 42 23 56
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total return does not reflect a sales charge.
(d) From 1995 to 1998, total expenses include fees paid indirectly, if any,
through an offset arrangement.
(e) Annualized
(f) Based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
<PAGE> 73
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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, as
amended (the "Code"), 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 carryover of approximately $6,282,000
as of December 31, 1999, 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, $4,238,000 in 2006 and
$128,000 in 2007.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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
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 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
<PAGE> 74
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY CHINA REGION FUND
--------------------------------------------------------------------------------
10
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 12b-1 fees and certain other expenses) to an annual rate of
1.95% 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, 2000, the net amount of underwriting
discount retained by IMDI was $3,750.
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
$13,902, $33,978 and $3,714, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $26,310, $16,704, $2,571 and $350, for Class A, Class B, Class C and
Advisor Class respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in the China
region. Therefore, the Fund is more susceptible to factors adversely affecting
securities within the China region than is an equity fund that is not
concentrated in such securities to the same extent.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C, and Advisor Class were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 937,403 $ 8,377,775 2,892,229 $ 19,961,432
Issued on
reinvestment of
distributions....... -- -- 12,715 113,544
Repurchased.......... (1,154,353) (10,504,342) (2,949,520) (20,834,889)
---------- ------------ ---------- ------------
Net decrease......... (216,950) $ (2,126,567) (44,576) $ (759,913)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 27,968 $ 251,647 147,314 $ 1,099,716
Issued on
reinvestment of
distributions....... -- -- 1,988 17,556
Repurchased.......... (151,219) (1,345,200) (293,462) (2,204,821)
---------- ------------ ---------- ------------
Net decrease......... (123,251) $ (1,093,553) (144,160) $ (1,087,549)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 15,162 $ 134,650 64,217 $ 459,612
Issued on
reinvestment of
distributions....... -- -- 105 930
Repurchased.......... (19,789) (179,316) (91,400) (678,175)
---------- ------------ ---------- ------------
Net decrease......... (4,627) $ (44,666) (27,078) $ (217,633)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 21,329 $ 189,312 123,402 $ 1,090,855
Issued on
reinvestment of
distributions....... -- -- 478 4,224
Repurchased.......... (48,939) (436,975) (90,832) (781,090)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (27,610) $ (247,663) 33,048 $ 313,989
========== ============ ========== ============
</TABLE>
<PAGE> 75
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
11
<PAGE> 76
03ICRF063000
<PAGE> 77
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth by investing primarily in
the common stock of companies that are expected to benefit from the
development, advancement and/or use of science and technology.
An interview with James W. Broadfoot III, President of Ivy Management, Inc. and
portfolio manager of Ivy Global Science & Technology Fund.
Q: JIM, CAN YOU COMMENT ON THE TECHNOLOGY MARKET IN THE FIRST HALF OF THE YEAR?
A: Technology stocks experienced a great deal of volatility in the first half
of 2000. They performed very well during the first two and a half months of the
first quarter, but saw a sharp sell-off in March. In retrospect, technology
stocks were chased to unsustainable levels, partly by the influx of day traders
and the market's enthusiasm over this sector. Since the sell-off, we've had a
relatively strong rebound off those lows.
One of the issues that investors have been grappling with since the technology
sell-off is valuation. In other words, how do you accurately value these
companies, given the fact that many of them don't yet have earnings? Investors
have increasingly accepted the notion that technology stocks should be valued
based on revenues rather than earnings. However, paying high share prices for
companies without earnings or cash flow carries strong risk.
We believe it is earnings that ultimately count.
The extremely high growth rate of many technology companies has also made
valuation difficult. Today, many technology companies are growing 30%, 40% or
50% on a sequential quarterly basis. Not too long ago, that was considered a
strong growth rate on an annual basis. So we're seeing young companies that are
doubling in size in three quarters, when previously that would have taken three
years. All of this has made it difficult for investors to value these stocks,
and as a result, many of them became highly overvalued before the sell-off.
The future of Microsoft was also an issue in the first half of 2000. After
ruling that the company violated US antitrust laws, US District Judge Thomas
Penfield Jackson ordered that Microsoft be split into two companies (operating
systems and applications). The courts must also rule on the restrictions that
seek to rein in Microsoft's aggressive business tactics. Even if these
restrictions are never enforced, we believe that the ongoing investigation by
the Department of Justice has clearly made Microsoft less assertive than it
would have been had it not been under the government's microscope.
The government and the courts, however, move more slowly than the technology
markets. We believe the company would be less dominant today than it was a
couple of years ago even if the government had not acted. Because of the
Internet, we no longer live in a PC-centric world, but in a network-centric
world. We are already seeing a proliferation of non-PC computing devices --
mobile phones,
<PAGE> 78
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
personal digital assistants, TV set-top boxes, and video games -- that do not
use Microsoft software. So while Microsoft will remain a major player in the
technology landscape, we do not believe it will ever be as dominant as it once
was.
As for interest rates, we may not have seen the end of increases by the Federal
Reserve. But if the Federal Reserve does limit future interest rate hikes, it
could be good news for high-valuation growth stocks, such as the majority of
technology stocks. Investment opportunities with a large potential return in
the future are generally worth more as interest rates decline.
Despite recent volatility, we believe that the fundamentals for technology and
Internet stocks remain strong. Generally, revenue growth of technology
companies declines sequentially from the fourth quarter of one year to the
first quarter of the next, with a lot of negative earnings surprises at the
beginning of the year. This happens for a number of reasons. On the consumer
side, the Christmas season is the big buying time for computers and consumer
electronics. And most corporate purchasing of technology peaks in the fourth
quarter as information technology managers are forced to "use or lose" their
budgets. Yet despite this traditional weakness in the first quarter, this
year's first quarter showed very strong revenue growth and positive earnings.
"IN OUR VIEW, WE'RE JUST AT THE BEGINNING OF A REVOLUTION IN
INTERNET AND WIRELESS TECHNOLOGY, AND WE BELIEVE THAT THIS
OFFERS A LOT OF OPPORTUNITY FOR LONG-TERM INVESTORS."
Q: DID THE VOLATILITY IN TECHNOLOGY STOCKS CAUSE YOU TO MAKE ANY MAJOR
CHANGES TO THE FUND?
A: We focus more on solid fundamentals and strong earnings than market
behavior, so we didn't make any dramatic changes to the Fund. In general, we
look for companies with strong balance sheets that may help them weather market
overreactions. And because we find that companies don't have access to funding
through the stock market the way they did a few months ago, we do a thorough
review process to ensure that all of the companies in which the Fund is
invested can execute their business plans without being overreliant on the
capital markets for funding.
Q: WHAT DEVELOPMENTS DOES YOUR RESEARCH INDICATE LOOK PROMISING AS WE MOVE
AHEAD?
A: We see a number of opportunities as we move into the second half of the
year. For example, we're continuing our focus on companies involved with
Internet infrastructure. Many businesses worldwide -- from the largest Fortune
500 and Global 2000 companies to the smaller telecommunications firms, Internet
service providers and "dot-coms" -- are investing heavily in Internet-related
hardware and software, and we believe that companies that deliver these
products and services are well positioned. This includes networking hardware
companies such as Cisco Systems as well as:
- companies such as Ariba and Commerce One that are enabling
business-to-business e-commerce;
- companies such as Inktomi and CacheFlow that are improving
the performance of the Internet by "caching," or storing data
closer to the users that request it;
- companies such as BEA Systems that provide Web application
servers;
- companies such as Vignette that produce the associated
software used to personalize Web-sites and manage changing
content; and
- companies such as VeriSign that provide electronic security,
which is becoming more important as e-commerce grows and
organizations attach internal networks to the Internet.
We also think that components suppliers -- particularly photonics firms
specializing in optical components for fiber optic communications backbones --
and companies that provide high-speed communications semiconductors are well
positioned to benefit from Internet infrastructure spending.
In the wireless area, we're particularly interested in what we call "real
estate companies for the new economy." These are companies such as Crown Castle
that rent space on communications towers to cellular providers or other
communications companies. We believe that this is a highly leveraged business
model that will benefit greatly from the continued growth in wireless usage,
particularly wireless Internet access.
We also think that analog semiconductor companies offer attractive
opportunities for growth. Analog semiconductors
2
<PAGE> 79
have some kind of interface with real world information, such as playing a
digitized sound file or processing a voice. Barriers to entry in this field are
very high. There is a limited amount of analog engineers, and it takes several
years to learn the trade. Companies specializing in this field also tend to be
less capital-intensive, since they don't need the most cutting-edge
manufacturing processes. This, combined with limited competition, in our view,
makes analog semiconductors an attractive sector.
The Fund is also invested in general Internet stocks such as Yahoo! and America
Online. A bit of a shakeout is occurring in this area right now -- due to
funding difficulties, many consumer-related companies are finding it difficult
to survive. When that shakeout finishes, we believe that industry leaders like
Yahoo! and America Online will emerge even stronger than they are today.
In general, we believe that areas that have done well, such as optical and
broadband networking, will continue to do well. We also think that personal
computers may start to pick up again in the second half of 2000. Traditionally,
this market is stronger at the end of the year, and the introduction of the
first service pack for Windows 2000 will most likely drive PC demand among
businesses. In addition, prices are coming down and Internet connections are
improving. As we move ahead, Internet connections may be 20 to 50 times the
current speed.
Q: WHAT CHARACTERISTICS DO YOU LOOK FOR IN TECHNOLOGY COMPANIES?
A: We focus 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 number two in their niche, since many technology markets are
winner-take-all. We try to invest in companies that have set some standard
within their industry or that offer products with high switching costs, which
helps retain customers. Finally, we look for businesses that have created
barriers to entry due to well-differentiated products or a compelling
proprietary technology.
Q: WHAT IS YOUR GENERAL OUTLOOK FOR THE REST OF THE YEAR?
A: We believe that volatility will continue in the technology sector, but not
at the levels we saw in the second quarter of this year. Longer term, we're
very bullish on technology and the Internet. In the US, over half of all
capital spending now goes toward technology goods. The percentage of US
investment dedicated to technology has increased steadily over the last several
years. We believe this trend will continue for some time since many of the
recent investments companies have made in Internet infrastructure and
e-commerce have had very high and measurable results. In our view, we're just
at the beginning of a revolution in Internet and wireless technology, and we
believe that this offers a lot of opportunity for long-term investors.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
3
<PAGE> 80
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 93.8% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES -- 0.3%
Concord EFS, Inc(a).................... 16,050 $ 417,300
-----------
COMMUNICATION TOWERS -- 3.7%
American Tower Corporation(a).......... 19,000 792,063
Crown Castle International Corp.(a).... 46,800 1,708,200
Pinnacle Holdings Inc.(a).............. 22,000 1,188,000
SBA Communications Corp.(a)............ 16,000 831,000
-----------
4,519,263
-----------
COMPUTER EQUIPMENT & STORAGE -- 6.1%
Brocade Communications Systems,
Inc.(a).............................. 5,600 1,027,513
EMC Corporation........................ 17,200 1,323,325
Network Appliance, Inc.(a)............. 27,500 2,213,750
PC-Tel, Inc.(a)........................ 12,100 459,800
Qlogic Corporation(a).................. 9,200 607,775
Sun Microsystems, Inc.(a).............. 20,000 1,818,750
-----------
7,450,913
-----------
EDUCATIONAL SERVICES -- 0.8%
SmartForce Public Limited Company
Sponsored ADR(a)(b).................. 21,300 1,022,400
-----------
ELECTRONIC COMMERCE -- 0.3%
Pegasus Systems, Inc.(a)............... 17,100 185,962
QRS Corporation(a)..................... 6,200 152,288
-----------
338,250
-----------
ELECTRONIC MANUFACTURING SERVICES -- 3.1%
Flextronics International Ltd.(a)(b)... 21,400 1,469,912
Jabil Circuit, Inc.(a)................. 21,500 1,066,938
Sanmina Corporation(a)................. 12,000 1,026,000
Solectron Corporation(a)............... 4,600 192,625
-----------
3,755,475
-----------
INFORMATION SERVICES -- 2.3%
Dendrite International, Inc.(a)........ 29,200 972,725
FactSet Research Systems Inc........... 19,500 550,875
Forrester Research, Inc.(a)............ 16,000 1,165,000
Meta Group, Inc.(a).................... 8,100 155,925
-----------
2,844,525
-----------
INTERNET -- 17.7%
Accrue Software(a)..................... 18,500 656,750
Active Software, Inc.(a)............... 16,000 1,243,000
America Online, Inc.(a)................ 15,100 796,525
Ariba, Inc.(a)......................... 7,900 774,570
BEA Systems, Inc.(a)................... 22,600 1,117,288
Broadvision, Inc.(a)................... 13,500 685,969
CheckFree Holdings Corporation(a)...... 10,200 525,938
CMGI Inc.(a)........................... 11,600 531,425
CNET Networks, Inc.(a)................. 13,500 331,594
Commerce One, Inc.(a).................. 10,000 453,906
Digex, Inc.(a)......................... 6,900 468,769
Digital Insight Corporation(a)......... 13,611 462,774
DoubleClick Inc.(a).................... 9,570 364,856
E.piphany, Inc.(a)..................... 8,900 953,969
eBay Inc.(a)........................... 12,000 651,750
Entrust Technologies Inc.(a)........... 7,000 579,250
Exodus Communications, Inc.(a)......... 21,600 994,950
F5 Networks, Inc.(a)................... 11,500 627,469
India Media, Internet and
Communications Fund(a)(b)............ 150,000 558,000
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
InfoSpace.com, Inc.(a)................. 12,600 $ 696,150
Inktomi Corporation(a)................. 4,600 543,950
London Pacific Group Limited
Sponsored ADR(b)..................... 46,100 599,300
Macromedia, Inc.(a).................... 10,200 986,212
Packeteer, Inc.(a)..................... 24,500 713,563
RealNetworks, Inc.(a).................. 15,700 793,831
Stamps.com Inc.(a)..................... 23,700 173,306
VeriSign, Inc.(a)...................... 11,617 2,050,400
Vignette Corporation(a)................ 12,400 644,994
WebTrends Corporation(a)............... 14,400 557,100
Yahoo! Inc.(a)......................... 7,934 982,824
-----------
21,520,382
-----------
MISCELLANEOUS TECHNOLOGY -- 0.8%
Gemstar International Group Ltd.(a).... 15,200 934,088
-----------
NETWORK EQUIPMENT & SOFTWARE -- 8.5%
Cisco Systems, Inc.(a)................. 42,000 2,669,625
Clarent Corporation(a)................. 16,100 1,151,150
Concord Communications, Inc.(a)........ 15,200 606,100
Extreme Networks, Inc.(a).............. 10,400 1,097,200
Micromuse Inc.(a)...................... 12,600 2,085,103
Redback Networks Inc.(a)............... 4,300 765,400
SonicWall, Inc.(a)..................... 6,900 607,631
Sycamore Networks, Inc.(a)............. 5,700 629,138
TMP Worldwide Inc.(a).................. 7,900 583,119
Visual Networks, Inc.(a)............... 3,700 105,450
-----------
10,299,916
-----------
OPERATIONAL SUPPORT SYSTEMS -- 1.8%
Amdocs Limited(a)...................... 11,600 890,300
DSET Corporation(a).................... 26,700 811,013
Metasolv Software, Inc.(a)............. 12,000 528,000
-----------
2,229,313
-----------
SEMICONDUCTOR EQUIPMENT -- 5.1%
Applied Materials, Inc.(a)............. 22,209 2,012,691
ASM Lithography Holding NV(a)(b)....... 13,500 595,687
Credence Systems Corporation(a)........ 11,500 634,656
KLA-Tencor Corporation(a).............. 18,400 1,077,550
Novellus Systems, Inc.(a).............. 6,900 390,281
Photronics, Inc.(a).................... 6,900 195,788
PRI Automation, Inc.(a)................ 5,700 372,727
Teradyne, Inc.(a)...................... 11,800 867,300
-----------
6,146,680
-----------
SEMICONDUCTORS -- 13.1%
Applied Micro Circuits
Corporation(a)....................... 8,600 849,250
Broadcom Corporation(a)................ 3,800 831,963
Chartered Semiconductor Manufacturing
Limited(a)(b)........................ 7,400 666,000
Conexant Systems, Inc.(a).............. 13,900 675,887
Integrated Device Technology,
Inc.(a).............................. 23,500 1,407,061
Intel Corporation...................... 9,340 1,248,641
Intersil Holding Corporation(a)........ 21,200 1,146,125
Linear Technology Corporation.......... 11,800 754,463
LSI Logic Corporation(a)............... 23,500 1,271,938
Maxim Integrated Products, Inc.(a)..... 9,600 652,200
Micrel, Inc.(a)........................ 13,600 590,750
NETsilicon, Inc.(a).................... 21,400 700,850
</TABLE>
<PAGE> 81
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
PMC-Sierra, Inc.(a)(b).............. 4,200 $ 746,288
Power-One, Inc.(a).................. 4,800 546,900
RF Micro Devices, Inc.(a)........... 6,300 552,038
SanDisk Corporation(a).............. 14,600 893,337
Texas Instruments Inc............... 22,000 1,511,125
Xilinx, Inc.(a)..................... 10,500 866,906
------------
15,911,722
------------
SOFTWARE -- 6.5%
Actuate Software Corporation(a)..... 10,300 549,763
Mercury Interactive
Corporation(a).................... 10,600 1,025,550
Microsoft Corporation(a)............ 10,865 869,200
NetIQ Corporation(a)................ 8,471 505,083
Oracle Corporation(a)............... 18,200 1,529,938
Peregrine Systems, Inc.(a).......... 15,600 541,125
Quest Software, Inc.(a)............. 23,700 1,312,387
Symantec Corporation(a)............. 12,600 679,613
Veritas Software Corp.(a)........... 7,900 892,823
------------
7,905,482
------------
SYSTEM INTEGRATORS -- 1.4%
AppNet, Inc.(a)..................... 14,600 525,600
Concero, Inc.(a).................... 21,400 262,150
Razorfish Inc.(a)................... 9,400 150,987
Sapient Corporation(a).............. 7,700 823,419
------------
1,762,156
------------
TELECOMMUNICATION EQUIPMENT -- 15.5%
Advanced Fibre Communications,
Inc.(a)........................... 24,000 1,087,500
ANTEC Corporation(a)................ 13,700 569,406
Avanex Corporation(a)............... 4,900 467,950
Aware, Inc.(a)...................... 18,200 930,475
CacheFlow Inc.(a)................... 13,400 824,938
CIENA Corporation(a)................ 5,600 933,450
Comverse Technology, Inc.(a)........ 14,000 1,302,000
Copper Mountain Networks, Inc.(a)... 8,300 731,438
Ditech Communications
Corporation(a).................... 16,400 1,550,825
E-Tek Dynamics, Inc.(a)............. 4,900 1,292,681
Gilat Satellite Networks Ltd.(a).... 5,000 346,875
JDS Uniphase Corporation(a)......... 12,400 1,486,450
Motorola, Inc....................... 10,695 310,823
Next Level Communications,
Inc.(a)........................... 4,700 403,025
Nokia Oyj Sponsored ADR(b).......... 30,400 1,518,100
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Nortel Networks Corporation(b)...... 17,400 $ 1,187,550
Scientific-Atlanta, Inc............. 5,400 402,300
SDL, Inc.(a)........................ 7,700 2,195,943
Tut Systems, Inc.(a)................ 23,100 1,325,362
------------
18,867,091
------------
TELECOMMUNICATION SERVICES -- 6.8%
Allegiance Telecom, Inc.(a)......... 10,000 640,000
Cypress Communications, Inc.(a)..... 28,000 203,000
ITXC Corp.(a)....................... 17,800 630,231
McLeodUSA Incorporated(a)........... 74,523 1,541,694
Metromedia Fiber Network, Inc.(a)... 26,000 1,031,875
Nextel Communications, Inc.(a)...... 13,200 807,675
NEXTLINK Communications, Inc.(a).... 24,300 921,881
Pac-West Telecomm, Inc.(a).......... 36,800 736,000
PSINet Inc.(a)...................... 18,436 463,205
Rhythms NetConnections Inc.(a)...... 15,000 188,437
VoiceStream Wireless
Corporation(a).................... 6,300 732,670
WinStar Communications, Inc.(a)..... 12,450 421,744
------------
8,318,412
------------
TOTAL INVESTMENTS -- 93.8%
(Cost -- $67,282,846)(c).......... 114,243,368
OTHER ASSETS, LESS LIABILITIES --
6.2%.............................. 7,513,675
------------
NET ASSETS -- 100%.................. $121,757,043
============
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, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation.............. $ 54,050,814
Gross unrealized depreciation.............. (7,090,292)
------------
Net unrealized appreciation............ $ 46,960,522
============
Purchases and sales of securities other than short-term
obligations aggregated $55,058,469 and $36,135,629,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 82
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
--------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (identified cost -- $67,282,846)...... $114,243,368
Cash........................................................ 8,228,834
Receivables
Investments sold.......................................... 258,376
Fund shares sold.......................................... 269,536
Deferred organization expenses.............................. 12,490
Other assets................................................ 15,826
------------
Total assets............................................ 123,028,430
------------
LIABILITIES
Payables
Investments purchased..................................... 1,006,355
Fund shares repurchased................................... 96,039
Management fee............................................ 96,530
12b-1 service and distribution fees....................... 15,123
Other payables to related parties......................... 35,148
Accrued expenses............................................ 22,192
------------
Total liabilities....................................... 1,271,387
------------
NET ASSETS.................................................. $121,757,043
============
CLASS A
Net asset value and redemption price per share
($52,521,018/1,032,226 shares outstanding)................ $ 50.88
============
Maximum offering price per share ($50.88 X 100/94.25)*...... $ 53.98
============
CLASS B
Net asset value, offering price and redemption price** per
share ($48,072,030/966,448 shares outstanding)............ $ 49.74
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($20,054,964/401,448 shares outstanding)............ $ 49.96
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($1,109,031/21,805 shares outstanding).............. $ 50.86
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 66,510,007
Undistributed net realized gain on investments............ 9,386,396
Accumulated net investment loss........................... (1,099,882)
Net unrealized appreciation on investments................ 46,960,522
------------
NET ASSETS.................................................. $121,757,043
============
* 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> 83
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 12,923
Interest.................................................. 145,728
-----------
158,651
-----------
EXPENSES
Management fee............................................ $568,862
Transfer agent............................................ 94,848
Administrative services fee............................... 56,886
Custodian fees............................................ 27,573
Blue Sky fees............................................. 16,063
Auditing and accounting fees.............................. 13,308
Shareholder reports....................................... 16,960
Amortization of organization expenses..................... 5,988
Fund accounting........................................... 50,803
Trustees' fees............................................ 4,577
12b-1 service and distribution fees....................... 385,328
Legal..................................................... 14,085
Other..................................................... 3,252
-----------
Total expenses........................................ 1,258,533
-----------
NET INVESTMENT LOSS......................................... (1,099,882)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 8,537,140
Net change in unrealized appreciation on investments...... (6,742,266)
-----------
Net gain on investment transactions................... 1,794,874
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 694,992
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 84
[Ivy Leaf Logo]
--------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
--------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (1,099,882) $(1,035,652)
Net realized gain on investments.......................... 8,537,140 9,009,362
Net change in unrealized appreciation on investments...... (6,742,266) 40,021,044
------------ -----------
Net increase resulting from operations................ 694,992 47,994,754
------------ -----------
Distributions to shareholders from capital gain
Class A................................................... -- (2,818,813)
Class B................................................... -- (2,344,250)
Class C................................................... -- (1,216,600)
Advisor Class............................................. -- (12,840)
------------ -----------
Total distributions to shareholders................... -- (6,392,503)
------------ -----------
Fund share transactions (Note 4)
Class A................................................... 10,551,256 5,807,495
Class B................................................... 12,270,678 10,548,875
Class C................................................... 897,722 1,740,790
Advisor Class............................................. 747,912 364,323
------------ -----------
Net increase resulting from Fund share transactions... 24,467,568 18,461,483
------------ -----------
TOTAL INCREASE IN NET ASSETS................................ 25,162,560 60,063,734
NET ASSETS
Beginning of period....................................... 96,594,483 36,530,749
------------ -----------
END OF PERIOD............................................. $121,757,043 $96,594,483
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 85
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended July 22, 1996
June 30, for the year ended (commencement)
CLASS A (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 48.90 $23.63 $17.47 $16.40 $10.00
---------------------------------------------------------------------
Income from investment operations
Net investment loss.............................. (.36) (.43) (.36)(a) (.31)(a) (.06)(b)
Net gain on securities (both realized and
unrealized).................................... 2.34 29.27 6.52(a) 1.38(a) 6.49
---------------------------------------------------------------------
Total from investment operations................. 1.98 28.84 6.16 1.07 6.43
---------------------------------------------------------------------
Less distributions
Distributions from capital gain.................. -- 3.57 -- -- .03
---------------------------------------------------------------------
Total distributions............................ -- 3.57 -- -- .03
---------------------------------------------------------------------
Net asset value, end of period..................... $ 50.88 $48.90 $23.63 $17.47 $16.40
---------------------------------------------------------------------
---------------------------------------------------------------------
Total return(%).................................... 4.05(c) 122.56(d) 35.26(d) 6.53(d) 64.34(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $52,521 $41,516 $17,888 $12,159 $8,324
Ratio of expenses to average net assets
With expense reimbursement(%).................... -- -- -- -- 2.19(e)
Without expense reimbursement(%)................. 1.81(e) 1.98 2.16 2.11 2.90(e)
Ratio of net investment loss to average net
assets(%)........................................ (1.53)(e) (1.80) (1.88) (1.91) (2.18)(b)(e)
Portfolio turnover rate(%)......................... 34 62 73 54 23
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended July 22, 1996
June 30, for the year ended (commencement)
CLASS B (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 47.97 $23.31 $17.37 $16.44 $10.00
---------------------------------------------------------------------
Income from investment operations
Net investment loss.............................. (.52) (.62) (.50)(a) (.32)(a) (.06)(b)
Net gain on securities (both realized and
unrealized).................................... 2.29 28.67 6.44(a) 1.25(a) 6.52
---------------------------------------------------------------------
Total from investment operations................. 1.77 28.05 5.94 .93 6.46
---------------------------------------------------------------------
Less distributions
Distributions from capital gain.................. -- 3.39 -- -- .02
---------------------------------------------------------------------
Total distributions............................ -- 3.39 -- -- .02
---------------------------------------------------------------------
Net asset value, end of period..................... $ 49.74 $47.97 $23.31 $17.37 $16.44
---------------------------------------------------------------------
---------------------------------------------------------------------
Total return(%).................................... 3.69(c) 120.82(d) 34.20(d) 5.66(d) 64.59(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $48,072 $35,879 $10,197 $8,577 $3,425
Ratio of expenses to average net assets
With expense reimbursement(%).................... -- -- -- -- 2.99(e)
Without expense reimbursement(%)................. 2.52(e) 2.74 2.95 2.92 3.70(e)
Ratio of net investment loss to average net
assets(%)........................................ (2.25)(e) (2.55) (2.67) (2.72) (2.98)(b)(e)
Portfolio turnover rate(%)......................... 34 62 73 54 23
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 86
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended July 22, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 48.19 $23.38 $17.40 $16.46 $10.00
--------------------------------------------------------------------
Income from investment operations
Net investment loss............................... (.56) (.70) (.48)(a) (.42)(a) (.05)(b)
Net gain on securities (both realized and
unrealized)..................................... 2.33 28.87 6.46(a) 1.36(a) 6.53
--------------------------------------------------------------------
Total from investment operations.................. 1.77 28.17 5.98 .94 6.48
--------------------------------------------------------------------
Less distributions
Distributions from capital gain................... -- 3.36 -- -- .02
--------------------------------------------------------------------
Total distributions............................. -- 3.36 -- -- .02
--------------------------------------------------------------------
Net asset value, end of period...................... $ 49.96 $48.19 $23.38 $17.40 $16.46
--------------------------------------------------------------------
--------------------------------------------------------------------
Total return(%)..................................... 3.67(c) 120.98(d) 34.37(d) 5.71(d) 64.84(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $20,055 $18,769 $8,431 $6,348 $2,106
Ratio of expenses to average net assets
With expense reimbursement(%)..................... -- -- -- -- 2.95(e)
Without expense reimbursement(%).................. 2.50(e) 2.68 2.84 2.85 3.66(e)
Ratio of net investment loss to average net
assets(%)......................................... (2.22)(e) (2.49) (2.56) (2.65) (2.94)(b)(e)
Portfolio turnover rate(%).......................... 34 62 73 54 23
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year April 15,1998
June 30, ended (commencement)
ADVISOR CLASS (unaudited) December 31, to December 31,
----------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA -----------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $48.82 $ 23.62 $20.19
-----------------------------------------------------
Income from investment operations
Net investment loss.............................. (.24) (.24) (.20)(a)
Net gain on securities (both realized and
unrealized).................................... 2.28 29.07 3.63(a)
-----------------------------------------------------
Total from investment operations................. 2.04 28.83 3.43
-----------------------------------------------------
Less distributions
Distributions from capital gain.................. -- 3.63 --
-----------------------------------------------------
Total distributions............................ -- 3.63 --
-----------------------------------------------------
Net asset value, end of period..................... $50.86 $ 48.82 $23.62
-----------------------------------------------------
-----------------------------------------------------
Total return(%).................................... 4.18(c) 122.56(d) 16.99(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $1,109 $ 431 $ 15
Ratio of expenses to average net assets(%)......... 1.56(e) 1.89 2.18(e)
Ratio of net investment loss to average net
assets(%)........................................ (1.28)(e) (1.71) (1.91)(e)
Portfolio turnover rate(%)......................... 34 62 73
</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
The accompanying notes are an integral part of the financial statements.
<PAGE> 87
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market. Otherwise, the security is valued at the calculated mean between the
last bid and asked price on the exchange on which the security is traded most
extensively. 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, 2000,
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 on
foreign securities, 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,
2000, the interest rate was 6.0%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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
capital gain, 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.
RECLASSIFICATIONS -- The timing and characterization of certain income and
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.
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.
<PAGE> 88
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
--------------------------------------------------------------------------------
12
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, 2000, the net amount of underwriting
discount retained by IMDI was $38,389.
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
$59,817, $223,604, and $101,907 for Class A, Class B and Class C, respectively,
are reflected as 12b-1 service and distribution fees in the Statement of
Operations.
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $45,858, $34,941, $13,273 and $776, 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold..................... 582,090 $31,146,316 505,052 $16,958,259
Issued on reinvestment of
distributions........... -- -- 55,874 2,645,066
Repurchased.............. (398,831) (20,595,060) (468,791) (13,795,830)
-------- ----------- -------- -----------
Net increase............. 183,259 $10,551,256 92,135 $ 5,807,495
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold..................... 333,773 $18,088,849 371,473 $11,662,058
Issued on reinvestment of
distributions........... -- -- 38,614 1,793,612
Repurchased.............. (115,206) (5,818,171) (99,651) (2,906,795)
-------- ----------- -------- -----------
Net increase............. 218,567 $12,270,678 310,436 $10,548,875
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold..................... 141,827 $ 7,708,048 88,831 $ 3,130,374
Issued on reinvestment of
distributions........... -- -- 20,486 955,872
Repurchased.............. (129,881) (6,810,326) (80,472) (2,345,456)
-------- ----------- -------- -----------
Net increase............. 11,946 $ 897,722 28,845 $ 1,740,790
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold..................... 15,009 $ 852,113 8,734 $ 376,835
Issued on reinvestment of
distributions........... -- -- 105 4,962
Repurchased.............. (2,033) (104,201) (640) (17,474)
-------- ----------- -------- -----------
Net increase............. 12,976 $ 747,912 8,199 $ 364,323
======== =========== ======== ===========
</TABLE>
03IGST063000
<PAGE> 89
[LOGO]
IVY MONEY MARKET FUND
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to obtain as high a level of current income as is consistent
with the preservation of capital and liquidity by investing in high quality,
short-term securities.
An interview with Michael Borowsky, portfolio manager of Ivy Money Market Fund.
Q: MICHAEL, CAN YOU GIVE US AN OVERVIEW OF RECENT ECONOMIC DEVELOPMENTS IN THE
UNITED STATES?
A: Growth in the US economy continued its upward trend throughout the first half
of the year. This was propelled by very low levels of unemployment, rising wages
and a strong -- if volatile -- stock market. Up until recently, inflation had
been held in check by significant increases in productivity, low oil prices and
a lack of pricing power in the US due to stiff competition from imports. But
more recently, some of these items have shown signs of reversing. The low
unemployment rate has tightened labor market conditions, which could lead to
wage inflation. The price of oil has more than doubled over the past year, and
although productivity is still increasing, this is occurring at a slower rate.
As a result, the Federal Reserve Board became concerned about a possible rise in
the level of inflation.
The Federal Reserve Board set out on June 30, 1999 with a 25 basis-point
increase in the Federal Funds rate as a preemptive strike against inflation.
Since then, it has raised the Federal Funds rate from 4.75% to 6.50%. This
tightening of monetary policy is showing some signs of slowing the economy.
While the US gross domestic product (GDP) rose at an annual rate of 7.3% in the
last quarter of 1999, it rose 5.4% in the first quarter of 2000. Retail sales
declined 0.6% in April and 0.3% in May. Housing starts declined nearly 4% in
May, a normal response to rising mortgage rates. This data indicates that the
economy may indeed be slowing down, and that may influence the Federal Reserve
Board's future interest rate decisions.
Q: WHAT EFFECT DID THIS HAVE ON IVY MONEY MARKET FUND?
A: In anticipation of these interest rate increases, we shortened the weighted
average maturity of the Fund. For the six months ending June 30, 1999, the
weighted average maturity of the Fund averaged 27 to 28 days. At June 30, 2000,
however, the weighted average maturity for the previous six months was about 21
days. This enabled the Fund to take advantage of higher interest rates by
rolling over its maturities more quickly and reinvesting at current rates.
Q: WHAT IS YOUR OUTLOOK AND STRATEGY FOR THE REST OF THE YEAR?
A: With a slowing US economy, we expect to see an increasing weakness in the job
market and stock market returns more typical of historical averages. We expect
this to slow consumer spending. At this point, we believe that the Federal
Reserve Board is approaching the end of its policy of raising interest rates.
While
<PAGE> 90
[LOGO]
IVY MONEY MARKET FUND
there is still potential for further interest rate increases, we expect
them to be limited. With this in mind, our strategy is to begin to lengthen the
weighted average maturity of the Fund to lock in these higher interest rates.
The current weighted average maturity of the Fund for the period of May through
June of 2000 is 29 days. As we become more certain that the Federal Reserve
Board has finished this round of tightening, we will increase the weighted
average maturity slightly further.
While it is impossible to predict the future direction that financial markets
will take, we will continue to search for high quality money market instruments
that provide investors with competitive yields.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
"GROWTH IN THE
US ECONOMY
CONTINUED ITS
UPWARD TREND
THROUGHOUT
THE FIRST HALF
OF THE YEAR."
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
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
2
<PAGE> 91
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
PRINCIPAL VALUE
--------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 94.6%
-----------------------------------
Federal National Mortgage
Association, 6.38%, 8/1/2000...... $2,000,000 $ 1,989,012
Federal National Mortgage
Association, 6.20%, 7/13/2000..... 2,000,000 1,995,867
Federal Home Loan Mortgage Corp.,
6.40%, 8/8/2000................... 2,000,000 1,986,489
Federal Home Loan Mortgage Corp.,
6.40%, 7/18/2000.................. 5,200,000 5,184,284
Federal Home Loan Mortgage Corp.,
6.38%, 7/6/2000................... 1,745,000 1,743,454
Federal Home Loan Mortgage Corp.,
6.36%, 7/5/2000................... 3,000,000 2,997,880
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
PRINCIPAL VALUE
<S> <C> <C>
Federal Home Loan Bank, 6.44%,
9/5/2000.......................... $2,000,000 $ 1,976,387
Federal Home Loan Bank, 6.41%,
8/23/2000......................... 2,000,000 1,981,126
-----------
TOTAL INVESTMENTS -- 94.6%
(Cost -- $19,854,499)(a).......... 19,854,499
OTHER ASSETS, LESS LIABILITIES -- 5.4%.. 1,131,226
-----------
NET ASSETS -- 100%.................. $20,985,725
===========
(a) Cost is approximately the same for Federal
income tax purposes.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 92
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY MONEY MARKET FUND
--------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $19,854,499)...... $19,854,499
Cash........................................................ 1,195,227
Receivable from Manager for expense reimbursement........... 14,764
Other assets................................................ 18,434
-----------
Total assets............................................ 21,082,924
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 73,937
Management fee............................................ 6,152
Other payables to related parties......................... 10,826
Accrued expenses............................................ 6,284
-----------
Total liabilities....................................... 97,199
-----------
NET ASSETS.................................................. $20,985,725
===========
CLASS A
Net asset value and redemption price per share
($15,562,832/15,562,832 shares outstanding)............... $ 1.00
===========
CLASS B
Net asset value, offering price and redemption price* per
share ($4,634,026/4,634,026 shares outstanding)........... $ 1.00
===========
CLASS C
Net asset value, offering price and redemption price* per
share ($788,867/788,867 shares outstanding)............... $ 1.00
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $20,985,725
-----------
NET ASSETS.................................................. $20,985,725
===========
</TABLE>
<TABLE>
<S> <C>
* Subject to any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 93
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $670,057
--------
EXPENSES
Management fee............................................ $45,515
Transfer agent............................................ 46,813
Administrative services fee............................... 11,379
Custodian fees............................................ 6,723
Blue Sky fees............................................. 14,782
Auditing and accounting fees.............................. 7,519
Shareholder reports....................................... 7,629
Fund accounting........................................... 14,960
Trustees' fees............................................ 3,061
Legal..................................................... 13,902
Other..................................................... 1,676
--------
173,959
Expenses reimbursed by Manager............................ (77,805)
--------
Net expenses.......................................... 96,154
--------
NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................. $573,903
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 94
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY MONEY MARKET FUND
--------------------------------------------------------------------------------
6
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 573,903 $ 1,105,482
----------- -----------
Net increase resulting from operations................ 573,903 1,105,482
----------- -----------
Distributions to shareholders from net investment income
Class A................................................... (418,972) (778,168)
Class B................................................... (131,045) (310,429)
Class C................................................... (23,886) (16,885)
----------- -----------
Total distributions to shareholders................... (573,903) (1,105,482)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (2,961,093) (579,302)
Class B................................................... (2,852,133) 850,618
Class C................................................... 416,745 (50,878)
----------- -----------
Net (decrease) increase resulting from Fund share
transactions......................................... (5,396,481) 220,438
----------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (5,396,481) 220,438
NET ASSETS
Beginning of period....................................... 26,382,206 26,161,768
----------- -----------
END OF PERIOD............................................. $20,985,725 $26,382,206
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 95
7
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
---------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
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 .04 .05 .05 .04 .05
Less dividends from net investment
income............................ (.02) (.04) (.05) (.05) (.04) (.05)
-----------------------------------------------------------------------
Net asset value, end of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=======================================================================
Total return(%)....................... 2.50(b) 4.16 4.51 4.60 4.47 4.80
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $15,563 $18,524 $19,103 $15,385 $21,359 $24,609
Ratio of expenses to average net
assets
With expense reimbursement(%)....... .85(c) .88 .87 .88 .86 .85
Without expense reimbursement(%).... 1.53(c) 1.40 1.42 1.57 1.86 1.39
Ratio of net investment income to
average net assets(%)(a)............ 5.04(c) 4.17 4.50 4.60 4.47 4.91
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
--------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------------------------------------------------
Income from investment operations
Net investment income(a)................ .02 .04 .05 .05 .05
Less dividends from net investment
income................................ (.02) (.04) (.05) (.05) (.05)
------------------------------------------------------------
Net asset value, end of period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============================================================
Total return(%)........................... 2.50(b) 4.30 4.59 4.77 4.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).............................. $ 4,634 $7,486 $6,636 $3,812 $3,474
Ratio of expenses to average net assets
With expense reimbursement(%)........... .85(c) .77 .76 .70 .77
Without expense reimbursement(%)........ 1.53(c) 1.29 1.31 1.39 1.77
Ratio of net investment income to average
net assets(%)(a)........................ 5.03(c) 4.28 4.61 4.77 4.57
</TABLE>
The accompanying notes are an integral part of the financial statement.
<PAGE> 96
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
for the six
months ended from April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
-------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------
Income from investment operations
Net investment income(a).......................... .02 .04 .05 .05 .03
Less dividends from net investment income......... (.02) (.04) (.05) (.05) (.03)
-------------------------------------------------------------------------
Net asset value, end of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========================================================================
Total return(%)..................................... 2.58(b) 4.14 4.55 4.78 4.78(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 789 $ 372 $ 423 $ 405 $ 74
Ratio of expenses to average net assets
With expense reimbursement(%)..................... .71(c) .87 .81 .70 .56(c)
Without expense reimbursement(%).................. 1.39(c) 1.39 1.36 1.39 1.56(c)
Ratio of net investment income to average net
assets(%)(a)...................................... 5.18(c) 4.18 4.56 4.78 4.78(c)
</TABLE>
(a) Net investment income is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return.
(c) Annualized
NOTE (unaudited): The seven day yield for Class A shares at June 30, 2000, was
5.82%; and the thirty day yield was 5.73%.
The seven day yield for Class B shares at June 30, 2000, was
5.87%; and the thirty day yield was 5.79%.
The seven day yield for Class C shares at June 30, 2000, was
6.01%; and the thirty day yield was 5.91%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 97
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
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.
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,
2000, the interest rate was 6.0%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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 to an 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 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 $34,805, $10,792 and $1,216, 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, 2000 YEAR ENDED
CLASS A (UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------
<S> <C> <C>
Sold................. 42,802,796 52,099,224
Issued on
reinvestment of
distributions...... 365,699 701,982
Repurchased.......... (46,129,588) (53,380,508)
----------- -----------
Net decrease......... (2,961,093) (579,302)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
CLASS B (UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------
<S> <C> <C>
Sold................. 3,589,109 10,516,744
Issued on
reinvestment of
distributions...... 108,494 342,399
Repurchased.......... (6,549,736) (10,008,525)
----------- -----------
Net (decrease)/
increase........... (2,852,133) 850,618
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
CLASS C (UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------
<S> <C> <C>
Sold................. 2,661,361 2,563,747
Issued on
reinvestment of
distributions...... 23,688 16,085
Repurchased.......... (2,268,304) (2,630,710)
----------- -----------
Net increase/
(decrease)......... 416,745 (50,878)
=========== ===========
</TABLE>
<PAGE> 98
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
10
<PAGE> 99
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
11
<PAGE> 100
03IMMF063000
<PAGE> 101
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
IVY DEVELOPING MARKETS FUND
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth primarily through
investment in equity securities of companies that should benefit from the
development and growth of emerging markets.
An interview with Moira McLachlan, Vice President at Ivy Management, Inc. and
member of the Ivy Developing Markets Fund portfolio management team.
Q: MOIRA, HOW DID EMERGING MARKETS PERFORM IN THE FIRST HALF OF 2000?
A: Driven by technology, media and telecom (TMT) stocks, emerging markets
started out the year doing well. That changed rather dramatically in March when
TMT stocks sold off around the world. Emerging markets had become very
correlated with the NASDAQ starting in the third quarter of 1999, and when
NASDAQ declined in the spring, TMT stocks quickly followed. However, in
contrast to many of the previous stock sell-offs in emerging markets, we
believe that the sell-off in March was a "market psychology"-based phenomenon
as opposed to a reflection on the underlying economies. We've seen very strong
fundamentals in most of the large emerging markets as their economies recover
from the 1997 and 1998 financial crises, and the volatility this year has not
undermined that. So while the performance of the equity markets has not been
particularly good this year, we believe that the economic fundamentals look
encouraging. We also believe that volatility will continue in emerging markets
at least until worries about Federal Reserve Board interest rate increases are
behind us. If that happens, we think emerging markets will be able to move
forward again in response to their improving fundamentals. Currently, our
research is uncovering some attractive valuations in emerging markets,
primarily as a result of the TMT sell-off. Also, interest rates are in a
downward trend in many -- but not all -- of the emerging markets. So in
general, we have strong economic growth, declining interest rates and more
reasonable valuations. And once concerns about US interest rates are out of the
way, we believe that the state of emerging markets will improve.
Q: WHAT DEVELOPMENTS HAVE OCCURRED IN LATIN AMERICA?
A: The big news in Latin America was the upgrade of Mexico by Moody's credit
rating agency to investment-grade status for its "sovereign debt" (fixed income
securities guaranteed by the Mexican government). Although it came sooner than
many analysts expected, we believe that it was an accurate reflection of the
substantial changes made in that country since the mid-1990s. There have been
major structural improvements in Mexico. It now has a floating -- or
market-determined -- exchange rate, which provides greater economic control.
(It previously had a fixed exchange rate, which meant that the peso was rigidly
pegged to the dollar.) In addition, the Mexican banking system has been
recapitalized. Over $50 billion entered the banks, which diminished one of
Mexico's big former structural weaknesses. We believe that fiscal accounts are
in good shape. The structure
<PAGE> 102
IVY DEVELOPING MARKETS FUND
of debt is much sounder than it was prior to the last time the Mexican economy
experienced problems. At that time, the government's liabilities -- the debts
of the country -- were nearly all dollar-denominated, and they were short-term
in nature. Now the overall level of indebtedness has decreased substantially,
and the maturity level has been lengthened. There is no longer the need for a
constant financing of debt, and we believe that the Mexican economy is much
less vulnerable to volatility in the financial markets as a result.
In Latin America in general, strong commodity prices were the driving factor at
the beginning of the current economic recovery -- since primary materials make
up a large portion of its output -- but lately there has been some weakening in
these prices. However, the recent boom in oil prices was positive for Mexico,
Argentina, and Venezuela -- the big oil producers.
"WE BELIEVE THAT EMERGING MARKETS WILL ALWAYS BE VOLATILE, BUT
THAT LONG-TERM INVESTORS CAN BENEFIT FROM THE STRONG ECONOMIC
FUNDAMENTALS AND ATTRACTIVE VALUATIONS THAT THESE MARKETS OFFER."
Q: AND THE FAR EAST?
A: We believe that Asia offers a host of investment opportunities. The
combination of Hong Kong's status as a regional trading and financial center,
Taiwan's focus on manufacturing high-tech products and China's low-cost labor
and consumer market could sustain a very dynamic regional economy.
Hong Kong is now going through a structural change, expanding from a service
provider for mainland importers and exporters to a more information-based
economy. Throughout Hong Kong, many companies are either implementing the
latest technology or diversifying into new high-tech areas. It is still an
international trade and financial center, but it's also growing into the
information services center for all of Asia.
Korea's economic state also looks strong, and the country is developing
world-class industries. The Korean economy rebounded strongly from the Asian
crisis of 1997-98, with the sharpest rebound of any of the Asian economies. We
believe that in the long term, Korea will be a leader among emerging market
economies.
Q: HOW DID ALL OF THIS AFFECT IVY DEVELOPING MARKETS FUND?
A: The Fund's technology underweighting was a disadvantage as the "new economy"
technology, media and telecommunications stocks outperformed during most of the
first quarter. However, after the sell-off of those same stocks in March, the
Fund performed well. It held up better than the overall market because it was
not exposed to the most vulnerable stocks.
Strategically, we took advantage of the sell-off in technology to add to
high-quality names that, in our opinion, were previously overvalued. Due to the
strength we saw in Korea, we added two Korean telecommunications companies. We
also added to the Fund's Taiwanese holdings. There was quite a bit of
volatility in the Taiwanese market prior to the presidential elections.
Political issues coming out of Taiwan during its presidential campaign and
controversy on the mainland led to substantial nervousness among investors and
a sell-off in the Taiwanese market. We saw that as a good opportunity to add
some of the world-class technology names that we hadn't purchased in the past
because of high valuations.
Q: IN THE PAST, THE FUND WAS MANAGED IN A VALUE STYLE. WILL THAT CHANGE AS YOU
MOVE FORWARD?
A: Yes. We're now taking a more flexible approach, blending growth and value to
take advantage of more investment opportunities. As a result, we have been
adding some growth-oriented telecom and technology stocks to the Fund, but
we're still keeping an eye on valuations, or how much an investor is asked to
pay for future earnings.
Q: WHAT'S YOUR LONG-TERM OUTLOOK FOR EMERGING MARKETS?
A: We believe that emerging markets will always be volatile, but that long-term
investors can benefit from the strong economic fundamentals and attractive
valuations that these markets offer. We believe that, over time, exposure to
emerging markets offers investors both diversification and the potential for
attractive returns.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
2
<PAGE> 103
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 99.3% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
AFRICA -- 6.8%
-----------------------------------
SOUTH AFRICA -- 6.8%
Anglo American plc.................. 3,700 $ 175,838
Liberty Life Association of Africa
Limited........................... 13,700 130,336
Nampak Limited...................... 87,600 189,290
Nedcor Limited...................... 8,400 176,431
South African Breweries plc......... 21,800 159,735
Standard Bank Investment Corporation
Limited........................... 45,067 176,153
-----------
1,007,783
-----------
ASIA/PACIFIC -- 44.0%
-----------------------------------
CHINA -- 6.7%
China Unicom Limited(a)............. 350,000 743,100
Nanjing Panda Electronics Co.,
Ltd.(a)........................... 450,000 161,641
Qingling Motors Company -- H
Shares............................ 713,000 82,322
-----------
987,063
-----------
HONG KONG -- 10.5%
Asia Satellite Telecommunications
Holdings Ltd. ADR................. 72,000 246,157
Cheung Kong Holdings Ltd............ 17,000 188,101
China Telecom (Hong Kong)
Limited(a)........................ 58,000 511,543
Citic Pacific Ltd................... 31,000 162,257
Guangdong Kelon Electrical Holdings
Co. Ltd. -- H Shares.............. 83,000 44,987
New World Infrastructure Ltd.(a).... 92,000 81,436
Ng Fung Hong Limited................ 48,000 25,709
Shanghai Industrial Holdings
Limited........................... 35,000 63,310
Sun Hung Kai Properties Ltd......... 8,000 57,473
Wharf Holdings Ltd.................. 52,111 93,258
Wing Hang Bank Limited.............. 32,000 79,640
-----------
1,553,871
-----------
MALAYSIA -- 0.3%
Sime Darby Berhad................... 35,000 44,948
-----------
PHILIPPINES -- 0.7%
Benpres Holdings Corporation
Sponsored GDR(a).................. 12,500 24,219
Philippine Long Distance Telephone
Co................................ 3,600 64,541
Universal Robina Corporation........ 147,000 18,023
-----------
106,783
-----------
SINGAPORE -- 2.8%
DBS Land Ltd........................ 92,000 119,192
Overseas Union Bank Ltd............. 42,254 163,739
Singapore Airlines Limited.......... 14,000 138,463
-----------
421,394
-----------
SOUTH KOREA -- 16.1%
Hyundai Motor Company Ltd........... 10,474 134,332
Hyundai Motor Company, GDR 144A..... 226 879
Korea Electric Power Corp. Sponsored
ADR............................... 12,400 228,625
Korea Telecom Corporation........... 2,700 237,796
Pohang Iron & Steel Company Ltd..... 4,000 352,951
Samsung Electronics................. 1,800 595,700
Samsung Fire & Marine Insurance..... 9,793 272,284
Shinhan Bank........................ 28,016 263,831
SK Telecom Co., Ltd................. 930 304,443
-----------
2,390,841
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
TAIWAN -- 6.9%
Asustek Computer Inc................ 27,200 $ 224,319
Compal Electronics Inc.............. 110,500 270,877
Hon Hai Precision Industry Co.,
Ltd............................... 25,000 225,657
Taiwan Semiconductor Manufacturing
Company........................... 64,000 303,387
-----------
1,024,240
-----------
EUROPE -- 12.4%
-----------------------------------
CZECH REPUBLIC -- 1.1%
Ceske Energeticke Zavody
a.s.(CEZ)(a)...................... 59,000 156,375
-----------
FINLAND -- 1.8%
Hansabank Ltd....................... 36,500 274,660
-----------
GREECE -- 2.4%
Hellenic Telecommunications
Organization S.A. ADR............. 28,900 352,219
-----------
HUNGARY -- 4.1%
BorsodChem Rt....................... 2,800 86,856
Magyar Tavkozlesi Rt................ 23,600 164,858
MOL Magyar Olaj-es Gazipari Rt...... 8,800 121,809
Pannonplast Rt...................... 4,700 102,134
Pick Szeged Rt...................... 3,700 137,143
-----------
612,800
-----------
ISRAEL -- 1.3%
Koor Industries Limited Sponsored
ADR............................... 8,900 189,125
-----------
POLAND -- 1.7%
Bank Rozwoju Eksportu S.A........... 1,550 48,050
Telekomunikacja Polska S.A.......... 28,200 196,695
-----------
244,745
-----------
LATIN AMERICA -- 36.1%
-----------------------------------
ARGENTINA -- 2.4%
Banco de Galicia y Buenos Aires S.A.
de C.V............................ 19,275 72,296
Quilmes Industrial S.A.............. 17,000 189,125
Telefonica de Argentina S.A.
Sponsored ADR..................... 3,000 95,250
-----------
356,671
-----------
BRAZIL -- 17.2%
Banco Bradesco S.A. -- Preferred.... 14,717,300 128,086
Centrais Electricas Brasileiras
S.A.(Electrobras)................. 10,200,000 209,208
Cia Brasileira de Distribuicao Grupo
Pao de Acucar..................... 8,148,100 264,233
Cia Energetica de Minas Gerais
(CEMIG)........................... 3,879,016 67,734
Cia Vale do Rio Doce -- Preferred A
(with 5,000 non-tradeable
debentures)....................... 11,500 324,482
Embratel Participacoes S.A.......... 6,000 141,750
Petroleo Brasileiro
S.A.(Petrobras)................... 13,543 409,154
Tam-cia De Invetimentos(a)(b)....... 9,200,000 150,448
Tele Centro Oeste Celular Part.
S.A............................... 70,000,000 282,491
Tele Norte Leste Participacoes
S.A............................... 12,288 290,304
Telecomunicacoes de Sao Paulo
S.A.(Telesp) Sponsored ADR........ 3,200 59,200
</TABLE>
<PAGE> 104
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--------------------------------------------------------------------------------
IVY DEVELOPING MARKETS FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 99.3% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
Uniao de Bancos Brasileiras S.A.
(Unibanco) Sponsored GDR.......... 3,900 $ 112,125
Uniao de Bancos Brasileiros S.A.
(Unibanco) Units.................. 1,950,000 113,490
-----------
2,552,705
-----------
CHILE -- 1.5%
Antofagasta Holdings plc............ 27,963 149,648
Laboratorio Chile S.A. ADR.......... 4,000 76,750
-----------
226,398
-----------
MEXICO -- 13.6%
Corporacion GEO, S.A. de
C.V. -- Series B(a)............... 43,600 71,314
Fomento Economico Mexicano, S.A.
Sponsored ADR..................... 6,300 271,294
Grupo Financiero Banamex Accival,
S.A. de C.V.(Banacci)............. 39,200 164,873
Grupo Financiero Bancomer, S.A. de
C.V.(a)........................... 166,600 84,627
Grupo Iusacell S.A. de C.V.
ADR(a)............................ 15,000 234,375
Kimberly-Clark de Mexico, S.A. de
C.V. Sponsored ADR................ 7,700 109,244
Organizacion Soriana S.A. de C.V.... 40,000 159,298
Panamerican Beverages Inc........... 15,100 225,556
Telefonos de Mexico S.A. ADR --
Class L........................... 9,900 565,537
Tubos de Acero de Mexico S.A.(TAMSA)
Sponsored ADR..................... 9,000 124,875
-----------
2,010,993
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
VENEZUELA -- 1.4%
Cia Anonima Nacional Telefonos de
Venezuela ADR(CANTV).............. 7,400 $ 201,188
-----------
TOTAL INVESTMENTS -- 99.3%
(Cost -- $13,644,936)(c).......... 14,714,802
OTHER ASSETS, LESS LIABILITIES -- 0.7% 106,007
-----------
NET ASSETS -- 100%.................. $14,820,809
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Security valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note I to the Financial
Statements
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is
as follows:
Gross unrealized appreciation............... $ 2,728,903
Gross unrealized depreciation............... (1,659,037)
-----------
Net unrealized appreciation............. $ 1,069,866
===========
Purchases and sales of securities other than short-term
obligations aggregated $5,453,647 and $5,303,125,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 105
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $13,644,936)...... $14,714,802
Cash........................................................ 165,049
Receivables
Investments sold.......................................... 63,098
Fund shares sold.......................................... 539
Dividends and interest.................................... 43,485
Manager for expense reimbursement......................... 16,671
Other assets................................................ 13,836
-----------
Total assets............................................ 15,017,480
-----------
LIABILITIES
Payables
Investments purchased..................................... 108,837
Fund shares repurchased................................... 37,355
Management fee............................................ 12,310
12b-1 service and distribution fees....................... 2,065
Other payables to related parties......................... 8,639
Accrued expenses............................................ 27,465
-----------
Total liabilities....................................... 196,671
-----------
NET ASSETS.................................................. $14,820,809
===========
CLASS A
Net asset value and redemption price per share
($5,062,031/618,507 shares outstanding)................... $ 8.18
===========
Maximum offering price per share ($8.18 X 100/94.25)*....... $ 8.68
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($6,707,284/836,741 shares outstanding)............. $ 8.02
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($2,914,342/361,836 shares outstanding)............. $ 8.05
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($137,152/16,681 shares outstanding).............. $ 8.22
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $22,577,452
Accumulated net realized loss on investments and foreign
currency transactions................................... (8,685,900)
Accumulated net investment loss........................... (168,353)
Net unrealized appreciation on investments and foreign
currency transactions................................... 1,097,610
-----------
NET ASSETS.................................................. $14,820,809
===========
</TABLE>
* On sales of more than $50,000 the offering price is reduced.
** Subject to a maximum deferred sales charge of 5%.
*** Subject to a maximum deferred sales charge of 1%.
The accompanying notes are an integral part of the financial statements.
<PAGE> 106
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--------------------------------------------------------------------------------
IVY DEVELOPING MARKETS FUND
--------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $18,429 foreign taxes withheld.......... $ 169,133
Interest.................................................. 18,038
-----------
187,171
-----------
EXPENSES
Management fee............................................ $80,240
Transfer agent............................................ 30,078
Administrative services fee............................... 8,024
Custodian fees............................................ 32,021
Blue Sky fees............................................. 15,953
Auditing and accounting fees.............................. 12,238
Shareholder reports....................................... 8,119
Fund accounting........................................... 17,967
Trustees' fees............................................ 2,896
12b-1 service and distribution fees....................... 58,553
Legal..................................................... 13,941
Other..................................................... 1,624
-----------
281,654
Expenses reimbursed by Manager............................ (66,350)
-----------
Net expenses.......................................... 215,304
-----------
NET INVESTMENT LOSS......................................... (28,133)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (1,042,610)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (54,742)
-----------
Net loss on investment transactions................... (1,097,352)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(1,125,485)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 107
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (28,133) $ (38,471)
Net realized loss on investments and foreign currency
transactions............................................ (1,042,610) (904,233)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (54,742) 6,508,089
----------- -----------
Net (decrease) increase resulting from operations..... (1,125,485) 5,565,385
----------- -----------
Class A distributions
Dividends from net investment income...................... -- (4,492)
Distributions from capital gain........................... -- (33,645)
----------- -----------
Total distributions to Class A shareholders........... -- (38,137)
----------- -----------
Class B distributions
Distributions from capital gain........................... -- (15,012)
----------- -----------
Total distributions to Class B shareholders........... -- (15,012)
----------- -----------
Class C distributions
Distributions from capital gain........................... -- (8,682)
----------- -----------
Total distributions to Class C shareholders........... -- (8,682)
----------- -----------
Advisor Class distributions
Dividends from net investment income...................... -- (2,222)
Distributions from capital gain........................... -- (1,949)
----------- -----------
Total distributions to Advisor Class shareholders..... -- (4,171)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (275,069) (1,654,359)
Class B................................................... (430,814) (983,723)
Class C................................................... (331,083) (271,069)
Advisor Class............................................. (157,508) 195,560
----------- -----------
Net decrease resulting from Fund share transactions... (1,194,474) (2,713,591)
----------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (2,319,959) 2,785,792
NET ASSETS
Beginning of period....................................... 17,140,768 14,354,976
----------- -----------
END OF PERIOD............................................. $14,820,809 $17,140,768
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 108
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
----------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 8.77 $ 6.02 $ 6.82 $10.12 $ 9.05 $ 8.64
-------------------------------------------------------------------
(Loss) income from investment operations
Net investment income (loss)(a)................ -- .01 .06(b) .01 (.02)(b) .01
Net (loss) gain on securities (both realized
and unrealized).............................. (.59) 2.80 (.86)(b) (2.80) 1.09(b) .54
-------------------------------------------------------------------
Total from investment operations............... (.59) 2.81 (.80) (2.79) 1.07 .55
-------------------------------------------------------------------
Less distributions
Dividends
From net investment income................... -- .01 -- -- -- .01
In excess of net investment income........... -- -- -- .01 -- --
Distributions
From capital gain............................ -- .05 -- .30 -- .10
In excess of capital gain.................... -- -- -- .20 -- .03
-------------------------------------------------------------------
Total distributions.......................... -- .06 -- .51 -- .14
-------------------------------------------------------------------
Net asset value, end of period................... $ 8.18 $ 8.77 $ 6.02 $ 6.82 $10.12 $ 9.05
===================================================================
Total return(%).................................. (6.73)(c) 46.70(d) (11.67)(d) (27.42)(d) 11.83(d) 6.40(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......... $5,062 $5,652 $5,487 $8,584 $9,925 $3,435
Ratio of expenses to average net assets(e)
With expense reimbursement(%).................. 2.22(f) 2.30 2.18 2.31 2.45 2.55
Without expense reimbursement(%)............... 3.05(f) 3.28 3.47 2.39 2.82 7.18
Ratio of net investment income (loss) to average
net assets(%)(a)............................... .11(f) .13 .88 .09 (.23) .24
Portfolio turnover rate(%)....................... 35 37 47 42 27 14
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
-----------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 8.63 $5.93 $6.77 $10.04 $ 9.05 $8.64
--------------------------------------------------------------------
(Loss) income from investment operations
Net investment (loss) income(a)................ (.03) (.04)(b) .01(b) (.06) (.06)(b) (.02)
Net (loss) gain on securities (both realized
and unrealized).............................. (.58) 2.76 (.85)(b) (2.76) 1.05(b) .51
--------------------------------------------------------------------
Total from investment operations............... (.61) 2.72 (.84) (2.82) .99 .49
--------------------------------------------------------------------
Less distributions
Dividends in excess of net investment income... -- -- -- .01 -- --
Distributions
From capital gain............................ -- .02 -- .28 -- .08
In excess of capital gain.................... -- -- -- .16 -- --
--------------------------------------------------------------------
Total distributions.......................... -- .02 -- .45 -- .08
--------------------------------------------------------------------
Net asset value, end of period................... $ 8.02 $8.63 $5.93 $6.77 $10.04 $9.05
====================================================================
Total return(%).................................. (7.07)(c) 45.82(d) (12.35)(d) (27.93)(d) 10.95(d) 5.62(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)......... $ 6,707 $7,676 $6,145 $8,488 $6,269 $945
Ratio of expenses to average net assets(e)
With expense reimbursement(%).................. 2.96(f) 2.92 2.96 3.09 3.20 3.30
Without expense reimbursement(%)............... 3.79(f) 3.90 4.25 3.17 3.57 7.93
Ratio of net investment (loss) income to average
net assets(%)(a)............................... (.63)(f) (.49) .10 (.69) (.98) (.51)
Portfolio turnover rate(%)....................... 35 37 47 42 27 14
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 109
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 8.67 $5.96 $6.79 $10.06 $ 9.89
------------------------------------------------------------------
(Loss) income from investment operations
Net investment (loss) income(a)................... (.03) (.03)(b) .01(b) (.07) (.02)(b)
Net (loss) gain on securities (both realized and
unrealized)..................................... (.59) 2.76 (.84)(b) (2.76) .19(b)
------------------------------------------------------------------
Total from investment operations.................. (.62) 2.73 (.83) (2.83) .17
------------------------------------------------------------------
Less distributions
Dividends in excess of net investment income...... -- -- -- .01 --
Distributions
From capital gain............................... -- .02 -- .27 --
In excess of capital gain....................... -- -- -- .16 --
------------------------------------------------------------------
Total distributions............................. -- .02 -- .44 --
------------------------------------------------------------------
Net asset value, end of period...................... $ 8.05 $8.67 $5.96 $6.79 $10.06
==================================================================
Total return(%)..................................... (7.15)(c) 45.84(d) (12.16)(d) (28.01)(d) 1.73(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $2,914 $3,474 $2,641 $2,420 $1,854
Ratio of expenses to average net assets(e)
With expense reimbursement(%)..................... 2.92(f) 2.85 2.96 3.12 3.16(f)
Without expense reimbursement(%).................. 3.75(f) 3.83 4.25 3.20 3.53(f)
Ratio of net investment (loss) income to average net
assets(%)(a)...................................... (.59)(f) (.43) .10 (.72) (.94)(f)
Portfolio turnover rate(%).......................... 35 37 47 42 27
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
for the six for the year for the period
months ended ended April 30, 1998
June 30, December (commencement)
ADVISOR CLASS (unaudited) 31, to December 31,
----------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA -----------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 8.80 $ 6.05 $ 7.48
-----------------------------------------------------
(Loss) income from investment operations
Net investment income(a)......................... .03 .03 .04(b)
Net (loss) gain on securities (both realized and
unrealized).................................... (.61) 2.83 (1.47)(b)
-----------------------------------------------------
Total from investment operations................. (.58) 2.86 (1.43)
-----------------------------------------------------
Less distributions
Dividends
From net investment income..................... -- .06 --
In excess of net investment income............. -- .05 --
-----------------------------------------------------
Total distributions.......................... -- .11 --
-----------------------------------------------------
Net asset value, end of period..................... $ 8.22 $ 8.80 $ 6.05
=====================================================
Total return(%).................................... (6.59)(c) 47.38(d) (19.06)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 137 $ 337 $ 82
Ratio of expenses to average net assets(e)
With expense reimbursement(%).................... 1.76(f) 1.74 1.68(f)
Without expense reimbursement(%)................. 2.59(f) 2.72 2.97(f)
Ratio of net investment income to average net
assets(%)(a)..................................... .57(f) .69 1.38(f)
Portfolio turnover rate(%)......................... 35 37 47
</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) From 1995 to 1997, total expenses include fees paid indirectly, if any,
through an offset arrangement.
(f) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 110
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY DEVELOPING MARKETS FUND
--------------------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Developing Markets Fund (the "Fund"), formerly Ivy Developing Nations 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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
Board valued securities amounted to $150,448 (1.0% 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 on
foreign securities, 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, as
amended (the "Code"), 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 carryover of approximately $7,640,000
as of December 31, 1999, 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 carryover expires $6,641,000 in 2006 and
$999,000 in 2007.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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
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
<PAGE> 111
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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% of the
Fund's average net assets. Currently, IMI limits the Fund's total operating
expenses (excluding 12b-1 fees and certain other expenses) to an annual rate of
1.95% 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, 2000, the net amount of underwriting
discount retained by IMDI was $445.
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 $6,722,
$36,072 and $15,759, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $10,566, $13,873, $5,364 and $275, 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 722,890 $ 5,975,002 403,801 $ 3,110,881
Issued on reinvestment
of distributions...... -- -- 2,958 25,081
Repurchased............ (748,754) (6,250,071) (673,581) (4,790,321)
-------- ----------- -------- -----------
Net decrease........... (25,864) $ (275,069) (266,822) $(1,654,359)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 78,237 $ 667,564 156,336 $ 1,112,285
Issued on reinvestment
of distributions...... -- -- 928 7,752
Repurchased............ (131,026) (1,098,378) (303,685) (2,103,760)
-------- ----------- -------- -----------
Net decrease........... (52,789) $ (430,814) (146,421) $ (983,723)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 21,620 $ 177,545 169,606 $ 1,253,679
Issued on reinvestment
of distributions...... -- -- 736 6,171
Repurchased............ (60,555) (508,628) (213,019) (1,530,919)
-------- ----------- -------- -----------
Net decrease........... (38,935) $ (331,083) (42,677) $ (271,069)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 19,382 $ 172,100 55,850 $ 426,326
Issued on reinvestment
of distributions...... -- -- 490 4,171
Repurchased............ (41,032) (329,608) (31,508) (234,937)
-------- ----------- -------- -----------
Net
(decrease)/increase... (21,650) $ (157,508) 24,832 $ 195,560
======== =========== ======== ===========
</TABLE>
<PAGE> 112
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY DEVELOPING MARKETS FUND
--------------------------------------------------------------------------------
12
5. SUBSEQUENT EVENT
At a meeting held on July 21, 2000, the shareholders of Ivy South America 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 South America Fund. On July 21, 2000, the date of the consummation
of the Reorganization, the Fund acquired all or substantially all of the assets
of Ivy South America Fund. The transaction was structured for tax purposes to
qualify as a tax-free reorganization under the Code.
Ivy South America Fund shareholders contributed net assets having an aggregate
value of $2,377,448 (including $329,267 of unrealized appreciation). Upon
completion of the merger, the combined net assets were $17,609,857.
03IDMF063000
<PAGE> 113
IVY FUNDS
Embracing the world
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
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[LOGO]
IVY GLOBAL FUND
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth by investing in stocks of
companies worldwide - including the US.
[PHOTO]
Ivy Global Fund uses a dual management approach. The international portion of
the Fund, which comprises approximately 65% of the portfolio, is managed by the
Ivy International Equity team. The US portion, which comprises approximately 35%
of the portfolio, is managed by Paul Baran.
INTERNATIONAL PERSPECTIVE
An interview with Moira McLachlan,
Vice President at Ivy Management, Inc.
and member of the Ivy International Equity team.
Q: MOIRA, CAN YOU GIVE US AN OVERVIEW OF THE PERFORMANCE OF INTERNATIONAL
MARKETS IN THE FIRST HALF OF 2000?
A: In Europe, where the Fund has 49% of its assets, the weakness in the euro
made headlines earlier in the year. This caused a drop in investor and consumer
confidence, although a weak euro was actually quite positive for the European
export sector. As we move ahead, we believe that the euro will recover against
other major currencies as the European economy continues its structural and
productivity growth. Stock market performance in Europe has not been very
strong, and we believe that was largely due to interest rate worries. We have
seen a number of interest rate hikes in Europe this year. This affected the
price of financial stocks, and we took the opportunity of adding some attractive
financial companies to the Fund that our research previously indicated were too
expensive. We don't expect to see the end of interest rate hikes until later in
the year, as is the case, we believe, in the US. However, inflation in Europe
continues to be very low. We believe that interest rates in Europe will continue
to hover below US interest rates and that they will not hinder economic activity
in Europe.
A number of changes in Europe are also underway as a result of the European
Monetary Union. In our view, increased competition and the larger European
marketplace have contributed to consolidation. Merger and acquisition activity
has increased in virtually every industry in Europe. Companies are focusing on
their core business, and they are eliminating less profitable assets. In
Germany, we believe that changes in the tax law could lead to an acceleration in
German restructuring and corporate activity.
Changes taking place in Japan are also opening opportunities for investors. A
great deal of corporate restructuring is taking place, and Japan's economy seems
to be turning in the right direction. As a result, we have added some Japanese
holdings to the Fund's portfolio.
Driven by technology stocks, emerging markets did relatively well in the first
quarter of the year. However, they suffered
<PAGE> 114
from a sell-off of these same stocks in the second quarter. Latin America,
particularly Mexico, Argentina and Venezuela, benefited from higher commodity
prices, as primary materials make up a large portion of that region's output.
Growth in Asia was driven by improved domestic demand, and Far East production
has returned to pre-crisis levels. Many businesses are restructuring, which
should allow for higher profitability.
Overall, emerging market performance has been weak this year, but we believe
that this was a function of the markets rather than economic fundamentals. Most
of the emerging markets have very strong fundamentals, and as they recover from
the 1997 and 1998 crises, we believe there will be an upward trend. There may,
however, be continued volatility. The Fund has approximately 9.5% of its assets
in emerging markets.
"If investors stop watching the Federal Reserve, they may refocus on the factors
that are driving corporate profitability all over the world."
Q: HOW DID ALL OF THIS AFFECT THE FUND'S PERFORMANCE?
A: The Fund's technology underweighting was a disadvantage as the "new economy"
technology, media and telecommunications stocks outperformed during most of the
first quarter. However, after the sell-off of those same stocks in March, the
Fund performed well. It held up better than the overall market because it was
not exposed to the most vulnerable stocks.
When markets overreact on the downside, as we believe they did in March and
April, it creates excellent buying opportunities. Strategically, we took
advantage of the sell-off in technology to add high-quality names to the Fund
that, in our opinion, were previously overvalued. We also reduced the Fund's
exposure to emerging Asia in favor of more developed markets, such as Japan. And
when the "old economy" stocks -- we prefer to call them "real economy" stocks --
came back into favor and began to outperform in the second quarter, the Fund
benefited from its strong position in those companies.
Q: WHAT IS YOUR OUTLOOK FOR THE REST OF 2000?
A: During the first half of the year, we believe that uncertain performance in
equity markets around the world was related to nervousness about the Federal
Reserve Board and US interest rates. If the Federal Reserve winds down its
"tightening" of the US economy, it is our belief that investors worldwide are
going to focus back on the fundamentals of particular regions. We should see a
renewed focus on the increase in Japan's gross domestic product, which is
positive for both Japan and other markets that export to Asia, and on the
positive economic growth and corporate changes -- consolidation, restructuring
and more -- taking place in Europe. In Latin America, and in emerging markets in
general, there are improving economic fundamentals and a strong recovery from
the bottom of the cycle. We're seeing this improved economic growth translate
into higher earnings, and valuations that are lower than those in the United
States. If investors stop watching the Federal Reserve, they may refocus on the
factors that are driving corporate profitability all over the world. As a
result, we anticipate a much healthier international market for the rest of the
year.
Q: IN THE PAST, THE INTERNATIONAL COMPONENT OF THE FUND WAS MANAGED IN A VALUE
STYLE. WILL THAT CHANGE AS YOU MOVE FORWARD?
A: Yes. We're now taking a more flexible approach, blending growth and value to
take advantage of more investment opportunities around the world. We've also
increased the US portion of the portfolio to capture more domestic opportunities
and to take advantage of more attractive valuations.
US PERSPECTIVE
An interview with Paul Baran, Senior Vice President at Ivy Management, Inc. and
head of the Ivy Domestic Equity team.
Q: PAUL, HOW DID THE US ECONOMY DO IN THE FIRST HALF OF 2000?
A: The big news in the first half of 2000 was interest rates. The Federal
Reserve Board increased interest rates a number of times in the last year in an
effort to head off inflation and to slow what some have perceived to be an
"overheated" economy.
Evidence does show that the economy, while strong, is beginning to slow. While
the US gross domestic product (GDP) rose at an annual rate of 7.3% in the last
quarter of 1999, it only rose 5.4% in the first quarter of 2000. Retail sales
declined 0.6% in April and 0.3% in May.
<PAGE> 115
Housing starts declined nearly 4% in May, a typical response to rising mortgage
rates. This data indicates that the economy may indeed be slowing down, and that
may influence the Federal Reserve Board's future interest rate decisions.
We believe that the US economy and corporate earnings will continue to grow
without excessive inflationary pressures, largely due to technology spending and
the resulting gains in productivity. Slower -- but more sustainable -- economic
growth should have a long-term healthy impact on the stock market. We believe
the US is still in the midst of the longest economic expansion in its history.
Q: HOW DID THE US MARKET PERFORM DURING THIS PERIOD?
A: Over the last few months, the increase in interest rates drove stock prices
lower. In addition, uncertainty about the effect of higher interest rates on
future corporate profits caused an increase in market volatility.
In the first three months of the year, we saw the usual seasonal investment of
money into the stock market, driven by corporate pension and IRA funding. This
helped propel stock prices, particularly in the technology-heavy NASDAQ. But as
we moved into April and the end of IRA season, pension and IRA funding
decreased. Combined with concern over interest rates and the Federal Reserve
Board's actions, this stemmed the flow of investment into the market and reduced
volume to two-thirds of what it was in the first quarter.
Market leadership seems to be narrowing, and the performance of the market is
getting more dependent on a smaller number of stocks -- mostly those in
technology companies. Of course, many of these stocks are volatile. As the first
quarter ended, technology stocks took a tumble. In our view, this was a
reasonable response to overvaluations and excesses caused by a long period of
momentum investing. We believe investors need to look beyond the NASDAQ for
investment options. However, we do expect an eventual broadening of market
leadership that should lead to a more balanced environment -- one that is not
overly dependent on one sector for its performance.
Q: HOW DID THIS AFFECT THE US PORTION OF THE IVY GLOBAL FUND?
A: The US portion benefited from the strong economy during the first half of
2000. It was invested primarily in high-quality, large-cap companies that hold
leading positions in their industries, and this provided the US portion of the
Fund with diversified exposure to a number of sectors. It benefited from its
exposure to the healthcare sector, which was up 23% in the first half of the
year. The US portion also benefited from its exposure to the energy sector,
which was up 3.5%, and its exposure to the technology sector, which -- despite
all the volatility -- was up 2.9% in the first half of 2000. Underperformance by
the capital goods sector (companies that supply tools, equipment and other
materials to businesses) and the consumer cyclicals sector (automotive
companies, retailers and other businesses that depend on consumer spending) hurt
the US portion of the Fund's performance.
Q: HOW DOES YOUR INVESTMENT PROCESS HELP YOU TARGET OPPORTUNITIES IN THIS
MARKET?
A: Typically, we ignore short-term market volatility, and we make no attempt to
time the market. Instead, we employ a disciplined investment philosophy based on
stock selection.
When selecting companies for the US portion of the Fund, we divide the stock
market into eight broad economic sectors, and the weightings approximate the
weighting of each sector within the market, as represented by the S&P 500 Index.
We use an equity style that blends growth and value stocks. The focus is on
companies that, in our judgement, have a proven and consistent record of
earnings profitability, but whose prices do not adequately reflect their
underlying profitability. In addition, we also consider financial strength,
trading liquidity and technical readings.
This is a consistent investment approach that is not affected by emotion or
short-term market trends. In the domestic large-cap market, we believe that
remaining fully invested and ignoring normal fluctuations is the key to
realizing good long-term equity returns.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
<PAGE> 116
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 98.2% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
AFRICA -- 0.9%
--------------------------------------
SOUTH AFRICA -- 0.9%
Anglo American plc..................... 3,090 $ 146,848
-----------
EUROPE -- 49.3%
--------------------------------------
AUSTRIA -- 1.0%
Bank Austria AG........................ 3,466 169,512
-----------
DENMARK -- 1.3%
Den Danske Bank Group.................. 1,786 215,730
-----------
FINLAND -- 0.4%
Stora Enso Oyj -- R Shares............. 7,847 71,836
-----------
FRANCE -- 10.1%
Alcatel SA Sponsored ADR............... 6,300 418,949
Banque Nationale de Paris.............. 3,364 325,049
Cie Generale des Etablissements
Michelin -- Class B.................. 3,000 96,655
Groupe Danone.......................... 1,200 159,893
Scor SA................................ 4,800 209,862
Societe Generale....................... 5,260 317,657
Suez Lyonnaise des Eaux................ 1,054 185,400
-----------
1,713,465
-----------
GERMANY -- 3.1%
Adidas-Salomon AG...................... 2,400 132,975
DaimlerChrysler AG..................... 2,715 143,011
Hornbach Holding AG non-voting --
Preferred............................ 2,921 106,121
Volkswagen AG.......................... 3,800 145,707
-----------
527,814
-----------
IRELAND -- 0.6%
Bank of Ireland........................ 15,000 94,541
-----------
ITALY -- 1.2%
Banca Popolare di Milano............... 27,500 199,027
-----------
NETHERLANDS -- 4.9%
AKZO Nobel NV.......................... 4,863 207,442
ING Groep NV........................... 4,022 272,966
Koninklije (Royal) Philips Electronics
NV................................... 7,252 343,413
-----------
823,821
-----------
PORTUGAL -- 1.0%
Portugal Telecom S.A. Sponsored ADR.... 14,885 167,456
-----------
SPAIN -- 0.1%
Telefonica S.A. Sponsored ADR(a)....... 218 13,977
-----------
SWEDEN -- 2.8%
Electrolux AB.......................... 12,000 186,758
Investor AB............................ 21,500 295,386
-----------
482,144
-----------
SWITZERLAND -- 6.2%
Holderbank Financiere Glaris AG........ 103 126,686
Nestle AG Registered................... 64 128,507
Novartis AG Registered................. 183 290,807
Swatch Group, (The) AG................. 210 267,849
UBS AG -- Registered................... 1,600 235,169
-----------
1,049,018
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
UNITED KINGDOM -- 16.6%
Allied Zurich plc...................... 13,000 $ 153,411
Bass plc............................... 12,800 143,203
Billiton plc........................... 32,742 132,347
BP Amoco plc Sponsored ADR............. 1,200 67,875
British Airways plc.................... 56,000 322,370
British Telecommunications plc......... 9,000 116,358
Cadbury Schweppes plc.................. 24,000 157,779
Corporate Services Group plc(a)........ 125,000 184,507
Gallaher Group plc..................... 41,048 224,179
Hilton Group plc....................... 49,000 171,358
Imperial Chemical Industries plc....... 21,539 170,213
Pilkington plc......................... 207,890 294,268
PowerGen plc........................... 18,831 161,927
Rio Tinto plc Sponsored ADR............ 89 5,807
Rolls-Royce plc........................ 25,000 89,415
Royal & Sun Alliance Insurance Group
plc.................................. 24,000 155,235
South African Breweries plc............ 18,144 135,415
Unilever plc........................... 21,000 126,611
-----------
2,812,278
-----------
FAR EAST -- 10.9%
--------------------------------------
AUSTRALIA -- 1.0%
National Australia Bank Ltd............ 10,248 171,659
-----------
HONG KONG -- 2.3%
Cheung Kong Holdings Ltd............... 17,000 188,101
Citic Pacific Ltd...................... 30,000 157,023
Sun Hung Kai Properties Ltd............ 6,000 43,104
-----------
388,228
-----------
JAPAN -- 3.0%
Bank Of Tokyo-Mitsubishi, Ltd.......... 14,000 169,506
Nintendo Co., Ltd...................... 1,000 175,045
Ricoh Company, Ltd..................... 8,000 169,752
-----------
514,303
-----------
MALAYSIA -- 0.1%
Sime Darby Berhad...................... 19,000 24,401
-----------
NEW ZEALAND -- 2.6%
Tourism Holdings Limited............... 289,422 333,805
Warehouse Group Limited (The).......... 45,000 109,521
-----------
443,326
-----------
PHILIPPINES -- 0.9%
Benpres Holdings Corporation Sponsored
GDR(a)............................... 20,100 38,944
Philippine Long Distance Telephone
Co................................... 3,800 68,126
Universal Robina Corporation........... 297,000 36,413
-----------
143,483
-----------
SINGAPORE -- 1.0%
Overseas Union Bank Ltd................ 27,408 106,209
Singapore Press Holdings Ltd........... 4,000 62,465
-----------
168,674
-----------
</TABLE>
<PAGE> 117
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
LATIN AMERICA -- 3.3%
------------------------------------
BRAZIL -- 2.8%
Petroleo Brasileiro S.A.
(Petrobras)........................ 5,400 $ 163,142
Tele Norte Leste Participacoes
S.A................................ 175 4,134
Telebras Holders Preferred Block
Sponsored ADR...................... 1,500 145,688
Telecomunicacoes de Sao Paulo S.A.
(Telesp) Sponsored ADR............. 1,500 27,750
Uniao de Bancos Brasileiros S.A.
(Unibanco) -- Preferred............ 4,400,000 136,589
-----------
477,303
-----------
MEXICO -- 0.5%
Panamerican Beverages Inc............ 6,000 89,625
-----------
NORTH AMERICA -- 33.8%
------------------------------------
CANADA -- 1.0%
Boliden Limited SDR(a)............... 3,790 4,451
JDS Uniphase Corporation(a).......... 700 83,912
Nortel Networks Corporation.......... 1,200 81,900
-----------
170,263
-----------
UNITED STATES -- 32.8%
Adobe Systems Incorporated........... 600 78,000
Agilent Technologies, Inc.(a)........ 700 51,603
ALLTEL Corporation................... 1,600 99,100
Altera Corporation(a)................ 700 71,356
American Power Conversion
Corporation(a)..................... 2,000 81,625
Analog Devices, Inc.(a).............. 1,200 91,200
Anheuser-Busch Companies, Inc........ 1,000 74,687
Apple Computer, Inc.(a).............. 1,900 99,512
Applied Materials, Inc.(a)........... 950 86,094
AT&T Corporation..................... 1,500 47,437
Bank of America Corporation.......... 1,750 75,250
Bell Atlantic Corporation............ 1,500 76,219
BellSouth Corporation................ 2,000 85,250
Best Buy Co., Inc.(a)................ 1,500 94,875
Bristol-Myers Squibb Company......... 1,750 101,937
Chase Manhattan Corporation (The).... 2,250 103,641
Chevron Corporation.................. 800 67,850
Cisco Systems, Inc.(a)............... 2,500 158,906
Citigroup Inc........................ 1,600 96,400
Colgate-Palmolive Company............ 1,500 89,812
Dell Computer Corporation(a)......... 1,500 73,969
Eli Lilly and Company................ 1,500 149,812
EMC Corporation...................... 1,000 76,937
Exxon Mobil Corporation.............. 1,200 94,200
FedEx Corp.(a)....................... 1,250 47,500
Gap, Inc. (The)...................... 2,000 62,500
General Electric Company............. 4,200 222,600
Heinz (H.J.) Company................. 2,000 87,500
Hewlett-Packard Company.............. 600 74,925
Home Depot, Inc...................... 1,500 74,906
Intel Corporation.................... 2,000 267,375
International Business Machines
Corp............................... 1,000 109,562
Johnson & Johnson.................... 1,000 101,875
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Kimberly-Clark Corporation........... 1,200 $ 68,850
Lattice Semiconductor
Corporation(a)..................... 1,000 69,125
Legg Mason, Inc...................... 1,200 60,000
Lowe's Companies, Inc................ 1,800 73,912
LSI Logic Corporation(a)............. 1,500 81,188
Medtronic, Inc....................... 1,250 62,266
Mellon Financial Corporation......... 2,500 91,094
Merck & Co, Inc...................... 1,250 95,781
Merrill Lynch & Co., Inc............. 1,000 115,000
Microchip Technology(a).............. 1,200 69,919
Microsoft Corporation(a)............. 1,800 144,000
Montana Power Company (The).......... 1,800 63,563
Morgan Stanley Dean Witter & Co...... 2,000 166,500
Noble Drilling Corporation(a)........ 1,200 49,425
Novellus Systems, Inc.(a)............ 1,500 84,844
Paine Webber Group Inc............... 1,200 54,600
PepsiCo, Inc......................... 1,800 79,988
Pfizer Inc........................... 1,000 48,000
SBC Communications Inc............... 2,000 86,500
Schering-Plough Corporation.......... 2,200 111,100
State Street Corporation............. 750 79,547
Sun Microsystems, Inc.(a)............ 1,000 90,938
Texaco Inc........................... 1,200 63,900
Texas Instruments Inc................ 1,600 109,900
Vitesse Semiconductor
Corporation(a)..................... 750 55,172
Wal-Mart Stores, Inc................. 1,500 86,438
WorldCom, Inc.(a).................... 1,500 68,813
Wrigley (Wm.) Jr. Company............ 1,000 80,188
Xilinx, Inc.(a)...................... 800 66,050
-----------
5,551,016
-----------
TOTAL INVESTMENTS -- 98.2%
(Cost -- $13,948,361)(b)........... 16,629,748
OTHER ASSETS, LESS LIABILITIES -- 1.8%.......... 299,692
-----------
NET ASSETS -- 100%.............................. $16,929,440
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
SDR -- Swedish Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 4,026,111
Gross unrealized depreciation............... (1,344,724)
-----------
Net unrealized appreciation................. $ 2,681,387
===========
Purchases and sales of securities other than short-term
obligations aggregated $4,348,221 and $7,005,444,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 118
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL FUND
--------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $13,948,361)...... $16,629,748
Cash........................................................ 277,855
Receivables
Investments sold.......................................... 28,044
Fund shares sold.......................................... 117
Dividends and interest.................................... 92,215
Manager for expense reimbursement......................... 15,247
Other assets................................................ 17,508
-----------
Total assets............................................ 17,060,734
-----------
LIABILITIES
Payables
Investments purchased..................................... 74,320
Management fee............................................ 14,071
12b-1 service and distribution fees....................... 1,728
Other payables to related parties......................... 8,671
Accrued expenses............................................ 32,504
-----------
Total liabilities....................................... 131,294
-----------
NET ASSETS.................................................. $16,929,440
===========
CLASS A
Net asset value and redemption price per share
($10,146,855/761,126 shares outstanding).................. $ 13.33
===========
Maximum offering price per share ($13.33 X 100/94.25)*...... $ 14.14
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($6,389,812/491,470 shares outstanding)............. $ 13.00
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($193,618/15,369 shares outstanding)................ $ 12.60
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($199,155/14,832 shares outstanding)................ $ 13.43
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $13,776,520
Undistributed net realized gain on investments and foreign
currency transactions................................... 454,185
Undistributed net investment income....................... 16,665
Net unrealized appreciation on investments and foreign
currency transactions................................... 2,682,070
-----------
NET ASSETS.................................................. $16,929,440
===========
</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> 119
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $23,333 foreign taxes withheld.......... $ 277,825
Interest.................................................. 7,078
---------
284,903
---------
EXPENSES
Management fee............................................ $87,194
Transfer agent............................................ 29,266
Administrative services fee............................... 8,719
Custodian fees............................................ 35,416
Blue Sky fees............................................. 15,704
Auditing and accounting fees.............................. 15,125
Shareholder reports....................................... 8,223
Fund accounting........................................... 17,926
Trustees' fees............................................ 2,939
12b-1 service and distribution fees....................... 46,994
Legal..................................................... 13,959
Other..................................................... 1,804
---------
283,269
Expenses reimbursed by Manager............................ (66,248)
---------
Net expenses.......................................... 217,021
---------
NET INVESTMENT INCOME....................................... 67,882
---------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 454,185
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (755,847)
---------
Net loss on investment transactions................... (301,662)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(233,780)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 120
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL FUND
--------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 67,882 $ (40,972)
Net realized gain on investments and foreign currency
transactions............................................ 454,185 2,479,642
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (755,847) 2,250,842
----------- -----------
Net (decrease) increase resulting from operations..... (233,780) 4,689,512
----------- -----------
Distributions to shareholders from capital gain
Class A................................................... -- (738,164)
Class B................................................... -- (468,259)
Class C................................................... -- (17,380)
Advisor Class............................................. -- (11,002)
----------- -----------
Total distributions to shareholders................... -- (1,234,805)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (1,558,795) (5,072,125)
Class B................................................... (822,223) (1,283,220)
Class C................................................... (65,570) (216,719)
Advisor Class............................................. 20,191 (197,021)
----------- -----------
Net decrease resulting from Fund share transactions... (2,426,397) (6,769,085)
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (2,660,177) (3,314,378)
NET ASSETS
Beginning of period....................................... 19,589,617 22,903,995
----------- -----------
END OF PERIOD............................................. $16,929,440 $19,589,617
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 16,665 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 121
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 13.42 $11.32 $ 10.93 $ 13.17 $ 11.97 $ 11.23
---------------------------------------------------------------------------
(Loss) income from investment operations
Net investment income............................. .04(a) .01(a) .02(a) .08 .08 .09(a)
Net (loss) gain on securities (both realized and
unrealized)..................................... (.13) 2.98 .91 (1.23) 1.86 1.25
---------------------------------------------------------------------------
Total from investment operations.................. (.09) 2.99 .93 (1.15) 1.94 1.34
---------------------------------------------------------------------------
Less distributions
Dividends
From net investment income...................... -- -- -- .05 .08 .04
In excess of net investment income.............. -- -- -- .05 .18 --
Distributions
From capital gain............................... -- .89 .54 .99 .48 .49
In excess of capital gain....................... -- -- -- -- -- .07
---------------------------------------------------------------------------
Total distributions............................. -- .89 .54 1.09 .74 .60
---------------------------------------------------------------------------
Net asset value, end of period...................... $ 13.33 $13.42 $ 11.32 $ 10.93 $ 13.17 $ 11.97
===========================================================================
Total return(%)..................................... (0.67)(b) 26.51(c) 8.59(c) (8.72)(c) 16.21(c) 12.08(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $10,147 $11,828 $14,660 $19,692 $24,152 $21,264
Ratio of expenses to average net assets
With expense reimbursement(%)..................... 2.18(d) 2.17 2.18 -- -- 2.20
Without expense reimbursement(%).................. 2.94(d) 2.77 2.54 2.07 2.18 2.46
Ratio of net investment income to average net
assets(%)......................................... 1.09(a)(d) .09(a) .16(a) .58 .58 .71(a)
Portfolio turnover rate(%).......................... 25 50 17 45 43 53
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
SELECTED PER SHARE DATA -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 13.14 $11.19 $10.90 $13.12 $11.97 $11.23
-----------------------------------------------------------------------
(Loss) income from investment operations
Net investment income (loss)...................... .01(a) (.10)(a) (.09)(a) (.02) (.02) --(a)
Net (loss) gain on securities (both realized and
unrealized)..................................... (.15) 2.94 .92 (1.20) 1.85 1.25
-----------------------------------------------------------------------
Total from investment operations.................. (.14) 2.84 .83 (1.22) 1.83 1.25
-----------------------------------------------------------------------
Less distributions
Dividends
From net investment income...................... -- -- -- .05 -- --
In excess of net investment income.............. -- -- -- .05 .20 --
Distributions
From capital gain............................... -- .89 .54 .90 .48 .45
In excess of capital gain....................... -- -- -- -- -- .06
-----------------------------------------------------------------------
Total distributions............................. -- .89 .54 1.00 .68 .51
-----------------------------------------------------------------------
Net asset value, end of period...................... $ 13.00 $13.14 $11.19 $10.90 $13.12 $11.97
=======================================================================
Total return(%)..................................... (1.07)(b) 25.31(c) 7.69(c) (9.33)(c) 15.30(c) 11.25(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 6,390 $7,316 $7,495 $10,056 $8,968 $4,811
Ratio of expenses to average net assets
With expense reimbursement(%)..................... 2.97(d) 2.99 2.97 -- -- 2.95
Without expense reimbursement(%).................. 3.73(d) 3.59 3.33 2.82 2.94 3.21
Ratio of net investment income (loss) to average net
assets(%)......................................... .30(a)(d) (.72)(a) (.63)(a) (.18) (.17) (.04)(a)
Portfolio turnover rate(%).......................... 25 50 17 45 43 53
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 122
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended April 30, 1996
June 30, for the year ended (commencement)
CLASS C (unaudited) December 31, to December 31,
---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
SELECTED PER SHARE DATA ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 12.75 $ 10.90 $ 10.67 $ 12.94 $13.31
---------------------------------------------------------------------------
(Loss) income from investment operations
Net investment loss............................... --(a) (.16)(a) (.16)(a) (.02) (.01)
Net (loss) gain on securities (both realized and
unrealized)..................................... (.15) 2.90 .93 (1.24) .42
---------------------------------------------------------------------------
Total from investment operations.................. (.15) 2.74 .77 (1.26) .41
---------------------------------------------------------------------------
Less distributions
Dividends
From net investment income...................... -- -- -- .05 --
In excess of net investment income.............. -- -- -- .05 .30
Distributions from capital gain................... -- .89 .54 .91 .48
---------------------------------------------------------------------------
Total distributions............................. -- .89 .54 1.01 .78
---------------------------------------------------------------------------
Net asset value, end of period...................... $ 12.60 $ 12.75 $ 10.90 $ 10.67 $12.94
===========================================================================
Total return(%)..................................... (1.18)(b) 25.34(c) 7.30(c) (9.72)(c) 3.07(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............ $ 194 $ 267 $ 428 $ 727 $ 71
Ratio of expenses to average net assets
With expense reimbursement(%)..................... 3.34(d) 3.23 3.30 -- --
Without expense reimbursement(%).................. 4.10(d) 3.83 3.66 2.82 3.77(d)
Ratio of net investment loss to average net
assets(%)......................................... (.08)(a)(d) (.96)(a) (.96)(a) (.18) (1.01)(d)
Portfolio turnover rate(%).......................... 25 50 17 45 43
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year April 30,1998
June 30, ended (commencement)
ADVISOR CLASS (unaudited) December 31, to December 31,
-------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $13.50 $11.36 $13.26
------------------------------------------------------
(Loss) income from investment operations
Net investment income(a)........................... .04 .08 .05
Net (loss) gain on securities (both realized and
unrealized)...................................... (.11) 2.95 (1.41)
------------------------------------------------------
Total from investment operations................... (.07) 3.03 (1.36)
------------------------------------------------------
Less distributions
From capital gain................................ -- .89 .54
------------------------------------------------------
Total distributions.............................. -- .89 .54
------------------------------------------------------
Net asset value, end of period....................... $13.43 $13.50 $11.36
======================================================
Total return(%)...................................... (0.52)(b) 26.77(c) (10.19)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 199 $ 179 $ 321
Ratio of expenses to average net assets
With expense reimbursement(%)...................... 1.94(d) 1.96 1.75(d)
Without expense reimbursement(%)................... 2.70(d) 2.56 2.11(d)
Ratio of net investment income to average net
assets(%)(a)....................................... 1.33(d) .31 .59(d)
Portfolio turnover rate(%)........................... 25 50 17
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total return does not reflect a sales charge.
(d) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 123
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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 on
foreign securities, 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, as
amended (the "Code"), 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
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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 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.
<PAGE> 124
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL FUND
--------------------------------------------------------------------------------
12
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 12b-1 fees and certain other expenses) to an
annual rate of 1.95% 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, 2000, the net amount of underwriting
discount retained by IMDI was $667.
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 $13,111,
$32,826 and $1,057, 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 $16,471, $11,747, $770 and $278, 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 475,393 $ 6,087,960 241,445 $ 3,162,247
Issued on reinvestment of
distributions.............. -- -- 50,936 671,840
Repurchased................. (595,704) (7,646,755) (706,165) (8,906,212)
-------- ----------- -------- -----------
Net decrease................ (120,311) $(1,558,795) (413,784) $(5,072,125)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 29,314 $ 365,631 62,902 $ 775,522
Issued on reinvestment of
distributions.............. -- -- 29,290 378,431
Repurchased................. (94,521) (1,187,854) (205,333) (2,437,173)
-------- ----------- -------- -----------
Net decrease................ (65,207) $ (822,223) (113,141) $(1,283,220)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 2,774 $ 33,568 3,127 $ 39,261
Issued on reinvestment of
distributions.............. -- -- 1,153 14,448
Repurchased................. (8,317) (99,138) (22,661) (270,428)
-------- ----------- -------- -----------
Net decrease................ (5,543) $ (65,570) (18,381) $ (216,719)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 2,698 $ 34,279 3,716 $ 44,937
Issued on reinvestment of
distributions.............. -- -- 829 11,002
Repurchased................. (1,110) (14,088) (19,538) (252,960)
-------- ----------- -------- -----------
Net increase/(decrease)..... 1,588 $ 20,191 (14,993) $ (197,021)
======== =========== ======== ===========
</TABLE>
03IGLF063000
<PAGE> 125
[LOGO]
IVY GLOBAL NATURAL RESOURCES FUND
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth by investing in equity
securities of companies that explore, develop, produce and/or distribute natural
resources and other basic commodities, or in those that supply goods and
services to such companies.
An interview with Fred Sturm, portfolio manager of Ivy Global Natural Resources
Fund and member of the Mackenzie Financial Corporation investment team.
Q: FRED, CAN YOU GIVE US AN OVERVIEW OF THE GLOBAL NATURAL RESOURCES MARKET IN
THE FIRST HALF OF 2000?
A: In general, we've seen short-term excitement and longer-term opportunity, but
also a few caution flags. Resource investors have been asking for less
volatility, longer up-cycles and better underlying profit sustainability, and,
in many cases, we're seeing that come to pass.
Investors need look no further than the gas pump to understand why energy
producers are quietly smiling this year. The combined energy sectors (oil
producers, gas producers and energy services), in which the Fund has a 34%
weighting, is up 30% year-to-date. Natural gas prices have surged, reflecting
growing demand, low inventories, high decline rates in existing production and a
gradual increase in new development. US natural gas prices have gone from $1.65
in early 1999 to their current price of over $4. This increase has been even
more dramatic in Canada, where natural gas prices have gone from $1.15 to $5.25
in Canadian dollars. OPEC is keeping oil inventories tight, and the heavy oil
economics are strong.
As a result, the profitability of the energy sectors is soaring. Higher oil
income should lead to more drilling, and more drilling provides investment
potential for resource investors as well as larger profits for the energy
service sector. Cash flow multiples are still under five times compared to a
historic range of five to nine times, which in our view provides attractive
valuations. Steady takeover announcements are confirming value in this sector,
with a positive spillover to the coal and uranium markets.
Pulp prices are also up significantly, and paper prices are beginning to rise. A
number of big international mergers are taking place, and many companies are
maintaining tight inventory levels to maximize production efficiency and support
prices. To cite just one example, Stone Container, one of the world's largest
makers of containerboard, is cost-cutting and reducing capacity in the face of
rising demand and prices.
In the platinum sector, stockpiles in Russia are nearly depleted, with prices up
from $335 to $565 per ounce. That is the highest price we've seen in 10 years.
This sector has few producers in a tightly controlled world market, but there is
a potentially large demand coming from fuel cells.
Some sectors, while currently weak, are showing greater long-term opportunity.
Share prices for forest, base metals, and
<PAGE> 126
[LOGO]
IVY GLOBAL NATURAL RESOURCES FUND
steel companies are down an average of 25% year-to-date. However, the market is
imposing discipline on management in these sectors, forcing them to shift the
focus from production growth to bottom-line profitability. In many cases, a lack
of capital is limiting production growth, which is leading to higher
profitability.
In our view, the outlook for gold remains positive. Although gold shares have
declined more than 10% year-to-date, the market is absorbing central bank sales,
and stocks are attractively priced. According to our research, merger activity
looks ready to intensify with the recently announced Franco/Goldfields and
Newmont/Battle Mountain mergers. Gold's large "short" position leaves the gold
price open to significant increase.
Base metal inventories are declining rapidly, but big mergers in aluminum and
copper may strengthen the industry's structure and discipline. Right now,
however, some stocks have pulled back close to the levels seen during the Asian
financial crisis of 1997-1998 and are already priced for a potential economic
slowdown. Steel stocks offer large potential, but they will most likely take
more time to improve. The steel industry still needs more cost cutting. The
process is well in stride in Europe, but US companies are still struggling with
issues such as pension liabilities. And although steel inventories are currently
too high, according to our research well-run companies are posting solid
returns.
Q: HOW DOES THE LARGER ECONOMIC PICTURE AFFECT NATURAL RESOURCES?
A: In general, rising interest rates may leave the stock market vulnerable to a
downdraft. A slowing US economy will mute demand for natural resources. However,
we still expect to see some growth this year. Energy prices are currently at the
upper end of mid-term price expectations. The challenge will be to sustain
highly profitable prices.
A decline in the US dollar would be potentially positive, especially for gold,
as it is expensive for foreigners to buy commodities in US dollars when their
own currency is weak. They can afford to pay higher US dollar prices when their
own currencies are strong.
The major economic blocks, including North America, Europe and Asia, are in a
period of synchronized growth, and this has set the stage for what we believe
could be a period of sustained outperformance in the resources sector. The
rebound in oil prices, improving base metal prices, stronger forest product
pricing, strong platinum and palladium prices and the start of rising gold
prices are all positive developments that we've seen in 2000. The ongoing
downsizing and cost reduction among many of the companies in this sector is
yielding tremendous improvements in profits. At the same time, commodity prices
are rebounding from multidecade lows to more normal levels.
Q: HOW DID IVY GLOBAL NATURAL RESOURCES FUND BENEFIT FROM THESE DEVELOPMENTS?
A: The Fund continues to make gains, and it outperformed its underlying
commodity-related index in the first half of the year. Energy has been the only
sector to post gains this year, and the Fund is overweight in this area. The
market itself is showing many divergent trends right now. This provides good
reason for diversification, and we are taking advantage of new opportunities to
rotate investments between resource sectors. The Fund is also well-diversified
by country. As of 6/30, some of the Fund's largest holdings are Canada's
Hurricane Hydrocarbons (oil producer), South Africa's Anglo American Platinum
(platinum group metals), Brazil's Aracruz Celulose S.A. (paper and forest), and
the United States' Battle Mountain (gold mining). We believe that the Fund is
well positioned to give shareholders exposure to some lesser-known names with
strong profit potential.
Q: HOW DOES YOUR INVESTMENT PROCESS HELP YOU TARGET OPPORTUNITIES IN THIS
MARKET?
A: We divide the investment process into two parts: individual security analysis
and macroeconomic and industry-dynamics analysis.
For individual security analysis, we maintain models for hundreds of companies
worldwide in sectors including integrated energy companies, energy producers,
energy services, chemicals, steel, forest products, base metals, gold and other
precious metals, coal and uranium, and agricultural commodities. These models
track earnings, cash flow, physical production and other factors. We then make
adjustments for interest rates and risk items including commodity prices, debt,
quality of assets and management,
2
<PAGE> 127
growth prospects, and political risk. This leads to "fair valuation" price
targets, which guide individual purchase and sale decisions. Typically, we
formally review each company twice per year, corresponding with industry
conferences and company visits. We also monitor the progress of changes at these
companies. In addition to monitoring broker research, we retain consultants to
review specific companies and assist in site visits as necessary.
In qualitative terms, the investment process begins by seeking out well-managed
companies with strong balance sheets, and the technological capability and
expertise to grow independently of commodity prices. Quite often, these are
intermediate-sized companies that are growing through exploration and
development. These companies are sometimes neglected in liquidity-driven markets
and may lead to temporary underperformance, but over time their superior growth
adds value.
We also emphasize sectors that are out of favor but likely to show meaningful
improvement over the next two to three years. This is normally based upon
industry analysis. Here we anchor the portfolio with world-class companies --
typically larger companies that tend to have "trophy assets" and low cost
operations.
When it comes to macroeconomic analysis, our asset-mix team tracks several
models to prepare an outlook for economic and financial market conditions. These
are largely used as inputs to track demand for various commodities. We overlay
capacity additions to establish likely commodity price direction and closely
monitor inventory levels of each commodity. These macro conclusions are used
more to adjust the level of individual security holdings rather than to
significantly change the selection.
Q: DO YOU HAVE A CERTAIN PROCESS FOR PORTFOLIO CONSTRUCTION AS WELL?
A: Yes. In addition to the return-seeking research process, the portfolio is
constructed to minimize risk through a careful diversification process. First,
the portfolio is diversified by sector. This is a broadly diversified resource
fund, which would be reflected in a market-neutral sector mix of roughly 40%
energy (including integrated energy, oil, gas, and services), 14% in forest
products, 14% in base metals, 14% in precious metals, 14% in industrial
materials, and the remaining in agricultural and other sectors. These are only
guidelines, and at any one time there may be significant under- or
over-representation in one sector -- approximately 50% variance for major
sectors, more for smaller commodities. Second, the portfolio is diversified by
capitalization, maintaining a balance of world-class senior companies, and
superior growth opportunities in a selected number of smaller companies. Third,
we diversify by geographic location of the primary producing assets of stocks
held. We fully use the Fund's foreign content allowance where possible. Finally,
the Fund is diversified by individual securities, typically limiting any single
holding to 5% of the portfolio. The Fund maintains focus with the top 10
holdings representing 35% of the portfolio, and the top 30 representing 75-80%
of the portfolio.
As we move forward in 2000, we will continue to emphasize the energy sectors
while maintaining our established sector diversification.
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
"Resource
investors have
been asking for
less volatility,
longer up-cycles
and better
underlying profit
sustainability,
and, in many
cases, we're
seeing that come
to pass."
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
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
3
<PAGE> 128
[IVY LEAF LOGO]
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IVY GLOBAL NATURAL RESOURCES FUND
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4
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 93.3% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
DIAMONDS -- 4.0%
Aber Resources, Ltd.(a)................ 35,000 $ 223,228
De Beers Consolidated Mines Ltd........ 5,000 121,562
-----------
344,790
-----------
ENERGY SERVICES -- 8.7%
Badger Daylighting Inc.(a)............. 50,000 72,553
CenAlta Energy Services Inc.(a)........ 70,000 288,188
Friede Goldman Halter, Inc.(a)......... 10,000 89,375
NQL Drilling Tools Inc. -- Class
A(a)................................. 32,500 197,413
Shaw Industries Ltd.................... 10,000 104,612
-----------
752,141
-----------
FOOD/AGRICULTURE -- 2.3%
IMC Global Inc......................... 4,500 58,500
Potash Corporation of Saskatchewan
Inc.................................. 2,500 136,670
-----------
195,170
-----------
GAS PRODUCERS -- 7.3%
Beau Canada Exploration Ltd.(a)........ 25,200 27,552
Compton Petroleum Corporation(a)....... 50,000 87,739
Genesis Exploration Ltd.(a)............ 33,000 244,994
Niko Resources Ltd.(a)................. 35,000 150,000
Penn West Petroleum Ltd.(a)............ 5,000 123,509
-----------
633,794
-----------
INDUSTRIAL -- 8.9%
AK Steel Holding Corporation........... 17,800 142,400
Arch Coal, Inc......................... 20,000 153,750
Cameco Corporation..................... 2,000 24,432
IPSCO, Inc............................. 20,000 249,043
Pohang Iron & Steel Company Ltd.
Sponsored ADR........................ 8,200 196,800
-----------
766,425
-----------
JUNIOR PRECIOUS METALS -- 8.2%
Geomaque Explorations Ltd.(a).......... 500,000 101,237
IAMGOLD Corporation(a)................. 100,000 205,849
Meridian Gold, Inc.(a)................. 30,000 182,227
Orvana Minerals Corporation(a)......... 600,000 72,891
Randgold & Exploration Company
Ltd.(a).............................. 19,000 68,875
Repadre Capital Corporation (a)........ 62,500 73,818
-----------
704,897
-----------
METALS & MINERALS -- 2.0%
Centaur Mining and Exploration
Limited(a)........................... 775,000 55,839
Ivernia West plc(a).................... 85,000 55,977
Pasminco Limited(a).................... 100,000 53,437
-----------
165,253
-----------
OIL PRODUCERS -- 18.5%
Cabre Exploration Ltd.(a).............. 18,800 204,283
Canadian Natural Resources Ltd......... 12,900 374,375
Canadian Occidental Petroleum Ltd...... 7,000 189,685
Crestar Energy, Inc.(a)................ 10,000 152,193
Hurricane Hydrocarbons Ltd. -- Class
A(a)................................. 100,000 452,192
Talisman Energy Inc. (a)............... 6,800 225,111
-----------
1,597,839
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS -- 13.7%
Aracruz Celulose S.A. Sponsored ADR.... 19,100 $ 368,869
Asia Pulp & Paper Warrants,
7/27/2000(a)......................... 2,500 39
Canfor Corporation..................... 20,000 177,503
Cascades Inc........................... 30,000 158,942
PT Indah Kiat Pulp & Paper Corporation
Tbk(a)............................... 303,000 61,450
Sino-Forest Corp. -- Class A(a)........ 350,000 342,519
UPM-Kymmene Oyj........................ 2,800 69,785
-----------
1,179,107
-----------
PLATINUM GROUP METALS -- 6.2%
Anglo American Platinum Corporation.... 15,000 432,315
Northam Platinum Limited............... 92,201 106,076
-----------
538,391
-----------
SENIOR PRECIOUS METALS -- 13.3%
Battle Mountain Gold Company(a)........ 100,000 218,750
Durban Roodepoort Deep Limited(a)...... 175,000 180,684
Gold Fields Limited.................... 41,249 161,837
Harmony Gold Mining Company Limited.... 45,000 248,902
Newcrest Mining Limited(a)............. 30,000 81,057
Newmont Mining Corporation............. 5,500 118,938
Normandy Mining Limited................ 250,000 135,095
-----------
1,145,263
-----------
SUNDRY -- 0.2%
Gold Fields of South Africa
Limited(a)........................... 4,261 5,355
Standard Bank Investment Corporation
Limited.............................. 4,099 16,023
-----------
21,378
-----------
TOTAL EQUITY SECURITIES -- 93.3%
(Cost --$8,312,475).................. 8,044,448
-----------
U.S. CORPORATE BOND -- 2.1%
Freeport-McMoRan Copper & Gold, Inc.,
7.50%, 11/15/2006
(Cost -- $213,062)................... 20,000 185,000
-----------
TOTAL INVESTMENTS -- 95.4%
(Cost -- $8,525,537)(b).............. 8,229,448
OTHER ASSETS, LESS LIABILITIES -- 4.6% 397,150
-----------
NET ASSETS -- 100%..................... $ 8,626,598
===========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 1,534,610
Gross unrealized depreciation............... (1,830,699)
-----------
Net unrealized depreciation............. $ (296,089)
===========
Purchases and sales of securities other than short-term
obligations aggregated $5,693,034 and $6,788,665,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 129
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $8,525,537)....... $ 8,229,448
Cash........................................................ 178,396
Receivables
Investments sold.......................................... 543,114
Fund shares sold.......................................... 8,500
Dividends and interest.................................... 9,884
Manager for expense reimbursement......................... 18,525
Deferred organization expenses.............................. 14,107
Other assets................................................ 14,913
-----------
Total assets............................................ 9,016,887
-----------
LIABILITIES
Payables
Investments purchased..................................... 349,183
Management fee............................................ 6,797
12b-1 service and distribution fees....................... 823
Other payables to related parties......................... 6,401
Accrued expenses............................................ 27,085
-----------
Total liabilities....................................... 390,289
-----------
NET ASSETS.................................................. $ 8,626,598
===========
CLASS A
Net asset value and redemption price per share
($5,574,909/587,201 shares outstanding)................... $ 9.49
===========
Maximum offering price per share ($9.49 X 100/94.25)*....... $ 10.07
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($2,604,988/279,593 shares outstanding)............. $ 9.32
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($418,461/45,590 shares outstanding)................ $ 9.18
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($28,240/2,974 shares outstanding) ****............. $ 9.49
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $18,046,618
Accumulated net realized loss on investments and foreign
currency transactions................................... (9,042,924)
Accumulated net investment loss........................... (79,536)
Net unrealized depreciation on investments and foreign
currency transactions................................... (297,560)
-----------
NET ASSETS.................................................. $ 8,626,598
===========
</TABLE>
<TABLE>
<C> <S>
* 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%.
**** Actual shares at June 30, 2000 were 2,974.465.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 130
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IVY GLOBAL NATURAL RESOURCES FUND
--------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 37,537
Interest.................................................. 678
---------
38,215
---------
EXPENSES
Management fee............................................ $40,806
Transfer agent............................................ 23,178
Administrative services fee............................... 4,081
Custodian fees............................................ 29,187
Blue Sky fees............................................. 15,511
Auditing and accounting fees.............................. 15,631
Shareholder reports....................................... 6,950
Amortization of organization expenses..................... 4,899
Fund accounting........................................... 11,904
Trustees' fees............................................ 2,723
12b-1 service and distribution fees....................... 20,302
Legal..................................................... 15,868
Other..................................................... 1,527
---------
192,567
Expenses reimbursed by Manager............................ (92,698)
---------
Net expenses.......................................... 99,869
---------
NET INVESTMENT LOSS......................................... (61,654)
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 946,500
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (396,013)
---------
Net gain on investment transactions................... 550,487
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 488,833
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 131
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (61,654) $ (12,345)
Net realized gain (loss) on investments and foreign
currency transactions................................... 946,500 (1,827,773)
Net change in unrealized appreciation/depreciation on
investments and foreign currency transactions........... (396,013) 4,156,527
---------- -----------
Net increase resulting from operations................ 488,833 2,316,409
---------- -----------
Fund share transactions (Note 5)
Class A................................................... (591,121) 2,942,391
Class B................................................... (48,242) 481,343
Class C................................................... (63,343) 371,378
Advisor Class............................................. 524 21,786
---------- -----------
Net (decrease) increase resulting from Fund share
transactions......................................... (702,182) 3,816,898
---------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (213,349) 6,133,307
NET ASSETS
Beginning of period....................................... 8,839,947 2,706,640
---------- -----------
END OF PERIOD............................................. $8,626,598 $ 8,839,947
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 132
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
----------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 8.91 $ 6.32 $ 9.01 $ 10.00
------------------------------------------------------------
Income (loss) from investment operations
Net investment (loss) income(a)....................... (.06) --(b) .03 (.11)
Net gain (loss) on securities (both realized and
unrealized)......................................... .64 2.59(b) (2.68) .70
------------------------------------------------------------
Total from investment operations...................... .58 2.59 (2.65) .59
------------------------------------------------------------
Less distributions
Dividends in excess of net investment income.......... -- -- .04 .22
Distributions
From capital gain................................... -- -- -- 1.08
In excess of capital gain........................... -- -- -- .28
------------------------------------------------------------
Total distributions................................. -- -- .04 1.58
------------------------------------------------------------
Net asset value, end of period.......................... $ 9.49 $ 8.91 $ 6.32 $ 9.01
------------------------------------------------------------
------------------------------------------------------------
Total return(%)......................................... 6.51(c) 40.98(d) (29.35)(d) 6.95 (d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 5,575 $ 5,823 $ 1,345 $ 3,907
Ratio of expenses to average net assets
With expense reimbursement(%)......................... 2.28(e) 2.16 2.22 2.10
Without expense reimbursement(%)...................... 4.55(e) 4.53 5.75 2.88
Ratio of net investment (loss) income to average net assets(%)(a) (1.34)(e) .02 .29 (1.10)
Portfolio turnover rate(%).............................. 70 157 98 199
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
----------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 8.77 $ 6.27 $ 9.00 $ 10.00
------------------------------------------------------------
Income (loss) from investment operations
Net investment loss(a)................................ (.09) (.04)(b) (.04) (.15)
Net gain (loss) on securities (both realized and
unrealized)......................................... 64 2.54(b) (2.65) .68
------------------------------------------------------------
Total from investment operations...................... .55 2.50 (2.69) .53
------------------------------------------------------------
Less distributions
Dividends in excess of net investment income.......... -- -- .04 .17
Distributions
From capital gain................................... -- 1.08
In excess of capital gain........................... -- -- -- .28
------------------------------------------------------------
Total distributions................................. -- -- .04 1.53
------------------------------------------------------------
Net asset value, end of period.......................... $ 9.32 $ 8.77 $ 6.27 $ 9.00
------------------------------------------------------------
------------------------------------------------------------
Total return(%)......................................... 6.27(c) 39.87(d) (29.82)(d) 6.28 (d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 2,605 $ 2,520 $ 1,320 $ 2,706
Ratio of expenses to average net assets
With expense reimbursement(%)......................... 2.79(e) 2.71 2.90 2.86
Without expense reimbursement(%)...................... 5.06(e) 5.08 6.43 3.64
Ratio of net investment loss to average net
assets(%)(a).......................................... (1.86)(e) (.53) (.39) (1.86)
Portfolio turnover rate(%).............................. 70 157 98 199
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 133
9
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the six
months ended
June 30,
CLASS C (unaudited) for the year ended December 31,
-------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.63 $ 6.21 $ 9.00 $10.00
-----------------------------------------------------
Income (loss) from investment operations
Net investment loss(a).................................... (.09) (.04)(b) (.14) (.17)
Net gain (loss) on securities (both realized and
unrealized)............................................. .64 2.46(b) (2.61) .68
-----------------------------------------------------
Total from investment operations.......................... .55 2.42 (2.75) .51
-----------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- -- .04 .15
Distributions
From capital gain....................................... -- -- -- 1.08
In excess of capital gain............................... -- -- -- .28
-----------------------------------------------------
Total distributions..................................... -- -- .04 1.51
-----------------------------------------------------
Net asset value, end of period.............................. $ 9.18 $ 8.63 $ 6.21 $ 9.00
-----------------------------------------------------
-----------------------------------------------------
Total return(%)............................................. 6.37(c) 38.97(d) (30.49)(d) 6.08 (d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 418 $ 472 $ 41 $ 124
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 2.76(e) 2.73 3.57 3.08
Without expense reimbursement(%).......................... 5.03(e) 5.10 7.10 3.86
Ratio of net investment loss to average net assets(%)(a).... (1.83)(e) (.55) (1.06) (2.08)
Portfolio turnover rate(%).................................. 70 157 98 199
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
for the six for the period
months ended April 8, 1999
June 30, (commencement)
ADVISOR CLASS (unaudited) to December 31,
--------------------------------------------------------------------------------------------------
2000 1999
SELECTED PER SHARE DATA ------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.90 $ 7.00
------------------------------------
Income from investment operations
Net investment (loss) income(a)........................... (.05) .02 (b)
Net gain on securities (both realized and unrealized)..... .64 1.88 (b)
------------------------------------
Total from investment operations.......................... .59 1.90
------------------------------------
Net asset value, end of period.............................. $ 9.49 $ 8.90
------------------------------------
------------------------------------
Total return(%)(c).......................................... 6.63 27.14
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 28 $ 26
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 1.97 1.87
Without expense reimbursement(%)(e)....................... 4.24 4.24
Ratio of net investment (loss) income to
average net assets(%)(a)(e)............................... (1.04) .31
Portfolio turnover rate(%).................................. 70 157
</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
The accompanying notes are an integral part of the financial statements.
<PAGE> 134
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IVY GLOBAL NATURAL RESOURCES FUND
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10
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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 on
foreign securities, 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, as
amended (the "Code"), and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
As of December 31, 1999, the Fund has a net tax-basis capital loss carryover of
approximately $9,488,000 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. Approximately $1,134,000 of the carryover expires
in 2006 and approximately $1,855,000 of the carryover expires in 2007.
Approximately $6,499,000 of the capital loss carryover was acquired in the
transfer of net assets as described in Note 4, and 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
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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
<PAGE> 135
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
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
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 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"), 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.
Mackenzie Financial Corporation ("MFC") in Toronto, Ontario, Canada is the
sub-advisor of the Fund. For its services MFC receives a fee monthly at the
annual rate of .50% of the Fund's average net assets. The fee is collected from
the Fund and remitted to MFC by MIMI. Currently, IMI limits the Fund's total
operating expenses (excluding 12b-1 fees and certain other expenses) to an
annual rate of 1.95% of the Fund's average net assets.
MIMI also provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees 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, 2000, the net amount of underwriting
discount retained by IMDI was $330.
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 $6,791,
$11,877 and $1,634, 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 $17,596, $4,880, $625 and $77 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 Ivy Canada Fund approved
an Agreement and Plan of Reorganization (the "Reorganization") which provided
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.
<PAGE> 136
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
--------------------------------------------------------------------------------
12
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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 222,436 $ 1,990,709 202,795 $ 1,722,555
Repurchased.......... (288,480) (2,581,830) (316,732) (2,665,348)
Issued on acquisition
of Ivy Canada
Fund................ -- -- 554,442 3,885,184
-------- ----------- -------- -----------
Net (decrease)/
increase............ (66,044) $ (591,121) 440,505 $ 2,942,391
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 43,716 $ 393,585 51,156 $ 399,377
Repurchased.......... (51,437) (441,827) (80,968) (654,849)
Issued on acquisition
of Ivy Canada
Fund................ -- -- 106,477 736,815
-------- ----------- -------- -----------
Net (decrease)/
increase............ (7,721) $ (48,242) 76,665 $ 481,343
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 24,939 $ 223,815 26,590 $ 229,609
Repurchased.......... (34,001) (287,158) (9,236) (67,346)
Issued on acquisition
of Ivy Canada
Fund................ -- -- 30,640 209,115
-------- ----------- -------- -----------
Net (decrease)/
increase............ (9,062) $ (63,343) 47,994 $ 371,378
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 67 $ 600 964 $ 8,253
Repurchased.......... (9) (76) (69) (609)
Issued on acquisition
of Ivy Canada
Fund................ -- -- 2,021 14,142
-------- ----------- -------- -----------
Net increase......... 58 $ 524 2,916 $ 21,786
======== =========== ======== ===========
</TABLE>
03IGNRF063000
<PAGE> 137
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
IVY US BLUE CHIP FUND
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth primarily by investing in
common stocks of established domestic companies that either hold a leading
industry position or that are expected to do so in the future.
An interview with Paul Baran, portfolio manager of Ivy US Blue Chip Fund and
head of Ivy Management, Inc.'s Domestic Equity team.
Q: PAUL, HOW DID THE US ECONOMY DO IN THE FIRST HALF OF 2000?
A: The big news in the first half of 2000 was interest rates. The Federal
Reserve Board increased interest rates a number of times in the last year in an
effort to head off inflation and to slow what some have perceived to be an
"overheated" economy.
Evidence does show that the economy, while strong, is beginning to slow down.
While the US gross domestic product (GDP) rose at an annual rate of 7.3% in the
last quarter of 1999, it rose 5.4% in the first quarter of 2000. Retail sales
declined 0.6% in April and 0.3% in May. Housing starts declined nearly 4% in
May, a normal response to rising mortgage rates.
In a speech given in mid-June, the vice chairman of the Federal Open Market
Committee, William McDonough, confirmed that the automotive, housing and
durable good sectors of the economy were slowing down. He also reiterated that
the Federal Reserve's long-term goals in raising interest rates are price
stability, sustainable economic growth and low inflation.
Other factors are also helping to stem inflation. Productivity gains, driven by
a boom in technology, are allowing employees to produce more goods and services
without a corresponding rise in wages. When costs are kept low but productivity
is increased, the economy can grow without price increases and strong wage
pressures. E-commerce and the opening of global markets are also helping to
keep costs down and prices low. And as trade barriers are lowered and
capitalism rises throughout the world, new global competition does its part in
keeping prices low.
Technology spending remains high, and as a result, we believe that productivity
gains will continue. We also believe that the US economy and corporate earnings
will continue to grow without excessive inflationary pressures, albeit at a
slower pace. Slower -- but more sustainable -- economic growth should have a
long-term healthy impact on the stock market. We believe the US is still in the
midst of the longest economic expansion in its history.
Q: HOW DID THE US MARKET PERFORM DURING THIS PERIOD?
A: Over the last few months, the increase in interest rates drove stock prices
lower. In addition, market volatility increased, perhaps due in part to
uncertainty about the effect of higher interest rates on future corporate
profits.
<PAGE> 138
IVY US BLUE CHIP FUND
In the first three months of the year, we saw the usual seasonal
investment of money into the stock market, driven by corporate pension and IRA
funding. This helped propel stock prices, particularly in the technology-heavy
NASDAQ. But as we moved into April and the end of IRA season, pension and IRA
funding decreased. Combined with concern over interest rates and the Federal
Reserve Board's actions, this stemmed the flow of investment into the market
and reduced volume to two-thirds of what it was in the first quarter.
Market leadership continues to be narrow, and the performance of the market
remains dependent on a small number of stocks -- mostly those in technology
companies. Of course, many of these stocks are volatile. As the first quarter
ended, technology stocks took a tumble. In our view, this was a reasonable
response to overvaluations and excesses caused by a long period of momentum
investing. Going forward, we expect an eventual broadening of market leadership
that should lead to a more balanced environment -- one that is not overly
dependent on one sector for its performance.
"WE BELIEVE THE US IS STILL IN THE MIDST OF THE
LONGEST ECONOMIC EXPANSION IN ITS HISTORY."
Q: HOW DID THIS AFFECT IVY US BLUE CHIP FUND?
A: The Fund benefited from the strong US economy during the first half of 2000.
It was invested primarily in high-quality, large-cap companies that hold
leading positions in their industries. Some of the Fund's holdings include
Intel, Cisco, Sun Microsystems, Morgan Stanley and General Electric, which
provides the Fund with diversified exposure to a number of sectors. The Fund
benefited from its exposure to the healthcare sector, which was up 23% in the
first half of the year. It also benefited from its exposure to the energy
sector, which was up 3.5%, and its exposure to the technology sector, which,
despite all the volatility, was up 2.9% in the first half of 2000.
Underperformance by the capital goods sector (companies that supply tools,
equipment and other materials to businesses) and the consumer cyclicals sector
(automotive companies, retailers and other businesses that depend on consumer
spending) hurt the Fund's performance.
Q: HOW DOES YOUR INVESTMENT PROCESS HELP YOU TARGET OPPORTUNITIES IN THIS
MARKET?
A: We are long-term investors. So typically, we ignore short-term market
volatility, and we make no attempt to time the market. Instead, we employ a
disciplined investment philosophy based on stock selection. When selecting
companies for the Fund, we divide the stock market into eight broad economic
sectors, and the weightings 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," we focus entirely on selecting the
appropriate individual securities in which the Fund invests.
We use an equity style that blends growth and value stocks. The focus is on
companies that, in our judgement, have a proven and consistent record of
earnings profitability, but whose prices do not adequately reflect their
underlying profitability. The profitability of each company is compared to the
patterns of that company's industry to account for normal cyclicality. In
addition, we also consider financial strength, trading liquidity and technical
readings.
This is a consistent investment approach that is not affected by emotion or
short-term market trends. In the domestic blue chip market, we believe that
remaining fully invested and ignoring normal fluctuations is the key to
realizing good long-term equity returns.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated
document. This report and any excerpt of this report may not be copied or
reprinted without first obtaining the written permission of Ivy Funds.
2
<PAGE> 139
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 99.7% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS -- 4.7%
FedEx Corp.(a)....................... 20,000 $ 760,000
General Electric Company............. 68,000 3,604,000
-----------
4,364,000
-----------
CONSUMER CYCLICALS -- 7.1%
Best Buy Co., Inc.(a)................ 27,700 1,752,025
Gap, Inc. (The)...................... 31,000 968,750
Home Depot, Inc...................... 27,500 1,373,281
Lowe's Companies, Inc................ 30,800 1,264,725
Wal-Mart Stores, Inc................. 19,500 1,123,688
-----------
6,482,469
-----------
CONSUMER STAPLES -- 8.1%
Anheuser-Busch Companies, Inc........ 15,700 1,172,594
Colgate-Palmolive Company............ 24,000 1,437,000
Heinz (H.J.) Company................. 30,200 1,321,250
Kimberly-Clark Corporation........... 24,400 1,399,950
PepsiCo, Inc......................... 25,500 1,133,156
Wrigley (Wm.) Jr. Company............ 12,800 1,026,400
-----------
7,490,350
-----------
ENERGY -- 6.7%
BP Amoco plc Sponsored ADR(b)........ 21,700 1,227,406
Chevron Corporation.................. 13,600 1,153,450
Exxon Mobil Corporation.............. 21,700 1,703,450
Noble Drilling Corporation(a)........ 23,500 967,906
Texaco Inc........................... 21,600 1,150,200
-----------
6,202,412
-----------
FINANCIAL SERVICES -- 13.5%
Bank of America Corporation.......... 30,800 1,324,400
Chase Manhattan Corporation (The).... 31,000 1,427,938
Citigroup Inc........................ 24,750 1,491,187
Legg Mason, Inc...................... 24,000 1,200,000
Mellon Financial Corporation......... 30,800 1,122,275
Merrill Lynch & Co., Inc............. 12,750 1,466,250
Morgan Stanley Dean Witter & Co...... 24,700 2,056,275
Paine Webber Group Inc............... 29,100 1,324,050
State Street Corporation............. 9,500 1,007,594
-----------
12,419,969
-----------
HEALTHCARE -- 11.4%
Bristol-Myers Squibb Company......... 27,700 1,613,525
Eli Lilly and Company................ 18,300 1,827,712
Johnson & Johnson.................... 18,200 1,854,125
Medtronic, Inc....................... 24,500 1,220,406
Merck & Co, Inc...................... 21,500 1,647,438
Pfizer Inc........................... 15,000 720,000
Schering-Plough Corporation.......... 30,800 1,555,400
-----------
10,438,606
-----------
MISCELLANEOUS -- 0.3%
S&P 500 Depository Receipts.......... 2,000 290,563
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
TECHNOLOGY -- 38.5%
Adobe Systems Incorporated........... 9,350 $ 1,215,500
Agilent Technologies, Inc.(a)........ 12,251 903,500
Altera Corporation(a)................ 9,300 948,019
American Power Conversion
Corporation(a)..................... 36,000 1,469,250
Analog Devices, Inc.(a).............. 17,500 1,330,000
Apple Computer, Inc.(a).............. 30,200 1,581,725
Applied Materials, Inc.(a)........... 12,500 1,132,813
Cisco Systems, Inc.(a)............... 47,600 3,025,575
Dell Computer Corporation(a)......... 22,500 1,109,531
EMC Corporation...................... 15,500 1,192,531
Hewlett-Packard Company.............. 9,250 1,155,094
Intel Corporation.................... 30,500 4,077,469
International Business Machines
Corp............................... 12,000 1,314,750
JDS Uniphase Corporation(a).......... 10,700 1,282,663
Lattice Semiconductor
Corporation(a)..................... 12,600 870,975
LSI Logic Corporation(a)............. 24,500 1,326,062
Microchip Technology(a).............. 18,000 1,048,781
Microsoft Corporation(a)............. 36,500 2,920,000
Nortel Networks Corporation(b)....... 24,500 1,672,125
Novellus Systems, Inc.(a)............ 18,500 1,046,406
Sun Microsystems, Inc.(a)............ 12,500 1,136,719
Texas Instruments Inc................ 24,750 1,700,016
Vitesse Semiconductor
Corporation(a)..................... 12,200 897,462
Xilinx, Inc.(a)...................... 12,200 1,007,262
-----------
35,364,228
-----------
UTILITIES -- 9.4%
ALLTEL Corporation................... 26,700 1,653,731
AT&T Corporation..................... 31,000 980,375
Bell Atlantic Corporation............ 22,300 1,133,119
BellSouth Corporation................ 31,200 1,329,900
Montana Power Company (The).......... 30,000 1,059,375
SBC Communications Inc............... 28,300 1,223,975
WorldCom, Inc.(a).................... 27,500 1,261,563
-----------
8,642,038
-----------
TOTAL INVESTMENTS -- 99.7%
(Cost -- $71,554,036)(c)........... 91,694,635
OTHER ASSETS, LESS
LIABILITIES -- 0.3%................ 235,129
-----------
NET ASSETS -- 100%................... $91,929,764
===========
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, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is
as follows:
Gross unrealized appreciation............... $21,993,391
Gross unrealized depreciation............... (1,852,792)
-----------
Net unrealized appreciation............. $20,140,599
===========
Purchases and sales of securities other than short-term
obligations aggregated $66,503,702 and $8,097,629,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 140
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
--------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $71,554,036)...... $91,694,635
Cash........................................................ 1,235,361
Receivables
Fund shares sold.......................................... 31,598
Dividends and interest.................................... 57,247
Manager for expense reimbursement......................... 23,401
Other assets................................................ 17,022
-----------
Total assets............................................ 93,059,264
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 3,444
Investments purchased..................................... 1,023,754
Fund shares repurchased................................... 42,674
Management fee............................................ 13,800
12b-1 service and distribution fees....................... 5,151
Other payables to related parties......................... 7,345
Accrued expenses............................................ 33,332
-----------
Total liabilities....................................... 1,129,500
-----------
NET ASSETS.................................................. $91,929,764
===========
CLASS A
Net asset value and redemption price per share
($60,368,760/4,812,058 shares outstanding)................ $ 12.55
===========
Maximum offering price per share ($12.55 X 100/94.25)*...... $ 13.32
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($27,427,667/2,199,978 shares outstanding).......... $ 12.47
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($2,857,107/229,023 shares outstanding)............. $ 12.48
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($1,276,230/101,317 shares outstanding)............. $ 12.60
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $72,364,878
Accumulated net realized loss on investments.............. (517,149)
Accumulated net investment loss........................... (58,564)
Net unrealized appreciation on investments................ 20,140,599
-----------
NET ASSETS.................................................. $91,929,764
===========
</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> 141
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 87,424
Interest.................................................. 11,602
---------
99,026
---------
EXPENSES
Management fee............................................ $61,514
Transfer agent............................................ 14,742
Administrative services fee............................... 8,202
Custodian fees............................................ 26,850
Blue Sky fees............................................. 16,045
Auditing and accounting fees.............................. 11,844
Shareholder reports....................................... 6,191
Fund accounting........................................... 18,293
Trustees' fees............................................ 2,866
12b-1 service and distribution fees....................... 62,399
Legal..................................................... 13,866
Other..................................................... 328
---------
243,140
Expenses reimbursed by Manager.............................. (85,550)
---------
Net expenses.......................................... 157,590
---------
NET INVESTMENT LOSS......................................... (58,564)
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized loss on investments.......................... (337,666)
Net change in unrealized appreciation on investments...... 828,620
---------
Net gain on investment transactions................... 490,954
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 432,390
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 142
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
--------------------------------------------------------------------------------
6
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (58,564) $ (60,564)
Net realized loss on investments.......................... (337,666) (169,569)
Net change in unrealized appreciation on investments...... 828,620 1,730,573
----------- -----------
Net increase resulting from operations................ 432,390 1,500,440
----------- -----------
Dividends to shareholders from net investment income
Class A................................................... -- (18,102)
Class B................................................... -- (7,134)
Class C................................................... -- (2,157)
Advisor Class............................................. -- (7,101)
----------- -----------
Total distributions to shareholders................... -- (34,494)
----------- -----------
Fund share transactions (Note 5)
Class A................................................... 56,817,129 2,307,988
Class B................................................... 18,491,345 6,883,607
Class C................................................... 338,909 2,161,639
Advisor Class............................................. 337,983 273,966
----------- -----------
Net increase resulting from Fund share transactions... 75,985,366 11,627,200
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 76,417,756 13,093,146
NET ASSETS
Beginning of period....................................... 15,512,008 2,418,862
----------- -----------
END OF PERIOD............................................. $91,929,764 $15,512,008
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 143
7
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year November 6, 1998
June 30, ended (commencement)
CLASS A (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.32 $ 10.74 $ 10.00
------------------------------------------------------
Income from investment operations
Net investment loss(a).................................... (.01) (.01) --(b)
Net gain on securities (both realized and unrealized)..... .24 1.66 .74(b)
------------------------------------------------------
Total from investment operations.......................... .23 1.65 .74
------------------------------------------------------
Less distributions
Dividends from net investment income...................... -- .07 --
------------------------------------------------------
Total distributions..................................... -- .07 --
------------------------------------------------------
Net asset value, end of period.............................. $ 12.55 $ 12.32 $ 10.74
======================================================
Total return(%)............................................. 1.87(c) 15.35(d) 7.40(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $60,369 $ 3,353 $ 726
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 1.44(e) 1.46 1.43(e)
Without expense reimbursement(%).......................... 2.48(e) 3.49 6.34(e)
Ratio of net investment (loss) income to average net
assets(%)(a).............................................. (.23)(e) (.12) .02(e)
Portfolio turnover rate (%)................................. 31 80 3
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year November 6, 1998
June 30, ended (commencement)
CLASS B (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.29 $ 10.72 $ 10.30
------------------------------------------------------
Income from investment operations
Net investment loss(a).................................... (.03) (.07) (.01)(b)
Net gain on securities (both realized and unrealized)..... .21 1.65 .43(b)
------------------------------------------------------
Total from investment operations.......................... .18 1.58 .42
------------------------------------------------------
Less distributions
Dividends from net investment income...................... -- .01 --
------------------------------------------------------
Total distributions..................................... -- .01 --
------------------------------------------------------
Net asset value, end of period.............................. $ 12.47 $ 12.29 $ 10.72
======================================================
Total return(%)............................................. 1.46(c) 14.74(d) 4.08(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $27,428 $ 8,742 $ 1,047
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 2.15(e) 2.15 2.13(e)
Without expense reimbursement(%).......................... 3.19(e) 4.18 7.04(e)
Ratio of net investment loss to average net assets(%)(a).... (.94)(e) (.81) (.68)(e)
Portfolio turnover rate(%).................................. 31 80 3
</TABLE>
The accompanying notes are an integral part of the financial statement.
<PAGE> 144
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year November 6, 1998
June 30, ended (commencement)
CLASS C (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.30 $ 10.72 $ 10.30
------------------------------------------------------
Income from investment operations
Net investment loss(a).................................... (.03) (.07) (.01)(b)
Net gain on securities (both realized and unrealized)..... .21 1.66 .43(b)
------------------------------------------------------
Total from investment operations.......................... .18 1.59 .42
------------------------------------------------------
Less distributions
Dividends from net investment income...................... -- .01 --
------------------------------------------------------
Total distributions..................................... -- .01 --
------------------------------------------------------
Net asset value, end of period.............................. $ 12.48 $ 12.30 $ 10.72
======================================================
Total return(%)............................................. 1.46(c) 14.84(d) 4.08(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 2,857 $ 2,497 $ 110
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 2.16(e) 2.08 2.22(e)
Without expense reimbursement(%).......................... 3.20(e) 4.11 7.13(e)
Ratio of net investment loss to average net assets(%)(a).... (.96)(e) (.74) (.77)(e)
Portfolio turnover rate(%).................................. 31 80 3
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six for the period
months ended for the year November 2, 1998
June 30, ended (commencement)
ADVISOR CLASS (unaudited) December 31, to December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.35 $ 10.74 $ 10.00
------------------------------------------------------
Income from investment operations
Net investment income(a).................................. -- .02 .01(b)
Net gain on securities (both realized and unrealized)..... .25 1.69 .73(b)
------------------------------------------------------
Total from investment operations.......................... .25 1.71 .74
------------------------------------------------------
Less distributions
Dividends from net investment income...................... -- .10 --
------------------------------------------------------
Total distributions..................................... -- .10 --
------------------------------------------------------
Net asset value, end of period.............................. $ 12.60 $ 12.35 $ 10.74
======================================================
Total return(%)............................................. 2.02(c) 15.89(d) 7.40(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,276 $ 920 $ 537
Ratio of expenses to average net assets
With expense reimbursement(%)............................. 1.14(e) 1.10 1.08(e)
Without expense reimbursement(%).......................... 2.18(e) 3.13 5.99(e)
Ratio of net investment income to average net
assets(%)(a).............................................. .07(e) .24 .37(e)
Portfolio turnover rate(%).................................. 31 80 3
</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
The accompanying notes are an integral part of the financial statements.
<PAGE> 145
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
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, 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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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 on
foreign securities, 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, as
amended (the "Code"), 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 carryover of approximately $125,000 as
of December 31, 1999, 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 2007.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gain, if any, are declared in December.
RECLASSIFICATIONS -- The timing and characterization of certain income and
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 deferred offering costs. As a result, Net investment loss 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 12b-1 fees and certain other expenses) to an annual rate of
1.34% 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, 2000, MIMI owned
0.7% of the Fund's shares outstanding.
<PAGE> 146
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
--------------------------------------------------------------------------------
10
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, 2000, the net amount of underwriting
discount retained by IMDI was $2,068.
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 $4,959,
$46,026 and $11,414, 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 $4,091, $7,837, $2,081 and $733, 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 June 27, 2000, the shareholders of Ivy Growth with Income
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 Growth with Income Fund. On June 27, 2000, the date of the
consummation of the Reorganization, the Fund acquired all or substantially all
of the assets of Ivy Growth with Income Fund. The transaction was structured for
tax purposes to qualify as a tax-free reorganization under the Code.
Ivy Growth with Income Fund shareholders contributed net assets having an
aggregate value of $73,884,252 (including $17,484,201 of unrealized
appreciation). Upon completion of the merger, the combined net assets were
$91,519,890.
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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 169,267 $ 2,120,109 281,189 $ 3,172,160
Issued on
reinvestment of
distributions....... -- -- 1,246 15,288
Repurchased.......... (84,770) (1,031,787) (77,902) (879,460)
Issued on acquisition
of Ivy Growth with
Income Fund......... 4,455,447 55,728,807 -- --
---------- ------------ ---------- ------------
Net increase......... 4,539,944 $ 56,817,129 204,533 $ 2,307,988
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 173,865 $ 2,121,658 678,732 $ 7,639,044
Issued on
reinvestment of
distributions....... -- -- 483 5,908
Repurchased.......... (83,977) (1,014,483) (65,287) (761,345)
Issued on acquisition
of Ivy Growth with
Income Fund......... 1,398,527 17,384,170 -- --
---------- ------------ ---------- ------------
Net increase......... 1,488,415 $ 18,491,345 613,928 $ 6,883,607
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 26,436 $ 327,218 225,883 $ 2,547,834
Issued on
reinvestment of
distributions....... -- -- 163 1,994
Repurchased.......... (42,358) (509,054) (33,182) (388,189)
Issued on acquisition
of Ivy Growth with
Income Fund......... 41,859 520,745 -- --
---------- ------------ ---------- ------------
Net increase......... 25,937 $ 338,909 192,864 $ 2,161,639
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 11,296 $ 140,593 29,163 $ 329,193
Issued on
reinvestment of
distributions....... -- -- 577 7,101
Repurchased.......... (4,391) (53,140) (5,280) (62,328)
Issued on acquisition
of Ivy Growth with
Income Fund......... 19,951 250,530 -- --
---------- ------------ ---------- ------------
Net increase......... 26,856 $ 337,983 24,460 $ 273,966
========== ============ ========== ============
</TABLE>
<PAGE> 147
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
11
<PAGE> 148
03IBCF063000
<PAGE> 149
[IVY FUNDS LOGO]
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
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
IVY ASIA PACIFIC FUND
MARKET PERSPECTIVE
[PHOTO] The Fund's goal: to provide long-term capital growth by investing in
securities in the Asia Pacific (non-Japan) region.
Ivy Asia Pacific Fund is managed by Ivy's International Equity team. The
following is an interview with team member and Asian equity specialist Michelle
Chan.
Q: MICHELLE, WHAT HAPPENED IN THE ASIA PACIFIC REGION IN THE FIRST HALF OF 2000?
A: As in the rest of the world, technology, media and telecommunication (TMT)
stocks performed well for most of the first quarter, but experienced a sell-off
in March. The Hong Kong market, where the Fund has 32% of its assets, has become
very correlated with the technology-heavy NASDAQ. When the stocks in that index
declined in the spring, Hong Kong TMT stocks quickly followed. After the
"high-tech fever" cooled down, however, the Hong Kong market was dominated more
by concern over continuing interest rate increases in the US. Hong Kong's
currency is pegged to the US dollar, and an interest rate increase in the US is
inevitably followed by an interest rate increase in Hong Kong.
The Taiwanese market experienced quite a bit of volatility prior to its recent
presidential elections. Political issues in Taiwan during the presidential
campaign and controversy on the mainland led to substantial nervousness and a
sell-off in the Taiwanese market. The new government, however, seems to be
conciliatory on issues that affect Mainland China, which we believe is a good
sign.
Malaysia, which was dropped from the Morgan Stanley Capital International Far
East ex-Japan Index in September of 1998, was reincluded this past May. As a
result, investor sentiment toward Malaysia improved, and the market rallied.
This was good news for the Fund, since it has 7.4% of its assets in Malaysia.
Q: WHAT RECENT DEVELOPMENTS DO YOU FIND ENCOURAGING?
A: In China, the government seems committed to accelerating reforms and reducing
the role of the state-owned sector in the economy. As a result, it is
privatizing many companies and opening them to foreign investment. Currently,
the state-owned sector is less than 40% of the total economy. Of course,
completely revitalizing the state-owned enterprise sector will take time. But in
the coastal regions -- where most of the wealth is centered -- China has already
done a fantastic job of encouraging an entrepreneurial spirit, which bodes well
for the rest of the country.
The normalization of China's trade relationship with the US and China's imminent
entry into the World Trade Organization should greatly benefit the surrounding
region. Mainland China could benefit because current trade quotas -- which limit
China's textile exports to the US -- may be lifted. If China's external trading
activity increases dramatically, and we believe that it will, it should directly
<PAGE> 150
benefit Hong Kong, since Hong Kong has always been a conduit between China and
the rest of the world for trade and financial activity. Taiwan is now playing a
major manufacturing role for multinational electronic companies, so it too
should benefit if it outsources its lower-end manufacturing to China and takes
advantage of China's cheaper labor market. We believe that all these factors
should be positive for equity markets in this region.
Q: WHAT OTHER CHANGES ARE TAKING PLACE IN HONG KONG, TAIWAN AND KOREA?
A: Hong Kong is now going through a structural change, expanding from its role
as service provider for mainland importers and exporters to a more
information-based economy. Throughout Hong Kong, many companies are either
implementing the latest technology or diversifying into new high-tech areas.
Hong Kong is still an international center of finance, but it is also growing
into the information services center for all of Asia. It has skilled labor, an
educated labor force and China's huge consumer market right in its backyard.
Outside of Japan, the largest concentration of electronics companies is now in
Taiwan and Korea. Taiwan is continuing its role as Asia's high-tech
manufacturing center, and it is continually enhancing its value in this area. In
fact, Japan is now starting to outsource more of its manufacturing of
electronics products to Taiwan.
While Taiwan tends to have smaller companies, Korea is dominated more by large
conglomerates, many of which are now restructuring. Korean companies are working
hard to eliminate debt and attract foreign investors. There is also a new focus
on shareholder value and bottom-line profitability, which we believe is positive
for the markets. In general, Korea's economy looks strong, and the country is
developing world-class industries.
"WE BELIEVE THAT THE ASIA PACIFIC REGION WILL CONTINUE
TO BE AMONG THE WORLD'S FASTEST-GROWING MARKETS."
Q: HOW WAS IVY ASIA PACIFIC FUND POSITIONED TO BENEFIT FROM THESE TRENDS?
A: In our view, the short-term political uncertainty in Taiwan made the prices
of electronics manufacturing stocks -- which are already trading at low
valuations compared with their global peers -- even more attractive, so we
increased the Fund's holdings in this sector. We also took advantage of
attractive valuations in Korea to add to the Fund's holdings in high-quality
stocks in companies such as Samsung Electronics, Korea Telecom and SK Telecom.
In addition, we have been restructuring the Fund's Hong Kong holdings, divesting
financial stocks that are very sensitive to interest rates. Because the interest
rate outlook in the US is still uncertain, and Hong Kong's market is so closely
tied to US interest rates, we're trying to limit the Fund's exposure to these
stocks in favor of ones with less interest rate sensitivity.
Q: IN THE PAST, THE FUND WAS MANAGED IN A VALUE STYLE. WILL THAT CHANGE?
A: Yes. We're now taking a more flexible approach, blending growth and value to
take advantage of more investment opportunities. This strategy allows us to
target the more growth-oriented technology and telecommunications stocks. That's
important, because in this region we see a lot of opportunity coming from these
sectors.
Q: WHAT IS YOUR LONG-TERM OUTLOOK FOR THE ASIA PACIFIC REGION?
A: We believe that the Asia Pacific region will continue to be among the world's
fastest-growing markets. Asia in general has a high rate of domestic demand,
modern manufacturing capabilities, low-cost labor and pro-business policies. In
Northern Asia, the combination of Hong Kong's status as a regional trading and
financial center, Taiwan's focus on manufacturing high-tech products and China's
low-cost labor and consumer market could sustain a very dynamic regional
economy. Although we expect bumps in the road due to political events and the
region's sensitivity to external factors (such as US interest rates), we are
very positive on the Asia Pacific market and its strong economic recovery.
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
2
<PAGE> 151
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 97.7% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 1.6%
National Australia Bank Ltd............. 4,099 $ 68,660
Westpac Banking Corp. Ltd............... 9,000 65,116
----------
133,776
----------
CHINA -- 7.1%
China Unicom Limited(a)................. 176,000 373,674
Nanjing Panda Electronics Co.,
Ltd.(a)............................... 362,000 130,032
Qingling Motors Company -- H Shares..... 758,000 87,517
----------
591,223
----------
HONG KONG -- 31.5%
Asia Satellite Telecommunications
Holdings Ltd. ADR..................... 56,500 193,165
Automated Systems Holdings Ltd.......... 192,000 98,524
Cathay Pacific Airways.................. 121,000 224,303
Cheung Kong Holdings Ltd................ 26,000 287,683
China Telecom (Hong Kong) Limited(a).... 48,000 423,347
Citic Pacific Ltd....................... 48,000 251,237
Dah Sing Financial Group................ 52,000 209,467
Guangdong Kelon Electrical Holdings Co.
Ltd. -- H Shares...................... 55,000 29,811
HSBC Holdings plc....................... 16,800 191,814
Hutchison Whampoa Limited............... 12,000 150,865
Orient Overseas International Ltd....... 93,000 46,828
Sun Hung Kai Properties Ltd............. 12,000 86,209
Swire Pacific Ltd....................... 28,000 163,797
Wharf Holdings Ltd...................... 42,810 76,613
Wing Hang Bank Limited.................. 74,000 184,169
----------
2,617,832
----------
MALAYSIA -- 7.4%
Berjaya Sports Toto Berhad.............. 61,000 99,528
Genting Berhad.......................... 17,000 62,633
Malayan Banking Berhad.................. 34,400 139,413
Public Bank Berhad...................... 40,000 36,843
Public Bank Berhad -- Foreign
Registered............................ 50,000 50,001
Sime Darby Berhad....................... 102,000 130,992
Sime UEP Properties Berhad.............. 68,000 91,265
----------
610,675
----------
NEW ZEALAND -- 3.1%
Fletcher Challenge Energy............... 21,000 68,707
Telecom Corporation of New Zealand
Limited............................... 22,253 78,044
Tourism Holdings Limited................ 98,591 113,710
----------
260,461
----------
PHILIPPINES -- 0.6%
Benpres Holdings Corporation Sponsored
GDR(a)................................ 8,000 15,500
Manila Electric Company -- B Shares..... 19,200 28,204
Universal Robina Corporation............ 67,500 8,276
----------
51,980
----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
SINGAPORE -- 9.8%
DBS Group Holdings Limited.............. 9,943 $ 127,668
DBS Land Ltd............................ 73,000 94,576
Overseas Union Bank Ltd................. 52,148 202,080
Singapore Airlines Limited.............. 17,000 168,134
Singapore Press Holdings Ltd............ 14,000 218,626
----------
811,084
----------
SOUTH KOREA -- 19.0%
Hyundai Motor Company Ltd............... 5,983 76,733
Korea Electric Power Corp............... 2,000 62,063
Korea Telecom Corporation............... 2,500 220,182
Pohang Iron & Steel Company Ltd......... 1,000 88,238
Samsung Electronics Co. Sponsored GDR... 2,970 581,377
Samsung Fire & Marine Insurance......... 1,749 48,627
Shinhan Bank............................ 24,400 229,778
SK Telecom Co., Ltd..................... 814 266,469
----------
1,573,467
----------
TAIWAN -- 16.9%
Asustek Computer Inc.................... 26,520 218,711
Compal Electronics Inc.................. 145,900 357,656
Hon Hai Precision Industry Co., Ltd..... 40,000 361,051
Taiwan Semiconductor Manufacturing
Company............................... 99,000 469,300
----------
1,406,718
----------
THAILAND -- 0.7%
Advanced Info Service Public Company
Limited -- Foreign Registered(a)...... 4,600 57,231
----------
TOTAL INVESTMENTS -- 97.7%
(Cost -- $6,625,127)(b)............... 8,114,447
OTHER ASSETS, LESS LIABILITIES -- 2.3% 188,027
----------
NET ASSETS -- 100% $8,302,474
==========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation................ $1,869,210
Gross unrealized depreciation................ (379,890)
----------
Net unrealized appreciation.............. $1,489,320
==========
Purchases and sales of securities other than short-term
obligations aggregated $5,293,294 and $3,758,977,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 152
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IVY ASIA PACIFIC FUND
--------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $6,625,127)....... $ 8,114,447
Cash........................................................ 173,677
Receivables
Investments sold.......................................... 6,469
Fund shares sold.......................................... 5,931
Dividends and interest.................................... 18,107
Manager for expense reimbursement......................... 23,876
Deferred organization expenses.............................. 14,106
Other assets................................................ 14,125
-----------
Total assets............................................ 8,370,738
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 26,468
Management fee............................................ 6,946
12b-1 service and distribution fees....................... 1,194
Other payables to related parties......................... 4,374
Accrued expenses............................................ 29,282
-----------
Total liabilities....................................... 68,264
-----------
NET ASSETS.................................................. $ 8,302,474
===========
CLASS A
Net asset value and redemption price per share
($2,749,276/384,368 shares outstanding)................... $ 7.15
===========
Maximum offering price per share ($7.15 X 100/94.25)*....... $ 7.59
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($3,250,875/461,235 shares outstanding)............. $ 7.05
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($2,300,597/324,896 shares outstanding)............. $ 7.08
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($1,726/244 shares outstanding)..................... $ 7.07
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 8,431,437
Accumulated net realized loss on investments and foreign
currency transactions................................... (1,611,496)
Accumulated net investment loss........................... (6,836)
Net unrealized appreciation on investments and foreign
currency transactions................................... 1,489,369
-----------
NET ASSETS.................................................. $ 8,302,474
===========
</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> 153
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 117,250
Interest.................................................. 15,152
-----------
132,402
-----------
EXPENSES
Management fee............................................ $43,657
Transfer agent............................................ 13,036
Administrative services fee............................... 4,366
Custodian fees............................................ 37,459
Blue Sky fees............................................. 15,668
Auditing and accounting fees.............................. 11,081
Shareholder reports....................................... 5,384
Amortization of organization expenses..................... 4,899
Fund accounting........................................... 10,243
Trustees' fees............................................ 2,732
12b-1 service and distribution fees....................... 33,390
Legal..................................................... 13,847
Other..................................................... 1,239
-----------
197,001
Expenses reimbursed by Manager............................ (78,485)
-----------
Net expenses.......................................... 118,516
-----------
NET INVESTMENT INCOME....................................... 13,886
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 211,218
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (1,249,445)
-----------
Net loss on investment transactions................... (1,038,227)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(1,024,341)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 154
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IVY ASIA PACIFIC FUND
--------------------------------------------------------------------------------
6
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 13,886 $ (17,446)
Net realized gain on investments and foreign currency
transactions............................................ 211,218 311,404
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (1,249,445) 2,429,520
----------- ----------
Net (decrease) increase resulting from operations..... (1,024,341) 2,723,478
----------- ----------
Class A distributions
Dividends from net investment income...................... -- (4,345)
Distributions from capital gain........................... -- (14,864)
----------- ----------
Total distributions to Class A shareholders........... -- (19,209)
----------- ----------
Class B distributions
Distributions from capital gain........................... -- (15,357)
----------- ----------
Total distributions to Class B shareholders........... -- (15,357)
----------- ----------
Class C distributions
Distributions from capital gain........................... -- (12,237)
----------- ----------
Total distributions to Class C shareholders........... -- (12,237)
----------- ----------
Advisor Class distributions
Dividends from net investment income...................... -- (791)
Distributions from capital gain........................... -- (934)
----------- ----------
Total distributions to Advisor Class shareholders..... -- (1,725)
----------- ----------
Fund share transactions (Note 5)
Class A................................................... 1,015,893 (107,980)
Class B................................................... (97,556) 529,602
Class C................................................... (420,013) 281,207
Advisor Class............................................. (116,624) 122,006
----------- ----------
Net increase resulting from Fund share transactions... 381,700 824,835
----------- ----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (642,641) 3,499,785
NET ASSETS
Beginning of period....................................... 8,945,115 5,445,330
----------- ----------
END OF PERIOD............................................. $ 8,302,474 $8,945,115
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 155
7
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 7.99 $ 5.56 $ 6.01 $ 10.00
------------------------------------------------------
(Loss) income from investment operations
Net investment income(a).................................. .03 .02 .03 .02
Net (loss) gain on securities (both realized and
unrealized)............................................. (.87) 2.49 (.44) (3.98)
------------------------------------------------------
Total from investment operations.......................... (.84) 2.51 (.41) (3.96)
------------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- .02 -- .01
In excess of net investment income...................... -- -- .03 .02
Distributions from capital gain........................... -- .06 .01 --
------------------------------------------------------
Total distributions..................................... -- .08 .04 .03
------------------------------------------------------
Net asset value, end of period.............................. $ 7.15 $ 7.99 $ 5.56 $ 6.01
======================================================
Total return(%)............................................. (10.51)(b) 45.10(c) (6.86)(c) (39.58)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 2,749 $2,015 $ 1,393 $ 692
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.16(e) 2.39 2.77 2.11
Without expense reimbursement(%).......................... 3.96(e) 4.03 6.15 10.17
Ratio of net investment income to average net
assets(%)(a).............................................. .88(e) .31 .53 .63
Portfolio turnover rate(%).................................. 47 24 86 1
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 7.91 $ 5.53 $ 5.99 $ 10.00
------------------------------------------------------
(Loss) income from investment operations
Net investment loss(a).................................... -- (.03) (.01) --
Net (loss) gain on securities (both realized and
unrealized)............................................. (.86) 2.44 (.44) (4.00)
------------------------------------------------------
Total from investment operations.......................... (.86) 2.41 (.45) (4.00)
------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- -- .01 .01
Distributions from capital gain........................... -- .03 -- --
------------------------------------------------------
Total distributions..................................... -- .03 .01 .01
------------------------------------------------------
Net asset value, end of period.............................. $ 7.05 $ 7.91 $ 5.53 $ 5.99
======================================================
Total return(%)............................................. (10.87)(b) 43.64(c) (7.48)(c) (39.96)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 3,251 $3,763 $ 2,197 $ 929
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 3.00(e) 3.17 3.65 2.86
Without expense reimbursement(%).......................... 4.80(e) 4.81 7.03 10.92
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .03(e) (.46) (.35) (.12)
Portfolio turnover rate(%).................................. 47 24 86 1
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 156
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS C (unaudited) for the year ended December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 7.94 $ 5.54 $ 5.99 $ 10.00
------------------------------------------------------
(Loss) income from investment operations
Net investment loss(a).................................... -- (.03) (.01) --
Net (loss) gain on securities (both realized and
unrealized)............................................. (.86) 2.46 (.43) (3.99)
------------------------------------------------------
Total from investment operations.......................... (.86) 2.43 (.44) (3.99)
------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- -- .01 .02
Distributions from capital gain........................... -- .03 -- --
------------------------------------------------------
Total distributions..................................... -- .03 .01 .02
------------------------------------------------------
Net asset value, end of period.............................. $ 7.08 $ 7.94 $ 5.54 $ 5.99
======================================================
Total return(%)............................................. (10.83)(b) 43.92(c) (7.37)(c) (39.94)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,301 $3,031 $ 1,855 $ 764
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.93(e) 3.09 3.54 2.74
Without expense reimbursement(%).......................... 4.73(e) 4.73 6.92 10.80
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .10(e) (.38) (.24) --
Portfolio turnover rate(%).................................. 47 24 86 1
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
for the six for the period
months ended July 1, 1999
June 30, (commencement)
ADVISOR CLASS (unaudited) to December 31,
--------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999
------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 7.97 $ 7.76
------------------------------------
(Loss) income from investment operations
Net investment income(a).................................. .05 .02
Net (loss) gain on securities (both realized and
unrealized)............................................. (.95) .30
------------------------------------
Total from investment operations.......................... (.90) .32
------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .05
Distributions from capital gain........................... -- .06
------------------------------------
Total distributions..................................... -- .11
------------------------------------
Net asset value, end of period.............................. $ 7.07 $ 7.97
====================================
Total return(%)(b).......................................... (11.29) 4.14
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 2 $ 136
Ratio of expenses to average net assets(d)
With expense reimbursement(%)(e).......................... 1.80 2.02
Without expense reimbursement(%)(e)....................... 3.60 3.66
Ratio of net investment income to average net
assets(%)(a)(e)........................................... 1.24 .69
Portfolio turnover rate(%).................................. 47 24
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total return does not reflect a sales charge.
(d) From 1997 through April 1999, total expenses include fees paid indirectly,
if any, through an offset arrangement.
(e) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 157
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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 on
foreign securities, 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, as
amended (the "Code"), 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 carryover of approximately $1,804,000
as of December 31, 1999 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 carryover expires in 2006.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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
capital gain distributions are determined annually in accordance with Federal
tax regulations
<PAGE> 158
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--------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
--------------------------------------------------------------------------------
10
which may differ from generally accepted accounting principles. These
differences primarily relate to foreign denominated securities, certain
securities sold at a loss, and non-deductible organization expenses. As a
result, Net investment income 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 average net assets. Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding 12b-1 fees and certain other expenses) to an
annual rate of 1.95% 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, 2000, the net amount of underwriting
discount retained by IMDI was $1,414.
Under Service and Distribution Plans, the Fund reimburses IMDI for service fee
payments made to brokers at an annual rate of .25% of its average net assets,
excluding Advisor Class. Class B and Class C shares are also subject to an
ongoing distribution fee at an annual rate of .75% of the average net assets
attributable to Class B and Class C. IMDI may use such distribution fee for
purposes of advertising and marketing shares of the Fund. Such fees of $3,223,
$17,206, and $12,961 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 $3,306, $6,006, $3,638 and $86, for Class A, Class B, Class C and
Advisor Class, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in the 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, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 181,195 $ 1,383,924 760,594 $ 4,417,001
Issued on reinvestment
of distributions...... -- -- 1,754 13,679
Repurchased............ (48,875) (368,031) (760,739) (4,538,660)
-------- ----------- -------- -----------
Net increase/
(decrease)............ 132,320 $ 1,015,893 1,609 $ (107,980)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 59,529 $ 442,652 189,550 $ 1,317,798
Issued on reinvestment
of distributions...... -- -- 1,107 8,546
Repurchased............ (73,954) (540,208) (112,554) (796,742)
-------- ----------- -------- -----------
Net (decrease)/
increase.............. (14,425) $ (97,556) 78,103 $ 529,602
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 41,906 $ 300,921 165,089 $ 1,098,147
Issued on reinvestment
of distributions...... -- -- 1,207 9,364
Repurchased............ (98,550) (720,934) (119,605) (826,304)
-------- ----------- -------- -----------
Net (decrease)/
increase.............. (56,644) $ (420,013) 46,691 $ 281,207
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 34,944 $ 257,152 78,562 $ 577,741
Issued on reinvestment
of distributions...... -- -- 222 1,725
Repurchased............ (51,760) (373,776) (61,724) (457,460)
-------- ----------- -------- -----------
Net
(decrease)/increase... (16,816) $ (116,624) 17,060 $ 122,006
======== =========== ======== ===========
</TABLE>
<PAGE> 159
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
11
<PAGE> 160
03IAPF063000
<PAGE> 161
IVY SOUTH AMERICA FUND
PORTFOLIO OF INVESTMENTS
June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
EQUITY SECURITIES - 87.2% SHARES VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA - 9.3%
Banco de Galicia y Buenos Aires S.A. de C.V 18,666 $ 70,011
PC Holdings S.A. Sponsored ADR 5,839 106,927
Quilmes Industrial S.A 5,830 64,859
Telecom Argentina S.A. Sponsored ADR 2,300 63,250
Telefonica de Argentina S.A. Sponsored ADR 2,700 85,725
-----------
390,772
-----------
BRAZIL - 65.1%
Banco Bradesco S.A. - Preferred 19,196,804 167,072
Banco Itau S.A. (a) 970,000 85,227
Cia Brasileira de Distribuicao Grupo Pao de Acucar 4,350,000 141,065
Cia Cervejaria Brahma Sponsored ADR 6,800 115,600
Cia de Saneamento Basico do Estado de Sao Paulo Rights (SABESP) 320,030 24,305
Cia Energetica de Minas Gerais (CEMIG) 3,368,933 58,827
Cia Paranaense de Energia (COPEL) 12,800,000 80,818
Cia Riograndense de Telecomunicacoes (CRT) - Preferred (a) 238,000 80,479
Cia Siderurgica de Tubarao - Preferred 4,900,000 60,165
Cia Vale do Rio Doce 8,300 --
Cia Vale do Rio Doce - Preferred A 9,400 265,229
Embratel Participacoes S.A 5,100 120,488
Gerdau S.A. (a) 7,400,000 90,246
Petroleo Brasileiro S.A. (Petrobras) 22,540 680,967
Tam-cia De Invetimentos (a) (b) 2,450,000 40,065
Tele Centro Oeste Celular Part. S.A 27,000,000 108,961
Tele Centro Sul Participacoes S.A 2,020 147,586
Tele Norte Leste Participacoes S.A 9,718 229,588
Telecomunicacoes de Sao Paulo S.A. (Telesp) Sponsored ADR 2,600 48,100
Uniao de Bancos Brasileiros S.A (Unibanco) Units 2,089,847 121,629
Usinas Siderurgicas de Minas Gerais S.A. - Preferred A (Usiminas) 16,910 78,178
-----------
2,744,595
-----------
CHILE - 7.1%
Antofagasta Holdings plc 21,700 116,130
Banco Santander Chile Sponsored ADR 1,000 16,000
Cia de Telecomunicaciones de Chile S.A. Sponsored ADR 4,800 87,000
Empresa Nacional Electricidad S.A. Sponsored ADR 2,793 30,897
Laboratorio Chile S.A. ADR 2,500 47,969
-----------
297,996
-----------
MEXICO - 2.2%
Panamerican Beverages Inc. 6,200 92,613
-----------
PERU - 1.1%
Credicorp Limited 5,273 47,457
-----------
VENEZUELA - 2.4%
Cia Anonima Nacional Telefonos de Venezuela ADR (CANTV) 3,800 103,313
-----------
TOTAL INVESTMENTS - 87.2%
(Cost - $3,528,817) (c) 3,676,746
OTHER ASSETS, LESS LIABILITIES - 12.8% 540,835
-----------
NET ASSETS - 100% $ 4,217,581
===========
</TABLE>
1
<PAGE> 162
<TABLE>
<CAPTION>
<S> <C>
ADR - American Depository Receipt
(a) Non-income producing security
(b) Security valued in good faith by the Valuation Committee of the Board of
Trustees. See Note I to the Financial Statements.
(c) Cost is approximately the same for Federal income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost for financial
statement and Federal income tax purposes is as follows:
Gross unrealized appreciation $ 528,007
Gross unrealized depreciation (380,078)
-----------
Net unrealized appreciation $ 147,929
===========
Purchases and sales of securities other than short-term obligations aggregated
$2,010,660 and $928,429, respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 163
IVY SOUTH AMERICA FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (identified cost -$3,528,817) ................................... $ 3,676,746
Cash .................................................................................. 526,227
Receivables
Investments sold .................................................................... 14,483
Dividends and interest .............................................................. 15,154
Other assets .......................................................................... 166
-----------
Total assets ........................................................................ 4,232,776
-----------
LIABILITIES
Payables to related parties ........................................................... 655
Accrued expenses ...................................................................... 14,540
-----------
Total liabilities ................................................................... 15,195
-----------
NET ASSETS ............................................................................ $ 4,217,581
===========
CLASS A
Net asset value and redemption price per share
($3,170,042/410,923 shares outstanding) ....................................... $ 7.71
===========
Maximum offering price per share
($7.71 x 100/94.25)* ..................................................... $ 8.18
===========
CLASS B
Net asset value, offering price and redemption price** per share
($907,288/119,594 shares outstanding) ....................................... $ 7.59
===========
CLASS C
Net asset value, offering price and redemption price*** per share
($138,212/18,514 shares outstanding) ........................................ $ 7.47
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per share
($2,039/266 shares outstanding) ........................................... $ 7.67
===========
NET ASSETS CONSIST OF
Capital paid-in ..................................................................... $ 5,451,870
Accumulated net realized loss on investments and
foreign currency transactions .................................................... (1,387,227)
Undistributed net investment income ................................................. 4,980
Net unrealized appreciation on investments and
foreign currency transactions ..................................................... 147,958
-----------
NET ASSETS ............................................................................ $ 4,217,581
===========
</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.
3
<PAGE> 164
IVY SOUTH AMERICA FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends ...................................................................... $ 53,531
Interest ....................................................................... 10,250
---------
63,781
---------
EXPENSES
Management fee ................................................................. $ 18,573
Transfer agent ................................................................. 7,747
Administrative services fee .................................................... 1,857
Custodian fees ................................................................. 23,403
Blue Sky fees .................................................................. 14,631
Auditing and accounting fees ................................................... 8,831
Shareholder reports ............................................................ 4,002
Fund accounting ................................................................ 9,971
Trustees' fees ................................................................. 2,415
12b-1 service and distribution fees ............................................ 9,031
Legal .......................................................................... 14,620
Other .......................................................................... 383
---------
115,464
Expenses reimbursed by Manager ................................................. (65,176)
---------
Net expenses ................................................................. 50,288
---------
NET INVESTMENT INCOME ............................................................ 13,493
---------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT
TRANSACTIONS
Net realized loss on
investments and foreign currency transactions ................................ (659,554)
Net change in unrealized depreciation on
investments and foreign currency transactions ................................ 405,088
---------
Net loss on investment transactions ......................................... (254,466)
---------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................................................ $(240,973)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 165
IVY SOUTH AMERICA FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, December 31,
--------------------- -------------------
2000 1999
--------------------- -------------------
(unaudited)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income ................................ $ 13,493 $ 29,117
Net realized loss on investments and
foreign currency transactions ...................... (659,554) (67,947)
Net change in unrealized depreciation on
investments and foreign currency transactions ...... 405,088 995,732
----------- -----------
Net (decrease) increase resulting from operations (240,973) 956,902
----------- -----------
Dividends to shareholders from net investment income
Class A .............................................. -- (58,620)
Class B .............................................. -- (37,286)
Class C .............................................. -- (11,584)
Advisor Class ........................................ -- (7,352)
----------- -----------
Total distributions to shareholders ............ -- (114,842)
----------- -----------
Fund share transactions (Note 5)
Class A .............................................. 1,841,820 (611,825)
Class B .............................................. (284,506) (59,625)
Class C .............................................. 12,824 (43,807)
Advisor Class ........................................ (129,955) 133,814
----------- -----------
Net increase (decrease) resulting from
Fund share transactions ....................... 1,440,183 (581,443)
----------- -----------
TOTAL INCREASE IN NET ASSETS ........................... 1,199,210 260,617
NET ASSETS
Beginning of period .................................. 3,018,371 2,757,754
----------- -----------
END OF PERIOD ........................................ $ 4,217,581 $ 3,018,371
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME .................... $ 4,980 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 166
IVY SOUTH AMERICA FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
for the six
months ended
June 30,
CLASS A (unaudited) For the Year Ended December 31,
------------ ----------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998 1997 1996 1995
------ -------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 7.83 $ 5.58 $ 8.96 $ 8.51 $ 6.88 8.37
------ -------- ------- ---------- ------- -------
(Loss) income from investment operations
Net investment income (a) .................. .01 .12 .21 .06 .01 .01
Net (loss) gain on securities (both realized
and unrealized) .......................... (.13) 2.45 (3.44) .53 1.66 (1.45)
------ -------- ------- ---------- ------- -------
Total from investment operations ........... (.12) 2.57 (3.23) .59 1.67 (1.44)
------ -------- ------- ---------- ------- -------
Less distributions
Dividends from net investment income ....... -- .32 -- .04 -- --
Distributions from capital gain ............ -- -- .15 .10 .04 --
Returns of capital ......................... -- -- -- -- -- .05
------ -------- ------- ---------- ------- -------
Total distributions ...................... -- .32 .15 .14 .04 .05
------ -------- ------- ---------- ------- -------
Net asset value, end of period ............... $ 7.71 $ 7.83 $ 5.58 $ 8.96 $ 8.51 $ 6.88
====== ======== ======= ========== ======= =======
Total return (%) ............................. (1.53)(b) 46.39(c) (36.07)(c) 7.03(c) 24.22(c) (17.28)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ..... $3,170 $ 1,478 $ 1,638 $ 5,671 $ 4,016 $,2,015
Ratio of expenses to average net assets (d)
With expense reimbursement (%) ............. 2.30(e) 2.20 2.38 2.45 2.55 2.61
Without expense reimbursement (%) .......... 5.64(e) 8.25 5.09 3.18 4.89 9.26
Ratio of net investment income to
average net assets (%) (a) ................. .97(e) 1.44 1.96 .65 .24 .22
Portfolio turnover rate (%) .................. 26 3 26 10 20 45
</TABLE>
6
<PAGE> 167
<TABLE>
<CAPTION>
for the six
months ended
June 30,
CLASS B (unaudited) For the Year Ended December 31,
---------- --------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999 1998 1997 1996 1995
------ ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 7.73 $ 5.52 $ 8.94 $ 8.48 $ 6.88 $ 8.37
------ ------- -------- ------- ------- -------
(Loss) income from investment operations
Net investment income (loss) (a)............ -- .05 .12 (.01) (.03) (.02)
Net (loss) gain on securities (both realized
and unrealized) .......................... (.14) 2.44 (3.39) .53 1.63 (1.47)
------ ------- -------- ------- ------- -------
Total from investment operations ........... (.14) 2.49 (3.27) .52 1.60 (1.49)
------ ------- -------- ------- ------- -------
Less distributions
Dividends from net investment income ....... -- .28 -- -- -- --
Distributions from capital gain ............ -- -- .15 .06 -- --
------ ------- -------- ------- ------- -------
Total distributions ...................... -- .28 .15 .06 -- --
------ ------- -------- ------- ------- -------
Net asset value, end of period ............... $ 7.59 $ 7.73 $ 5.52 $ 8.94 $ 8.48 $ 6.88
====== ======= ======== ======= ======= =======
Total return (%) ............................. (1.81)(b) 45.29(c) (36.59)(c) 6.18(c) 23.26(c) (17.90)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) .... $ 907 $ 1,237 $ 972 $ 3,028 $ 2,025 $ 684
Ratio of expenses to average net assets (d)
With expense reimbursement (%) ............. 3.18(e) 2.98 3.18 3.23 3.33 3.36
Without expense reimbursement (%) .......... 6.52(e) 9.03 5.89 3.96 5.67 10.01
Ratio of net investment income (loss) to
average net assets (%) (a) ................. .09(e) .66 1.16 (.13) (.54) (.53)
Portfolio turnover rate (%) .................. 26 3 26 10 20 45
</TABLE>
7
<PAGE> 168
<TABLE>
<CAPTION>
for the six For the Period
months ended April 30, 1996
CLASS C June 30, (commencement)
(unaudited) For the Year Ended December 31, to December 31,
-------------- ------------------------------------- ---------------
SELECTED PER SHARE DATA 2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 7.63 $ 5.48 $ 8.89 $ 8.46 $ 7.96
--------- --------- --------- --------- ---------
(Loss) income from investment operations
Net investment income (loss)(a) ............ -- .03 .12 (.02) (.02)
Net (loss) gain on securities (both realized
and unrealized) .......................... (.16) 2.45 (3.38) .53 .55
--------- --------- --------- --------- ---------
Total from investment operations ........... (.16) 2.48 (3.26) .51 .53
--------- --------- --------- --------- ---------
Less distributions
Dividends from net investment income ....... -- .33 -- -- --
Distributions from capital gain ............ -- -- .15 .08 .03
--------- --------- --------- --------- ---------
Total distributions ...................... -- .33 .15 .08 .03
--------- --------- --------- --------- ---------
Net asset value, end of period ............... $ 7.47 $ 7.63 $ 5.48 $ 8.89 $ 8.46
========= ========= ========= ========= =========
Total return (%) ............................. (2.10)(b) 45.59(c) (36.69) (c) 5.05 (c) 6.66 (b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) .... $ 138 $ 141 $ 148 $ 453 $ 111
Ratio of expenses to average net assets (d)
With expense reimbursement (%) ............. 3.41 (e) 2.94 3.21 3.30 3.45 (e)
Without expense reimbursement (%) .......... 6.75 (e) 8.99 5.92 4.03 5.80 (e)
Ratio of net investment (loss) income to
average net assets (%)(a) .................. (.13)(e) .70 1.13 (.20) (.68)(e)
Portfolio turnover rate (%) .................. 26 3 26 10 20
</TABLE>
8
<PAGE> 169
<TABLE>
<CAPTION>
for the six for the period
months ended July 1, 1999
ADVISOR CLASS June 30, (commencement)
(unaudited) to December 31,
----------- ---------------
SELECTED PER SHARE DATA 2000 1999
----------- ---------------
<S> <C> <C>
Net asset value, beginning of period ......... $ 7.80 $ 6.60
----------- ---------------
(Loss) income from investment operations
Net investment income (a) .................. .02 .04
Net (loss) gain on securities (both realized
and unrealized) .......................... (.15) 1.55
----------- ---------------
Total from investment operations ........... (.13) 1.59
----------- ---------------
Less distributions
Dividends from net investment income ....... -- .39
----------- ---------------
Total distributions ...................... -- .39
----------- ---------------
Net asset value, end of period ............... $ 7.67 $ 7.80
=========== ===============
Total return (%)(f) .......................... (1.67) 24.35
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ..... $ 2 $ 163
Ratio of expenses to average net assets (e)
With expense reimbursement (%) ............. 1.81 1.43
Without expense reimbursement (%) .......... 5.15 7.48
Ratio of net investment income to
average net assets (%)(a)(e) ............... 1.46 2.21
Portfolio turnover rate (%) .................. 26 3
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total return does not reflect a sales charge.
(d) Beginning in 1995, total expenses include fees paid indirectly, if any,
through an offset arrangement.
(e) Annualized
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 170
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000, a
Board valued security amounted to $40,065 (0.9% of net assets) and has 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, as
amended (the "Code"), and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
10
<PAGE> 171
IVY SOUTH AMERICA FUND
Notes to Financial Statements (unaudited)
The Fund has a net tax-basis capital loss carryover of approximately $709,000 as
of December 31, 1999, 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 $529,000 in 2006
and $180,000 in 2007.
DISTRIBUTIONS TO SHAREHOLDERS - Distributions from net investment income and
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS - Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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
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 12b-1 fees and certain other expenses) to an annual rate of
1.95% of the Fund's average net assets.
11
<PAGE> 172
IVY SOUTH AMERICA FUND
Notes to Financial Statements (unaudited)
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, 2000, the net amount of underwriting
discount retained by IMDI was $82.
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
$2,957, $5,283 and $791, 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 $4,357, $2,733, $594 and $63, for Class A, Class B, Class C and
Advisor Class, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. CONCENTRATION OF CREDIT RISK
The Fund primarily invests in equity securities of companies in 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, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------------------------------------
Class A SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold............................ 301,849 $ 2,460,347 66,279 $ 407,015
Issued on reinvestment
of distributions........ -- -- 6,707 50,105
Repurchased..................... (79,676) (618,527) (177,951) (1,068,945)
--------- ----------- --------- -----------
Net increase/(decrease)......... 222,173 $ 1,841,820 (104,965) $ (611,825)
========= =========== ========= ===========
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------------------------------------
Class B SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------
Sold............................ 12,278 $ 95,421 60,567 $ 400,074
Issued on reinvestment
of distributions........ -- -- 3,330 24,579
Repurchased..................... (52,657) (379,927) (80,045) (484,278)
--------- ----------- --------- -----------
Net decrease.................... (40,379) $ (284,506) (16,148) $ (59,625)
========= =========== ========= ===========
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------------------------------------
Class C SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------
Sold............................ 41,218 $ 329,134 48,657 $ 323,014
Issued on reinvestment
of distributions........ -- -- 952 6,929
Repurchased..................... (41,204) (316,310) (58,075) (373,750)
--------- ----------- --------- -----------
Net increase/(decrease)......... 14 $ 12,824 (8,466) $ (43,807)
========= =========== ========= ===========
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
--------------------------------------------------------------------------------------------------------------
Advisor Class SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------
Sold............................ 14,039 $ 112,040 19,933 $ 127,043
Issued on reinvestment
of distributions........ -- -- 987 7,352
Repurchased..................... (34,606) (241,995) (87) (581)
--------- ----------- --------- -----------
Net (decrease)/increase......... (20,567) $ (129,955) 20,833 $ 133,814
========= =========== ========= ===========
</TABLE>
12
<PAGE> 173
IVY SOUTH AMERICA FUND
Notes to Financial Statements (unaudited)
6. SUBSEQUENT EVENT
At a meeting held on July 21, 2000, the shareholders of the Fund approved an
Agreement and Plan of Reorganization (the "Reorganization") providing for the
transfer of all or substantially all of the assets of the Fund to Ivy Developing
Markets Fund. On July 21, 2000, the date of the consummation of the
Reorganization, the Fund transferred all or substantially all of its assets into
Ivy Developing Markets Fund. The transaction was structured for tax purposes to
qualify as a tax-free reorganization under the Code.
As a result of the transaction, the Fund was combined with Ivy Developing
Markets Fund and the Fund's shareholders became shareholders of Ivy Developing
Markets Fund, and received shares of Ivy Developing Markets Fund that had an
aggregate net asset value equal to the aggregate net asset value of each
respective shareholder's investment in the Fund. The Ivy Developing Markets Fund
shares received by the Fund in connection with the Reorganization were
distributed to the Fund's shareholders in complete liquidation of the Fund.
13
<PAGE> 174
[LOGO]
IVY INTERNATIONAL SMALL COMPANIES FUND
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth primarily through
investment in foreign equity securities of companies with a total market
capitalization of less than $2 billion.
[PHOTO]
Ivy International Small Companies Fund uses a dual management approach. Fifty
percent of the Fund is managed by Ivy Management, Inc. and fifty percent is
managed by Henderson Investors.
HENDERSON INVESTORS
An interview with Miranda Richards, small companies strategist at Henderson
Investors.
Q: MIRANDA, CAN YOU GIVE US AN OVERVIEW OF RECENT DEVELOPMENTS IN THE
INTERNATIONAL SMALL-CAP MARKET?
A: International small-caps were driven by the continued strong performance of
technology stocks in the first quarter. Technology stocks then experienced a
worldwide sell-off in March, and small-caps suffered as a result. Although
smaller companies have risen from their low levels since then, some markets --
the UK and Asia (excluding Japan), for example -- remain in negative territory
year-to-date. Japan has been the strongest country for smaller companies, and
returns in continental Europe have also been positive.
We've seen a broadening of equity market leadership since the technology
sell-off. It's no longer just technology companies that are getting all the
attention from investors. Many small non-technology stocks with strong earnings
growth that were neglected during the first quarter's technology run-up are now
realizing good performance.
Q: HOW DID THIS AFFECT THE HENDERSON-MANAGED PART OF THE FUND?
A: Performance was very strong during most of the first quarter, and although
the second quarter was not quite as successful, the Henderson part of the Fund
outperformed its index for the six-month period. It held up well during the
March correction.
Strategically, we recently broadened the Fund's holdings out into Asia by
selling some of its European position. We did this to position the Fund to
benefit from the resumed economic growth in China, Japan and other areas of the
Far East. This should allow us to take advantage of the growth potential Asia
has to offer while still retaining a strong interest in Europe.
Q: HOW DOES YOUR INVESTMENT PROCESS HELP YOU TARGET OPPORTUNITIES?
A: Stocks for the portfolio are selected on a bottom-up basis using fundamental
analysis. We also make regional allocation decisions based on top-down analysis.
The focus is on companies with proven management ability, leading market
positions, visible earnings growth and reasonable valuations. The Fund is
well-diversified across a broad range of sectors and countries. In fact, only
35% of the Fund is in technology and other "new economy" stocks. We believe
company fundamentals, and
<PAGE> 175
[LOGO]
IVY INTERNATIONAL SMALL COMPANIES FUND
therefore bottom-up stock selection, are more important than sector outlooks.
Q: WHAT'S YOUR OUTLOOK FOR THE REST OF THE YEAR?
A: We believe that interest rates could rise in Europe,
and possibly in Japan if economic recovery appears assured. While this may
dampen the attractiveness of equities over the short term, the long-term outlook
for quality smaller companies remains good. In Europe, there has been a renewal
of investor interest in initial public offerings (IPOs), which should be
positive for small-cap companies. We believe there will be opportunities to buy
stocks in European companies with exciting growth prospects and good management
that meet our selection criteria. In Asia, companies exposed to the
strengthening growth in China and Japan should give positive impetus to the
region and provide selective prospects for investment.
IVY MANAGEMENT, INC.
An interview with Oleg Makhorine, a member of the Ivy Management, Inc.
International Equity team.
Q: OLEG, HOW ARE THE ECONOMIES OF EUROPE AND ASIA DOING?
A: Europe has experienced an economic upswing, with a number of changes underway
as a result of the European Monetary Union. In our view, increased competition
and a larger European marketplace have contributed to consolidation. Mergers and
acquisitions have increased in virtually every industry in Europe, which should
particularly benefit smaller companies. European companies are now focusing on
their core business and eliminating less profitable assets. And while the euro
struggled against the dollar for most of the first half of 2000, a weak euro was
actually quite positive for the European export sector, since it has a cost
basis in euros but revenue in dollars. As we move ahead, we believe that the
euro will recover against other major currencies as the European economy
continues its structural and productivity growth.
Changes taking place in Japan are opening opportunities for investors. A great
deal of corporate restructuring is taking place, and Japan's economy seems to be
turning in the right direction. The rest of Asia is seeing a recovery in
economic growth, and we believe that this will continue even if the US economy
slows down. Many businesses in Asia are undergoing aggressive restructuring,
which should allow for higher profitability during the next cycle.
Q: HOW DID MARKET DEVELOPMENTS AFFECT THE IVY-MANAGED PORTION OF THE FUND?
A: Our strong value emphasis was a disadvantage during the first quarter, as
technology, media and telecommunication stocks outperformed all other sectors.
However, the Ivy-managed part of the Fund regained ground during the technology
sell-off when value played very well. During the first six months, the portfolio
was down less than the overall market.
Strategically, we took advantage of lower prices after the technology sell-off
to buy stocks that, in our opinion, were previously overvalued. Recent additions
include Automated Systems, a systems integrator in Asia, and Jenoptik, a company
that provides production facilities for the semiconductor industry in Germany.
Q: IN THE PAST, THE IVY PART OF THE FUND WAS MANAGED IN A VALUE STYLE. WILL THAT
CHANGE?
A: Yes. We're now taking a more flexible approach, blending growth and value
to take advantage of more investment opportunities around the world. As a
result, we have added some growth-oriented telecom and technology stocks to the
Ivy-managed part of the Fund, but we're still continuing our focus on companies
that are undervalued relative to their long-term earnings prospects.
Q: WHAT IS YOUR OUTLOOK AS WE MOVE AHEAD?
A: Short-term uncertainties aside, we believe that the long-term outlook for
small-cap stocks remains positive. Today's smaller companies are adept at
changing with the times and exploiting opportunities, and we believe that they
should benefit from continuing strong economic growth worldwide.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
"Today's smaller
companies are
adept at changing
with the times
and exploiting
opportunities."
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
June 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[LOGO]
<PAGE> 176
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 90.7% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
EASTERN EUROPE -- 2.2%
------------------------------------
HUNGARY -- 2.2%
Danubius Hotel & Spa Rt.............. 4,000 $ 77,412
Pick Szeged Rt....................... 2,875 106,563
----------
183,975
----------
EUROPE -- 63.5%
------------------------------------
AUSTRIA -- 4.6%
Flughafen Wien AG.................... 5,000 178,729
Mayr-Melnhof Karton AG............... 1,772 84,167
OMV AG............................... 1,400 122,124
----------
385,020
----------
DENMARK -- 1.7%
Sydbank A/S.......................... 4,300 146,425
----------
FINLAND -- 4.0%
F-Secure Oyj(a)...................... 10,200 118,407
Metso Oyj............................ 7,270 87,809
Rapala Normark Corp.................. 5,102 30,322
YIT-Yhtyma Oyj....................... 7,500 99,214
----------
335,752
----------
FRANCE -- 9.8%
Bongrain SA.......................... 600 158,052
Groupe Bull(a)....................... 24,000 211,196
Himalaya(a).......................... 3,700 102,857
Net2S(a)............................. 3,428 69,007
Scor SA.............................. 4,610 201,555
Transiciel SA........................ 1,280 82,577
----------
825,244
----------
GERMANY -- 12.9%
BERU AG.............................. 2,500 76,447
Dyckerhoff AG........................ 1,690 42,963
Dyckerhoff AG -- Preferred........... 1,500 38,104
Escada AG -- Preferred............... 800 79,755
Jenoptik AG.......................... 5,500 158,167
Merck KGaA........................... 6,740 205,456
Rational AG(a)....................... 2,800 101,994
Tecis Holding AG..................... 800 76,649
Telegate AG(a)....................... 1,420 147,009
Zapf Creaton AG...................... 2,700 163,056
----------
1,089,600
----------
GREECE -- 1.4%
Folli-Follie SA...................... 5,300 117,185
----------
IRELAND -- 1.5%
Parthus Technologies plc(a).......... 9,000 25,411
Ryanair Holdings plc(a).............. 13,794 100,493
----------
125,904
----------
ITALY -- 0.9%
Banca Popolare di Milano............. 10,650 77,078
----------
NETHERLANDS -- 2.1%
Athlon Groep NV...................... 1,577 28,118
Beter Bed Holding NV................. 1,015 30,551
Devote NV............................ 2 96
SNT Group NV(a)...................... 3,300 116,411
----------
175,176
----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
NORWAY -- 0.3%
Tandberg Television ASA(a)........... 5,059 $ 29,298
----------
PORTUGAL -- 0.9%
Impresa -- Sociedade Gestora de
Participacoes, S.A.(a)............. 6,913 76,207
----------
SPAIN -- 3.9%
Baron de Ley, S.A.(a)................ 4,600 113,545
Bodegas Y Bebidas SA................. 17,000 192,293
Enaco, S.A.(a)....................... 5,000 22,814
----------
328,652
----------
SWEDEN -- 2.3%
Micronic Laser Systems AB(a)......... 3,700 75,512
Semcon AB............................ 6,400 122,590
----------
198,102
----------
SWITZERLAND -- 2.0%
Swisslog Holding AG.................. 340 167,275
----------
UNITED KINGDOM -- 15.2%
CMG plc.............................. 10,937 153,323
Corporate Services Group plc(a)...... 125,929 185,878
Euro Sales Finance plc............... 6,500 127,433
F.I. Group plc....................... 14,301 83,351
Fitness First plc(a)................. 10,000 169,935
Informa Group plc.................... 11,500 118,996
Jarvis Hotels plc.................... 86,370 138,601
PizzaExpress plc..................... 6,500 61,994
RM plc............................... 12,000 120,355
Taylor Nelson Sofres plc............. 30,500 121,668
----------
1,281,534
----------
FAR EAST -- 20.6%
------------------------------------
AUSTRALIA -- 2.1%
CSL Limited.......................... 5,735 113,753
Energy Developments Limited.......... 10,500 61,468
----------
175,221
----------
CHINA -- 1.3%
Qingling Motors Company -- H
Shares............................. 920,000 106,221
----------
HONG KONG -- 7.4%
Asia Satellite Telecommunications
Holdings Ltd. ADR.................. 48,000 164,105
Automated Systems Holdings Ltd....... 204,000 104,682
Dah Sing Financial Group............. 40,000 161,128
Giordano International Ltd........... 10,000 15,202
Glorious Sun Enterprises Limited..... 126,000 35,157
Mandarin Oriental International
Limited............................ 25,000 16,625
Orient Overseas International Ltd.... 20,000 10,070
Varitronix International Limited..... 22,000 38,242
VTech Holdings Limited(a)............ 21,000 79,474
----------
624,685
----------
JAPAN -- 5.3%
Arrk Corporation..................... 3,000 151,699
Cresco, Ltd.......................... 1,300 93,383
People Co., Ltd...................... 1,300 104,441
Relocation Services Corporation...... 2,000 98,297
----------
447,820
----------
</TABLE>
<PAGE> 177
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IVY INTERNATIONAL SMALL COMPANIES FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
NEW ZEALAND -- 3.9%
Fletcher Challenge Building......... 95,822 $ 101,946
Fletcher Challenge Energy........... 53,000 173,402
Tourism Holdings Limited............ 43,475 50,142
-----------
325,490
-----------
SINGAPORE -- 0.6%
Keppel Telecommunications &
Transportation Limited............ 14,000 18,138
Neptune Orient Lines Limited(a)..... 35,000 32,389
-----------
50,527
-----------
LATIN AMERICA -- 4.4%
-----------------------------------
BRAZIL -- 2.3%
Tele Centro Oeste Celular Part.
S.A............................... 48,000,000 193,708
-----------
CHILE -- 1.3%
Cristalerias de Chile Sponsored
ADR............................... 6,500 107,250
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
MEXICO -- 0.8%
Corporacion GEO, S.A. de C.V. --
Series B(a)....................... 39,000 $ 63,790
-----------
TOTAL INVESTMENTS -- 90.7%
(Cost -- $7,150,583)(b)........... 7,637,139
OTHER ASSETS, LESS
LIABILITIES -- 9.3%............... 779,765
-----------
NET ASSETS -- 100%.................. $ 8,416,904
===========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation............... $ 1,102,131
Gross unrealized depreciation............... (615,575)
-----------
Net unrealized appreciation............. $ 486,556
===========
Purchases and sales of securities other than short-term
obligations aggregated $5,865,273 and $1,935,789,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 178
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $7,150,583)....... $ 7,637,139
Cash........................................................ 861,040
Receivables
Investments sold.......................................... 39,144
Fund shares sold.......................................... 14,481
Dividends and interest.................................... 18,392
Manager for expense reimbursement......................... 22,808
Deferred organization expenses.............................. 14,295
Other assets................................................ 21,320
-----------
Total assets............................................ 8,628,619
-----------
LIABILITIES
Payables
Investments purchased..................................... 174,670
Management fee............................................ 6,743
12b-1 service and distribution fees....................... 1,045
Other payables to related parties......................... 3,950
Accrued expenses............................................ 25,307
-----------
Total liabilities....................................... 211,715
-----------
NET ASSETS.................................................. $ 8,416,904
===========
CLASS A
Net asset value and redemption price per share
($3,503,693/245,034 shares outstanding)................... $ 14.30
===========
Maximum offering price per share ($14.30 X 100/94.25)*...... $ 15.17
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($3,048,193/216,505 shares outstanding)............. $ 14.08
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,632,236/115,154 shares outstanding)............. $ 14.17
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($232,782/16,213 shares outstanding)................ $ 14.36
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 7,484,539
Undistributed net realized gain on investments and foreign
currency transactions................................... 400,746
Undistributed net investment income....................... 45,801
Net unrealized appreciation on investments and foreign
currency transactions................................... 485,818
-----------
NET ASSETS.................................................. $ 8,416,904
===========
</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> 179
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
--------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $7,035 foreign taxes withheld........... $ 81,565
Interest.................................................. 19,780
---------
101,345
---------
EXPENSES
Management fee............................................ $30,574
Transfer agent............................................ 7,144
Administrative services fee............................... 3,057
Custodian fees............................................ 32,558
Blue Sky fees............................................. 16,760
Auditing and accounting fees.............................. 11,831
Shareholder reports....................................... 4,004
Amortization of organization expenses..................... 4,963
Fund accounting........................................... 10,491
Trustees' fees............................................ 2,637
12b-1 service and distribution fees....................... 20,431
Legal..................................................... 15,976
---------
160,426
Expenses reimbursed by Manager............................ (80,379)
---------
Net expenses.......................................... 80,047
---------
NET INVESTMENT INCOME....................................... 21,298
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions........................................... 674,969
Net change in unrealized appreciation on investments and
foreign currency transactions, net of taxes of $550..... (323,271)
---------
Net gain on investment transactions................... 351,698
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 372,996
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 180
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 21,298 $ (27,208)
Net realized gain (loss) on investments and foreign
currency transactions................................... 674,969 (51,710)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... (323,271) 1,075,611
---------- ----------
Net increase resulting from operations................ 372,996 996,693
---------- ----------
Distributions to shareholders from capital gain
Class A................................................... -- (2,645)
Class B................................................... -- (3,066)
Class C................................................... -- (2,646)
Advisor Class............................................. -- (682)
---------- ----------
Total distributions to shareholders................... -- (9,039)
---------- ----------
Fund share transactions (Note 4)
Class A................................................... 2,320,155 (219,679)
Class B................................................... 1,690,621 (128,120)
Class C................................................... 318,639 (217,497)
Advisor Class............................................. (79,126) 239,851
---------- ----------
Net increase (decrease) resulting from Fund share
transactions......................................... 4,250,289 (325,445)
---------- ----------
TOTAL INCREASE IN NET ASSETS................................ 4,623,285 662,209
NET ASSETS
Beginning of period....................................... 3,793,619 3,131,410
---------- ----------
END OF PERIOD............................................. $8,416,904 $3,793,619
========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 45,801 $ 24,503
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 181
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS A (unaudited) for the year ended December 31,
--------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.45 $ 8.95 $ 8.66 $ 10.00
------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .16 (.05) .04 (.01)
Net gain (loss) on securities (both realized and
unrealized)............................................. 1.69 3.58 .41 (1.24)
------------------------------------------------------
Total from investment operations.......................... 1.85 3.53 .45 (1.25)
------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- -- .15 --
Distributions from capital gain........................... -- .03 .01 .09
------------------------------------------------------
Total distributions..................................... -- .03 .16 .09
------------------------------------------------------
Net asset value, end of period.............................. $ 14.30 $12.45 $ 8.95 $ 8.66
======================================================
Total return(%)............................................. 14.86(b) 39.45(c) 5.24(c) (12.52)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 3,504 $1,069 $ 980 $ 992
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.22(e) 2.33 2.47 2.50
Without expense reimbursement(%).......................... 4.85(e) 8.56 6.38 4.87
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. 1.10(e) (.47) .39 (.11)
Portfolio turnover rate(%).................................. 36 98 18 10
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30,
CLASS B (unaudited) for the year ended December 31,
------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.30 $ 8.92 $ 8.63 $10.00
----------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .06 (.13) (.03) (.05)
Net gain (loss) on securities (both realized and
unrealized)............................................. 1.72 3.54 .41 (1.27)
----------------------------------------------------
Total from investment operations.......................... 1.78 3.41 .38 (1.32)
----------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- -- .08 --
Distributions from capital gain........................... -- .03 .01 .05
----------------------------------------------------
Total distributions..................................... -- .03 .09 .05
----------------------------------------------------
Net asset value, end of period.............................. $ 14.08 $12.30 $ 8.92 $ 8.63
====================================================
Total return(%)............................................. 14.47(b) 38.24(c) 4.46(c) (13.19)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 3,048 $1,238 $1,027 $1,007
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.95(e) 3.10 3.24 3.31
Without expense reimbursement(%).......................... 5.58(e) 9.33 7.15 5.68
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .37(e) (1.23) (.38) (.91)
Portfolio turnover rate(%).................................. 36 98 18 10
</TABLE>
The accompanying notes are an integral part of the financial statement.
<PAGE> 182
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
for the six
months ended
June 30, for the year ended
CLASS C (unaudited) December 31,
---------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
SELECTED PER SHARE DATA -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.38 $ 8.97 $ 8.65 $ 10.00
-------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .05 (.12) (.03) (.06)
Net gain (loss) on securities (both realized and
unrealized)............................................. 1.74 3.56 .42 (1.25)
-------------------------------------------------------
Total from investment operations.......................... 1.79 3.44 .39 (1.31)
-------------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. -- -- .06 --
Distributions from capital gain........................... -- .03 .01 .04
-------------------------------------------------------
Total distributions..................................... -- .03 .07 .04
-------------------------------------------------------
Net asset value, end of period.............................. $ 14.17 $ 12.38 $ 8.97 $ 8.65
=======================================================
Total return(%)............................................. 14.46(b) 38.36(c) 4.55(c) (13.14)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,632 $ 1,196 $ 1,125 $ 1,574
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 2.96(e) 3.04 3.16 3.23
Without expense reimbursement(%).......................... 5.59(e) 9.27 7.07 5.60
Ratio of net investment income (loss) to average net
assets(%)(a).............................................. .36(e) (1.18) (.30) (.83)
Portfolio turnover rate(%).................................. 36 98 18 10
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
for the six for the period
months ended July 1, 1999
June 30, (commencement)
ADVISOR CLASS (unaudited) to December 31,
--------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 2000 1999
------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $12.48 $ 9.94
------------------------------------
Income from investment operations
Net investment income(a).................................. .21 --
Net gain on securities (both realized and unrealized)..... 1.67 2.57
------------------------------------
Total from investment operations.......................... 1.88 2.57
------------------------------------
Less distributions
Dividends from capital gain............................. -- .03
------------------------------------
Total distributions..................................... -- .03
------------------------------------
Net asset value, end of period.............................. $14.36 $12.48
====================================
Total return(%)(b).......................................... 15.06 25.87
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 233 $ 291
Ratio of expenses to average net assets(d)
With expense reimbursement(%)............................. 1.84 1.83
Without expense reimbursement(%).......................... 4.47 8.06
Ratio of net investment income to average net
assets(%)(a)(e)........................................... 1.48 .03
Portfolio turnover rate(%).................................. 36 98
</TABLE>
(a) Net investment income (loss) is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Total return does not reflect a sales charge.
(d) From 1997 to 1999, total expenses include fees paid indirectly, if any,
through an offset arrangement.
(e) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 183
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
--------------------------------------------------------------------------------
10
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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
one exchange, or on one or more exchanges in the over-the-counter market, the
exchange reflecting the last quoted sale will be used. Otherwise, the security
is valued at the calculated mean between the last bid and asked price on the
exchange on which the security is traded most extensively. 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, 2000, 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 on
foreign securities, 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,
2000, the interest rate was 6.0%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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 carryover of approximately $272,000 as
of December 31, 1999 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 carryover expires $149,000 in 2006 and
$123,000 in 2007.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gain, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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 Code Section 988 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 organiza-
<PAGE> 184
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
tion 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
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 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. Since February 1, 1999, Henderson Investment
Management Limited has served as sub-advisor with respect to fifty percent of
the portfolio of the Fund. IMI, not the Fund, is obligated to compensate the
subadvisor. Currently, IMI limits the Fund's total operating expenses (excluding
12b-1 fees and certain other expenses) to an annual rate of 1.95% 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, 2000, the net amount of underwriting
discount retained by IMDI was $5,475.
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
$2,758, $10,834 and $6,839, 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 $2,774, $2,478, $1,664 and $228, 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 163,886 $ 2,387,999 4,001 $ 40,825
Issued on reinvestment of
distributions.............. -- -- 193 2,395
Repurchased................. (4,763) (67,844) (27,755) (262,899)
------- ----------- ------- ---------
Net increase/(decrease)..... 159,123 $ 2,320,155 (23,561) $(219,679)
======= =========== ======= =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 126,678 $ 1,842,831 12,882 $ 130,668
Issued on reinvestment of
distributions.............. -- -- 154 1,882
Repurchased................. (10,791) (152,210) (27,522) (260,670)
------- ----------- ------- ---------
Net increase/(decrease)..... 115,887 $ 1,690,621 (14,486) $(128,120)
======= =========== ======= =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 58,733 $ 843,136 23,289 $ 264,888
Issued on reinvestment of
distributions.............. -- -- 48 588
Repurchased................. (40,179) (524,497) (52,051) (482,973)
------- ----------- ------- ---------
Net increase/(decrease)..... 18,554 $ 318,639 (28,714) $(217,497)
======= =========== ======= =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 1, 1999
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold........................ 25,865 $ 384,062 23,921 $ 246,124
Issued on reinvestment of
distributions.............. -- -- 55 682
Repurchased................. (32,938) (463,188) (690) (6,955)
------- ----------- ------- ---------
Net (decrease)/increase..... (7,073) $ (79,126) 23,286 $ 239,851
======= =========== ======= =========
</TABLE>
<PAGE> 185
03IISC063000
<PAGE> 186
[LOGO] IVY FUNDS(R)
EMBRACING THE WORLD
IVY EUROPEAN OPPORTUNITIES FUND
SEMIANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[LOGO]
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide long-term capital growth by investing in companies
located in or doing business in Europe.
Ivy European Opportunities Fund is managed by Stephen Peak of London-based
Henderson Investors. Mr. Peak is head of Henderson's Continental European
Equities Team.
Q: STEPHEN, CAN YOU GIVE US AN OVERVIEW OF THE EUROPEAN MARKETS IN THE FIRST
HALF OF 2000?
A: The celebrations marking the arrival of the new millennium continued into
the early part of the year with the new "e"-conomy sectors of technology, media
and telecommunications (TMT) driving equity markets to new all-time highs. The
TMT sector peaked in March at around 30% above year-end levels. But after every
party comes the hangover, as well as the reflection that decisions made during
bouts of "irrational exuberance" may, in hindsight, appear questionable. The
equity market hangover was at its worst in April, with the TMT sector down 15%
from year-end 1999 levels. Finally, with the party well and truly over, it was
time to tidy up the mess and restore some level of balance. Investors returned
to what they knew, the markets broadened and "old economy" stocks returned to
favor.
When the TMT sector was doing well, however, it seemed that more and more
people wanted to come to the party and have a good time. The increase in the
number of initial public offerings (IPOs) continued with 211 European IPOs
worth $46 billion in the first half of 2000. Notably, some of those who arrived
late to the party have had the least enjoyable time, with some IPOs not doing
as well as expected. This has created some potentially interesting investment
opportunities, as some of these companies are still trading at or even below
their IPO price. This offers buying opportunities for the Fund, and it's
something that we are reviewing carefully.
Q: HOW DID IVY EUROPEAN OPPORTUNITIES FUND PERFORM DURING THIS PERIOD?
A: Despite the volatility in the markets, the Fund showed very strong
performance for the six-month period. Much of this was due to our participation
in the IPO market, which has been a growing feature in Europe over the past few
years. The effect of purchasing IPOs whose share prices have risen rapidly has
had a greater impact on the Fund's performance due to the relatively small
value of the assets. However, as the Fund continues to grow in size, IPOs will
have less of an impact on performance. Some IPO purchases have risen rapidly
and been sold in a relatively short amount of time, while others have been
built into long-standing portfolio positions. One example of an IPO holding
that was built into a portfolio position is Charles Voegele, a Swiss discount
clothing retailer, which was bought as an IPO in June 1999. It has been one of
the more robust performers in a weak sector this year, and the valuation
remains good for a company with a forecasted 15% self-financed growth rate over
the next few years. We remain positive on
<PAGE> 187
IVY EUROPEAN OPPORTUNITIES FUND
the long-term strategy and growth potential of the company.
A further factor contributing to the Fund's performance was the explosive
growth in TMT stocks between November and March, which was exploited by the
Fund's then heavily overweight position. After the technology sell-off, we took
the opportunity to purchase some TMT stocks that we believe are fundamentally
sound at substantially reduced prices. For example, we purchased VersaTel, a
Dutch company that offers telephone and Internet service across Europe. Its
share price dropped after the sell-off, but we believe that it has a sound
business model, high-quality management, solid funding and attractive growth
potential.
The Fund currently has approximately 40% of its assets in technology stocks,
but we also concentrate on other themes. First, we like "old economy" companies
that are restructuring their businesses and moving into new areas, using
technology to increase productivity. TelePizza, a Spanish pizza delivery
service that is undergoing significant expansion and moving into e-commerce, is
a good example. Second, we look for old economy GARP (growth at a reasonable
price) companies, which include non-technology companies that are undergoing
some kind of catalytic event -- a merger or acquisition, for example -- that
may lead to a significant rise in share price in the future.
"WE CONCENTRATE ON BOTTOM-UP STOCK ANALYSIS BECAUSE
IN A SINGLE MARKET WITH A SINGLE CURRENCY, AS
EUROPE IS TODAY, WE BELIEVE THAT STOCK SELECTION RATHER THAN
COUNTRY SELECTION IS THE KEY TO DELIVERING LONG-TERM PERFORMANCE."
Q: HOW WOULD YOU DEFINE YOUR INVESTMENT PROCESS?
A: Our investment process is focused, opportunistic and based on bottom-up
research. The portfolio is typically focused, with the top 10 holdings
representing approximately 25 to 40% of the Fund's value. This allows us to
back what we think are our best ideas with a significant portion of the Fund's
assets. We are opportunistic in that we are not limited by market
capitalization or investment style -- we buy growth stocks, value stocks,
small-caps, large-caps, IPOs and more. We also seize opportunity by buying
undervalued companies when markets overreact to events, as they did in the
recent technology sell-off. And we concentrate on bottom-up stock analysis
because in a single market with a single currency, as Europe is today, we
believe that stock selection rather than country selection is the key to
delivering long-term performance.
In general, we're very flexible in our approach. As markets change, we try to
alter our expectations of the present value of a company to reflect current
market conditions. And we are always open to new ideas -- I like to think that
we're pragmatic, not dogmatic. That's important in today's ever-changing world
economy.
Q: WHAT'S YOUR OUTLOOK FOR THE REST OF THE YEAR AND BEYOND?
A: The short-term outlook for European equities is positive. We expect that
economic growth coupled with low inflation and interest rates will continue,
which should lead to corporate earnings growth exceeding US levels in 2000. In
fact, we expect corporate earnings in Europe to grow at a strong 20% this year
and 10% the next. Factors such as corporate tax reform, most notably in
Germany, and strong economies should continue to drive this growth. In
addition, mergers and acquisitions are still offering opportunities, and the
flow of IPO and stock opportunities looks set to continue. All of this should
provide an excellent backdrop for equity investing.
With the global economy still buoyant, we believe the long-term outlook for
European markets remains good as well. The fundamentals, such as economic
growth and substantial corporate activity, are still strong. In our view, an
easing of inflationary pressures and the resulting peak in US interest rates
should provide strong pros-pects for a recovery in international equity
markets, particularly in Europe.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated
document. This report and any excerpt of this report may not be copied or
reprinted without first obtaining the written permission of Ivy Funds.
2
<PAGE> 188
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES -- 97.8% SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
EUROPE -- 93.7%
------------------------------------
AUSTRIA -- 3.3%
Bank Austria AG...................... 766 $ 37,463
EMTS Technologie AG(a)............... 75,000 5,119,722
VA Technologie AG.................... 23,720 1,254,668
Yline Internet Business Services
AG(a).............................. 13,000 1,557,707
-----------
7,969,560
-----------
DENMARK -- 0.0%
Sydbank A/S.......................... 1,186 40,386
-----------
FINLAND -- 2.0%
F-Secure Oyj(a)...................... 20,000 232,170
Metso Oyj............................ 2,000 24,156
Pohjola Insurance Group -- B
Shares............................. 1,203 42,691
Sonera Oyj........................... 100,000 4,577,263
Stora Enso Oyj -- R Shares........... 6,500 59,504
-----------
4,935,784
-----------
FRANCE -- 11.5%
Alcatel.............................. 1,750 115,246
Banque Nationale de Paris............ 1,189 114,888
Bongrain SA.......................... 173 45,572
Cie Francaise d'Etudes et de
Construction (Technic SA).......... 35,000 4,250,863
Cyberdeck(a)......................... 552,000 3,730,445
Groupe Bull(a)....................... 199,200 1,752,929
Groupe Danone........................ 594 79,147
Imerys............................... 30,000 3,496,933
Net2S(a)............................. 50,285 1,012,256
NetValue(a).......................... 10,700 182,880
Sagem SA -- Preferred................ 7,000 5,019,172
Scor SA.............................. 2,248 98,285
Societe Generale..................... 1,920 115,951
TotalFinaElf -- B Shares............. 50,000 7,697,470
Trader.com NV(a)..................... 33,300 478,815
-----------
28,190,852
-----------
GERMANY -- 8.9%
ACG AG(a)............................ 12,000 2,588,190
Adidas-Salomon AG.................... 900 49,866
Brainpool TV AG(a)................... 5,000 428,968
DaimlerChrysler AG................... 1,708 89,968
Dyckerhoff AG........................ 2,250 57,199
Dyckerhoff AG -- Preferred........... 750 19,052
Fresenius AG -- Preferred............ 320 73,313
Medion AG............................ 35,000 3,522,815
Merck KGaA........................... 3,279 99,954
Microlog Logistics AG(a)............. 27,500 1,626,486
Pironet AG(a)........................ 25,000 395,418
ProSieben Media AG................... 50,000 6,278,758
SGL Carbon AG(a)..................... 33,000 2,204,851
Software AG.......................... 38,900 3,598,399
Zapf Creaton AG...................... 12,000 724,693
-----------
21,757,930
-----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
GREECE -- 2.6%
Folli-Follie S.A..................... 50,000 $ 1,105,520
Germanos S.A......................... 100,000 2,956,589
Hellenic Telecommunications
Organization S.A. ADR.............. 7,700 93,844
Panafon Hellenic Telecom S.A......... 200,000 2,282,179
-----------
6,438,132
-----------
HUNGARY -- 0.0%
Magyar Tavkozlesi Rt................. 6,200 43,310
-----------
IRELAND -- 0.2%
Bank of Ireland...................... 16,100 101,474
Parthus Technologies plc(a).......... 174,000 491,276
-----------
592,750
-----------
ISRAEL -- 0.7%
Oridion Systems Ltd.(a).............. 60,000 1,590,342
-----------
ITALY -- 9.4%
Banca Popolare di Milano............. 9,000 65,136
Ferretti SpA(a)...................... 500,000 1,313,267
Industrie Natuzzi SpA Sponsored
ADR................................ 250,000 2,968,750
Luxottica Group SpA.................. 320,000 3,900,000
Saipem SpA........................... 2,500,000 14,858,130
-----------
23,105,283
-----------
NETHERLANDS -- 26.3%
AKZO Nobel NV........................ 1,822 77,721
Buhrmann NV.......................... 340,000 9,761,312
Free Record Shop Holding NV.......... 58,776 1,493,064
Fugro NV............................. 181,350 10,386,947
Hagemeyer NV......................... 257,239 7,121,417
IFCO Systems NV(a)................... 75,000 2,005,847
IHC Caland NV........................ 41,000 2,004,410
Koninklije (Royal) Philips
Electronics NV..................... 3,064 145,094
Koninklijke Numico NV................ 80,860 3,852,322
KPN NV............................... 1,200 53,892
Scala Business Solutions NV(a)....... 341,750 1,228,492
SNT Group NV(a)...................... 20,000 705,521
Vedior NV............................ 708,495 8,795,064
VersaTel Telecom International
NV(a).............................. 400,000 16,871,166
-----------
64,502,269
-----------
NORWAY -- 2.7%
Bergesen d.y. ASA -- B Shares........ 2,820 54,272
EniTel ASA(a)........................ 126,090 4,912,333
Smedvig ASA -- A Shares.............. 9,050 164,113
Tandberg Television ASA(a)........... 250,000 1,447,799
-----------
6,578,517
-----------
PORTUGAL -- 0.0%
Portugal Telecom S.A................. 2,650 29,873
Portugal Telecom S.A. Sponsored
ADR................................ 5,000 56,250
-----------
86,123
-----------
</TABLE>
<PAGE> 189
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
--------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
--------------------------------------------------------------
<S> <C> <C>
SPAIN -- 9.5%
Altadis, SA......................... 750,000 $ 11,567,773
Telefonica S.A. Sponsored ADR(a).... 1,658 106,216
Telepizza, S.A.(a).................. 2,031,000 11,486,676
------------
23,160,665
------------
SWEDEN -- 3.9%
AssiDoman AB........................ 1,326 18,974
Electrolux AB....................... 5,065 78,827
Enea Data AB........................ 154,000 1,053,505
Nordic Baltic Holding (NBH) AB(a)... 17,802 130,389
Skanska AB.......................... 125,000 4,453,737
Tele1 Europe Holding AB(a).......... 300,000 3,694,107
------------
9,429,539
------------
SWITZERLAND -- 4.5%
Charles Voegele Holding AG.......... 7,000 1,381,864
Cie Financiere Richemont AG......... 12 32,434
Highlight Communications AG(a)...... 125,250 3,601,898
Holderbank Financiere Glaris AG..... 46 56,578
Nestle AG Registered................ 15 30,119
Novartis AG Registered.............. 88 139,842
Pargesa Holding AG -- B Shares...... 18 41,179
Selecta Group....................... 4,565 1,420,540
Sulzer AG -- Registered(a).......... 119 79,403
Swatch Group, (The) AG.............. 33 42,091
UBS AG -- Registered................ 650 95,537
Unaxis Holding AG(a)................ 15,000 4,086,553
------------
11,008,038
------------
UNITED KINGDOM -- 8.2%
Allied Zurich plc................... 7,000 82,606
Barclay's Bank -- Ordinary......... 3,825 94,967
Bass plc............................ 3,900 43,632
British Airways plc................. 12,000 69,079
British American Tobacco plc........ 242,163 1,620,419
British Telecommunications plc...... 231,491 2,992,879
Cadbury Schweppes plc............... 10,480 68,897
Diageo plc.......................... 8,250 73,877
Hanson plc.......................... 13,050 92,954
Jarvis Hotels plc................... 30,468 48,893
NDS Group plc(a).................... 35,000 2,135,000
Next plc............................ 8,840 77,688
PowerGen plc........................ 10,300 88,569
Rentokil Initial plc................ 1,500,000 3,411,952
Rolls-Royce plc..................... 16,000 57,225
Royal & Sun Alliance Insurance Group
plc............................... 14,300 92,494
Shell Transport & Trading Co. plc... 11,422 96,142
Stagecoach Holdings plc............. 3,500,000 3,921,001
Standard Chartered plc.............. 4,270 53,105
Vodafone AirTouch plc............... 1,250,000 5,071,565
------------
20,192,944
------------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
NORTH AMERICA -- 4.1%
-----------------------------------
UNITED STATES -- 4.1%
Global TeleSystems Group, Inc.(a)... 400,000 $ 4,825,000
MIH Ltd.(a)......................... 150,000 4,504,687
OpenTV Corporation(a)............... 5,000 222,872
Riverdeep Group plc Sponsored
ADR(a)............................ 24,000 465,000
------------
10,017,559
------------
<CAPTION>
PRINCIPAL
---------
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS -- 0.5%
-----------------------------------
NETHERLANDS -- 0.5%
VersaTel Telecom International NV,
4.00%, 12/17/2004................. $ 630,000 702,047
VersaTel Telecom International NV,
4.00%, 3/30/2005.................. 560,000 503,259
------------
1,205,306
------------
TOTAL INVESTMENTS -- 98.3%
(Cost -- $237,280,170)(b)......... 240,845,289
OTHER ASSETS, LESS
LIABILITIES -- 1.7%............... 4,168,269
------------
NET ASSETS -- 100%.................. $245,013,558
============
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation.............. $ 29,641,725
Gross unrealized depreciation.............. (26,076,606)
------------
Net unrealized appreciation............ $ 3,565,119
============
Purchases and sales of securities other than short-term
obligations aggregated $277,601,515 and $71,828,950,
respectively, for the period ended June 30, 2000.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 190
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $237,280,170)..... $240,845,289
Cash........................................................ 1,936,276
Receivables
Investments sold.......................................... 5,033,732
Fund shares sold.......................................... 1,520,977
Dividends and interest.................................... 897,749
Other assets................................................ 39,210
------------
Total assets............................................ 250,273,233
------------
LIABILITIES
Payables
Investments purchased..................................... 4,803,776
Fund shares repurchased................................... 101,453
Management fee............................................ 190,515
12b-1 service and distribution fees....................... 28,886
Other payables to related parties......................... 58,184
Accrued expenses............................................ 76,861
------------
Total liabilities....................................... 5,259,675
------------
NET ASSETS.................................................. $245,013,558
============
CLASS A
Net asset value and redemption price per share
($75,635,423/3,249,743 shares outstanding)................ $ 23.27
============
Maximum offering price per share ($23.27 X 100/94.25)*...... $ 24.69
============
CLASS B
Net asset value, offering price and redemption price** per
share ($65,473,656/2,824,253 shares outstanding).......... $ 23.18
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($72,377,428/3,120,440 shares outstanding).......... $ 23.19
============
CLASS I
Net asset value, offering price and redemption price per
share ($14,417/615 shares outstanding).................... $ 23.44
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($31,512,634/1,344,430 shares outstanding).......... $ 23.44
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $227,295,695
Undistributed net realized gain on investments and foreign
currency transactions................................... 13,703,861
Undistributed net investment income....................... 179,070
Net unrealized appreciation on investments and foreign
currency transactions................................... 3,834,932
------------
NET ASSETS.................................................. $245,013,558
============
</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> 191
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
--------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $189,562 foreign taxes withheld......... $ 1,637,189
Interest.................................................. 287,395
-----------
1,924,584
-----------
EXPENSES
Management fee............................................ $828,116
Transfer agent............................................ 120,288
Administrative services fee............................... 82,808
Custodian fees............................................ 87,509
Blue Sky fees............................................. 19,321
Auditing and accounting fees.............................. 9,910
Shareholder reports....................................... 6,347
Amortization of deferred offering costs................... 19,361
Fund accounting........................................... 45,347
Trustees' fees............................................ 3,732
12b-1 service and distribution fees....................... 516,421
Legal..................................................... 17,998
Other..................................................... 2,868
-----------
Net expenses.......................................... 1,760,026
-----------
NET INVESTMENT INCOME....................................... 164,558
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 13,703,861
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 380,546
-----------
Net gain on investment transactions................... 14,084,407
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $14,248,965
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 192
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 3, 1999
MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
2000 1999
------------ ---------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss).............................. $ 164,558 $ (8,369)
Net realized gain on investments and foreign currency
transactions............................................ 13,703,861 1,182,131
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 380,546 3,344,443
------------ -----------
Net increase resulting from operations................ 14,248,965 4,518,205
------------ -----------
Class A distributions
Dividends from net investment income...................... -- (9,491)
Distributions from capital gain........................... -- (261,490)
------------ -----------
Total distributions to Class A shareholders........... -- (270,981)
------------ -----------
Class B distributions
Dividends from net investment income...................... -- (658)
Distributions from capital gain........................... -- (203,781)
------------ -----------
Total distributions to Class B shareholders........... -- (204,439)
------------ -----------
Class C distributions
Dividends from net investment income...................... -- (3,087)
Distributions from capital gain........................... -- (152,341)
------------ -----------
Total distributions to Class C shareholders........... -- (155,428)
------------ -----------
Class I distributions
Dividends from net investment income...................... -- --
Distributions from capital gain........................... -- (9)
------------ -----------
Total distributions to Class I shareholders........... -- (9)
------------ -----------
Advisor Class distributions
Dividends from net investment income...................... -- (5,049)
Distributions from capital gain........................... -- (558,976)
------------ -----------
Total distributions to Advisor Class shareholders..... -- (564,025)
------------ -----------
Fund share transactions (Note 5)
Class A................................................... 55,135,046 12,671,199
Class B................................................... 57,362,395 5,297,153
Class C................................................... 61,102,110 7,546,989
Class I................................................... 15,990 0
Advisor Class............................................. 23,994,796 4,315,592
------------ -----------
Net increase resulting from Fund share transactions... 197,610,337 29,830,933
------------ -----------
TOTAL INCREASE IN NET ASSETS................................ 211,859,302 33,154,256
NET ASSETS
Beginning of period....................................... 33,154,256 0
------------ -----------
END OF PERIOD............................................. $245,013,558 $33,154,256
============ ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 179,070 $ 14,512
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 193
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
for the six for the period
months ended May 4, 1999
June 30, (commencement)
CLASS A (unaudited) to December 31,
---------------------------------------------------------------------------------------------
2000 1999
SELECTED PER SHARE DATA -------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 17.13 $ 10.01
-------------------------------
Income from investment operations
Net investment income..................................... .06(a) --(b)
Net gain on securities (both realized and unrealized)..... 6.08 16.35
-------------------------------
Total from investment operations.......................... 6.14 16.35
-------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .01
Distributions from capital gain........................... -- 9.22
-------------------------------
Total distributions..................................... -- 9.23
-------------------------------
Net asset value, end of period.............................. $ 23.27 $ 17.13
===============================
Total return(%)(c).......................................... 35.84 215.58
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $75,635 $13,932
Ratio of expenses to average net assets(%)(d)
With expense reimbursement(%)............................. -- 2.22
Without expense reimbursement(%).......................... 1.75 6.10
Ratio of net investment income (loss) to average net
assets(%)(d).............................................. .58 (.15)(b)
Portfolio turnover rate(%).................................. 48 108
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
for the six for the period
months ended May 24, 1999
June 30, (commencement)
CLASS B (unaudited) to December 31,
---------------------------------------------------------------------------------------------
2000 1999
SELECTED PER SHARE DATA -------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 17.13 $ 10.21
-------------------------------
Income from investment operations
Net investment loss....................................... (.02)(a) (.01)(b)
Net gain on securities (both realized and unrealized)..... 6.07 16.15
-------------------------------
Total from investment operations.......................... 6.05 16.14
-------------------------------
Less distributions
Dividends in excess of net investment income.............. -- --
Distributions from capital gain........................... -- 9.22
-------------------------------
Total distributions..................................... -- 9.22
-------------------------------
Net asset value, end of period.............................. $ 23.18 $ 17.13
===============================
Total return(%)(c).......................................... 35.32 209.41
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $65,474 $ 5,900
Ratio of expenses to average net assets(%)(d)
With expense reimbursement(%)............................. -- 2.96
Without expense reimbursement(%).......................... 2.52 6.84
Ratio of net investment loss to average net assets(%)(d).... (.19) (.89)(b)
Portfolio turnover rate(%).................................. 48 108
</TABLE>
The accompanying notes are an integral part of the financial statement.
<PAGE> 194
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
for the six for the period
months ended October 24, 1999
June 30, (commencement)
CLASS C (unaudited) to December 31,
----------------------------------------------------------------------------------------------
2000 1999
SELECTED PER SHARE DATA --------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 17.13 $ 11.57
--------------------------------
Income from investment operations
Net investment loss....................................... (.02)(a) (.01)(b)
Net gain on securities (both realized and unrealized)..... 6.08 6.00
--------------------------------
Total from investment operations.......................... 6.06 5.99
--------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .01
Distributions from capital gain........................... -- .42
--------------------------------
Total distributions..................................... -- .43
--------------------------------
Net asset value, end of period.............................. $ 23.19 $ 17.13
================================
Total return(%)(c).......................................... 35.38 51.80
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $72,377 $ 8,076
Ratio of expenses to average net assets(%)(d)
With expense reimbursement(%)............................. -- 2.96
Without expense reimbursement(%).......................... 2.51 6.84
Ratio of net investment loss to average net assets (%)(d)... (.18) (.89)(b)
Portfolio turnover rate(%).................................. 48 108
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
for the period
March 16, 2000
(commencement)
to June 30,
CLASS I (unaudited)
----------------------------------------------------------------------------
2000
SELECTED PER SHARE DATA --------------
<S> <C>
Net asset value, beginning of period........................ $ 26.00
--------------
Loss from investment operations
Net investment income..................................... .06(a)
Net loss on securities (both realized and unrealized)..... (2.62)
--------------
Total from investment operations.......................... (2.56)
--------------
Net asset value, end of period.............................. $ 23.44
==============
Total return(%)(c).......................................... (9.85)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 14
Ratio of expenses to average net assets(%)(d)............... 1.46
Ratio of net investment income to average net
assets(%)(d).............................................. .86
Portfolio turnover rate(%).................................. 48
</TABLE>
The accompanying notes are an integral part of the financial statement.
<PAGE> 195
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
for the six for the period
months ended May 3, 1999
June 30, (commencement)
ADVISOR CLASS (unaudited) to December 31,
---------------------------------------------------------------------------------------------
2000 1999
SELECTED PER SHARE DATA -------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 17.23 $ 10.01
-------------------------------
Income from investment operations
Net investment income..................................... .09(a) --(b)
Net gain on securities (both realized and unrealized)..... 6.12 16.46
-------------------------------
Total from investment operations.......................... 6.21 16.46
-------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .02
Distributions from capital gain........................... -- 9.22
-------------------------------
Total distributions..................................... -- 9.24
-------------------------------
Net asset value, end of period.............................. $ 23.44 $ 17.23
===============================
Total return(%)(c).......................................... 36.04 217.16
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $31,513 $ 5,246
Ratio of expenses to average net assets(%)(d)
With expense reimbursement(%)............................. -- 1.93
Without expense reimbursement(%).......................... 1.48 5.81
Ratio of net investment income to average net
assets(%)(d).............................................. .84 .14(b)
Portfolio turnover rate(%).................................. 48 108
</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> 196
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy European Opportunities Fund (the "Fund"), is a diversified series of shares
of Ivy Fund. The Fund was initially seeded on April 26, 1999, commenced
operations on May 3, 1999 and received initial subscriptions beginning May 3,
1999. Performance is calculated beginning May 5, 1999, the date proceeds from
share sales were invested according to the Fund's investment objectives. 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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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,
2000, the interest rate was 6.0%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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
capital gain, if any, are normally declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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 were amortized over a one year period
which began May 3, 1999, the date the Fund commenced operations.
RECLASSIFICATIONS -- The timing and characterization of certain income and
capital gain distributions are determined annually in accordance with Federal
tax regulations
<PAGE> 197
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
--------------------------------------------------------------------------------
12
which may differ from generally accepted accounting principles. These
differences primarily relate to foreign denominated securities, passive foreign
investment companies and non-deductible deferred offering costs. 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 average net assets. Henderson Investment Management Limited is the
sub-advisor of the fund. IMI, not the Fund, is obligated to compensate the Sub-
advisor.
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, 2000, the net amount of underwriting
discount retained by IMDI was $251,986.
Under Service and Distribution Plans, the Fund reimburses IMDI for service fee
payments made to brokers at an annual rate of .25% of its average net assets,
excluding Class I and Advisor Class. Class B and Class C shares are also subject
to an ongoing distribution fee at an annual rate of .75% of the average net
assets attributable to Class B and Class C. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of
$67,665, $193,384 and $255,372 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 $37,954, $30,898, $38,027, $8 and $13,401 for Class A, Class B,
Class C, Class I 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 June 27, 2000, the shareholders of Ivy Pan-Europe 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 Pan-Europe Fund. On June 27, 2000, the date of the consummation of
the Reorganization, the Fund acquired all or substantially all of the assets of
Ivy Pan-Europe Fund. The transaction was structured for tax purposes to qualify
as a tax-free reorganization under the Code.
Ivy Pan-Europe Fund shareholders contributed net assets having an aggregate
value of $4,637,762 (including $109,943 of unrealized appreciation). Upon
completion of the merger, the combined net assets were $240,692,178.
5. 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
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
-----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 4,115,320 $ 93,993,358 848,535 $13,288,709
Issued on reinvestment
of distributions...... -- -- 9,961 167,529
Repurchased............ (1,742,928) (40,337,103) (45,071) (785,039)
Issued on acquisition
of Ivy Pan-Europe
Fund.................. 63,926 1,478,791 -- --
---------- ------------ ------- -----------
Net increase........... 2,436,318 $ 55,135,046 813,425 $12,671,199
========== ============ ======= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 24, 1999
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
-----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 2,462,814 $ 56,954,396 340,876 $ 5,238,984
Issued on reinvestment
of distributions...... -- -- 4,266 69,748
Repurchased............ (86,772) (1,982,957) (686) (11,579)
Issued on acquisition
of Ivy Pan-Europe
Fund.................. 103,755 2,390,956 -- --
---------- ------------ ------- -----------
Net increase........... 2,479,797 $ 57,362,395 344,456 $ 5,297,153
========== ============ ======= ===========
</TABLE>
<PAGE> 198
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
13
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 24, 1999
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
-----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 2,838,468 $ 65,429,986 465,614 $ 7,449,188
Issued on reinvestment
of distributions...... -- -- 7,527 127,207
Repurchased............ (204,453) (4,678,246) (1,754) (29,406)
Issued on acquisition
of Ivy Pan-Europe
Fund.................. 15,038 350,370 -- --
---------- ------------ ------- -----------
Net increase........... 2,649,053 $ 61,102,110 471,387 $ 7,546,989
========== ============ ======= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 4, 1999
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
-----------------------------------------------------------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 615 $ 15,990 1 $ 10
Issued on reinvestment
of distributions...... -- -- 1 9
Repurchased............ -- -- (2) (19)
---------- ------------ ------- -----------
Net change............. 615 $ 15,990 -- $ --
========== ============ ======= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1999
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
-----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................... 1,217,424 $ 28,458,832 262,585 $ 3,838,799
Issued on reinvestment
of distributions...... -- -- 42,286 481,911
Repurchased............ (195,674) (4,881,681) (306) (5,118)
Issued on acquisition
of Ivy Pan-Europe
Fund.................. 18,115 417,645 -- --
---------- ------------ ------- -----------
Net increase........... 1,039,865 $ 23,994,796 304,565 $ 4,315,592
========== ============ ======= ===========
</TABLE>
<PAGE> 199
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
14
<PAGE> 200
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
15
<PAGE> 201
03IEOF063000
<PAGE> 202
[IVY LOGO]
IVY INTERNATIONAL STRATEGIC BOND FUND
MARKET PERSPECTIVE
[PHOTO]
The Fund's goal: to provide a high level of total return, and secondarily
current income, by investing in the debt securities of issuers in any nation.
An interview with Richard Gluck, Senior Vice President at Ivy Management, Inc.
As head of the firm's fixed-income team, Mr. Gluck is also portfolio manager of
Ivy International Strategic Bond Fund.
Q: RICHARD, CAN YOU COMMENT ON THE PERFORMANCE OF THE INTERNATIONAL BOND MARKETS
IN THE FIRST HALF OF 2000?
A: Emerging markets, which are up 6.4% in total return, were the star performers
this year. Brazil, South Africa, Bulgaria and Mexico have all performed well.
But in the developed world, performance, in US dollar terms, has been weak.
Excluding the US, developed markets are down 3% year-to-date. This was mostly
due to currency changes. For example, the euro was down about 6% against the US
dollar for most of the year. The yen, the British pound and the Canadian dollar
have also suffered as a result of the strong dollar.
In local terms, the bond markets in the developed world have done reasonably
well. The countries that are further along in their growth cycles have realized
better bond performance. This is probably due to the fact that their central
banks have been raising interest rates for some time and are nearing the end of
their tightening cycles. In Europe, bond markets have been up 2% to 3%, with
both Sweden and the United Kingdom doing particularly well. Australia and Canada
have also seen good bond performance. Unfortunately, currency issues caused
these countries to underperform in US dollar terms.
Q: HOW DID THIS AFFECT THE FUND?
A: During the first half of the year, the Fund benefited from its low exposure
to foreign currency. The Fund also benefited from its holdings in emerging
markets, despite a sell-off in April and May that temporarily hurt performance.
The Fund was also significantly impacted by poor performance in the US
high-yield and investment-grade corporate bond markets.
Q: WHAT INTERNATIONAL DEVELOPMENTS ARE YOU EXCITED ABOUT, AND HOW DID YOU
POSITION THE FUND TO BENEFIT FROM THEM?
A: We're very positive on Mexico, and the Fund benefited by its overweighting in
that country. Mexico is the first emerging market country to graduate to
investment-grade status. There have been major structural improvements in Mexico
-- a recapitalization of the banking system, a floating exchange rate and a much
sounder debt structure. In addition, the outcome of the recent election -- which
ended 70 years of one-party rule -- bodes well for Mexico's future political and
economic growth.
We are also positive on Brazil, where the Fund currently has 10% of its
holdings. Brazil, in our opinion, has greatly benefited from the devaluation of
its currency,
<PAGE> 203
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IVY INTERNATIONAL STRATEGIC BOND FUND
the real. The devaluation has revived the Brazilian economy and allowed the
Brazilian government to lower interest rates. Brazil also now has extremely low
inflation.
Turkey is another favorite in which the Fund invests. Turkey's performance has
been catalyzed by its recent full candidacy for European Union membership. With
possible EU membership, cheap labor and a strategic location on its side, we
believe that Turkey may be the Mexico story of the early 21st century.
In the US, where the Fund has 15.2% of its assets, interest rates were a big
issue. When the Federal Reserve Board met at the end of June, it did exactly
what the market expected it to do: it announced no change in rates but gave a
statement that it would be vigilant in its effort to prevent inflation from
increasing. What matters now is the economic data that we receive. Measures have
shown that the economy is slowing, but we think the Federal Reserve may continue
its tightening policy of raising rates, at least in the short term.
We also reacted to some negative international developments this year. Although
Poland looked sound at the beginning of the year, we eliminated the Fund's
Polish holdings because of a political crisis, a potential downdraft in its
currency and a large imbalance of debt payments. We also reduced the Fund's
holdings in the Philippines due to poor performance by that country.
Q: HOW DOES YOUR INVESTMENT PROCESS HELP YOU TARGET OPPORTUNITIES IN
INTERNATIONAL MARKETS?
A: The Fund's style is "relative value." Our goal is to buy bonds from companies
and governments around the world with strong fundamentals and solid or improving
creditworthiness, but to do so inexpensively. When selecting securities, we
begin with market analysis to identify potential securities to buy or sell. Then
we move to country, security and currency analysis.
Our country analysis examines four different areas. First, we look at the
markets -- what they tell us about the fundamental value of a country, and how
they compare with other countries. Second, we look at prevailing economic
conditions. Third, we look at monetary and fiscal policy, paying careful
attention to government proposals and whether or not the government in question
has the ability to execute them. Lastly, we look at the political environment,
which can often be an important factor.
For security analysis, we study the bond relative to its peer group, industry
group and credit-rating group to determine if the price is reasonable. Then we
investigate the credit quality, based on the fundamental characteristics of the
company issuing the bond: its financial condition, business strategy, and
management, taking international conditions into account.
Finally, we do strategic currency management. We don't take big risks in the
currency markets because we find that they rarely pay off. We look at short- and
long-term trends, valuations, how monetary policy affects the currency and
again, prevailing economic conditions.
This process allows us to seek out international opportunities and decide
whether or not they are right for the Fund. To minimize risk, we keep the
portfolio diversified among high-quality government bonds, investment-grade
corporate bonds, high-yield corporate bonds, emerging market sovereign debt and
local emerging market bonds.
Q: WHAT IS YOUR LONG-TERM OUTLOOK FOR THE INTERNATIONAL BOND MARKETS?
A: Our outlook for international bond investing is very bright. If governments
shrink their budget deficits and even go into surplus, we can expect to see more
corporate and other non-government bond issuance, which should lead to greater
opportunities for bond investors. Realizing good investment performance,
however, will depend on selecting the best countries and companies in which to
invest.
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
This report is intended to be presented as a complete and integrated document.
This report and any excerpt of this report may not be copied or reprinted
without first obtaining the written permission of Ivy Funds.
"OUR GOAL IS
TO BUY BONDS FROM
COMPANIES AND
GOVERNMENTS
AROUND THE WORLD
WITH STRONG FUNDA-
MENTALS AND SOLID
OR IMPROVING
CREDITWORTHINESS,
BUT TO DO SO
INEXPENSIVELY."
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
JUNE 30, 2000
BOARD OF TRUSTEES
John S. Anderegg, Jr.
James W. Broadfoot
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Dianne Lister
Roy J. Glauber
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
Edward M. Tighe
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, Suite 300
Boca Raton, Florida 33432-6139
800.456.5111
www.ivyfunds.com
E-mail: [email protected]
[IVY MACKENZIE LOGO]
2
<PAGE> 204
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--------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------
CORPORATE BONDS -- 31.7% PRINCIPAL VALUE
----------------------------------------------------------------
<S> <C> <C>
BRAZIL -- 1.4%
Espirito Santo Centrais Eletricas S.A.
(ESCELSA), 10%, 07/15/07(a).......... $20,000 $ 15,600
-----------
CANADA -- 4.6%
Nova Scotia Power Corp., 7.7%,
10/15/03............................. 75,000 52,502
-----------
MEXICO -- 4.7%
Alestra S.A., 12.125%, 05/15/06(a)..... 25,000 23,438
Grupo Industrial Durango S.A. (GIDUSA),
12.625%, 08/01/03(a)................. 30,000 30,075
-----------
53,513
-----------
POLAND -- 2.0%
Telekomunikacja Polska S.A. Finance BV
(TPSA) 144A, 7.75%, 12/10/08......... 25,000 23,031
-----------
UNITED KINGDOM -- 3.8%
NTL Communications Corp., 9.25%,
11/15/06(a).......................... 30,000 25,882
RSL Communications, 10.50%,
11/15/08(a).......................... 25,000 17,250
-----------
43,132
-----------
UNITED STATES -- 15.2%
K-Mart Corporation, 8.375%, 12/01/04... 25,000 23,874
McCaw International Ltd., 13.0%,
04/15/07 (a)......................... 20,000 15,200
R & B Falcon Corp., 9.5%,
12/15/08(a).......................... 25,000 25,125
Spieker Properties, 7.35%, 12/01/17.... 25,000 21,719
TE Products Pipeline Co., 7.51%,
01/15/28............................. 25,000 22,656
Terex Corp., 8.875%, 04/01/08 (a)...... 25,000 22,500
Tommy Hilfiger USA, 6.50%, 06/01/03.... 25,000 19,063
Watson Pharmaceuticals, 7.125%,
05/15/08............................. 25,000 22,313
-----------
172,450
-----------
TOTAL CORPORATE BONDS
(Cost -- $386,518)..................... 360,228
-----------
GOVERNMENT OBLIGATIONS -- 53.7%
--------------------------------------
BRAZIL -- 8.0%
Federative Republic of Brazil, 12.75%,
01/15/20(a).......................... 50,000 47,688
Republic of Brazil, 6.86% FRN,
04/15/06(a).......................... 50,000 42,489
-----------
90,177
-----------
CANADA -- 8.8%
Province of Manitoba, 7.5%, 02/22/10... 50,000 50,687
Province of Ontario, 4.875%,
06/02/04............................. 75,000 48,371
-----------
99,058
-----------
</TABLE>
<TABLE>
----------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------
GOVERNMENT OBLIGATIONS PRINCIPAL VALUE
<S> <C> <C>
ITALY -- 4.6%
Italy Buoni Poliennali Del Tesoro,
4.25%, 11/01/09...................... $60,000 $ 52,180
-----------
MALAYSIA -- 4.5%
Malaysia Government Bond, 8.75%,
06/01/09............................. 50,000 51,375
-----------
MEXICO -- 5.1%
Mexican Government Cetes, 0.00%,
09/07/00............................. 100,000 9,893
United Mexican States, 11.50%,
05/15/26(a).......................... 40,000 48,100
-----------
57,993
-----------
NEW ZEALAND -- 2.1%
New Zealand Government, 7.00%,
07/15/09............................. 50,000 23,898
-----------
QATAR -- 2.2%
State Of Qatar 144A, 9.75%, 06/15/30... 25,000 24,656
-----------
SINGAPORE -- 5.2%
Singapore Government, 4.375%,
10/15/05............................. 100,000 58,503
-----------
SOUTH AFRICA -- 2.5%
Republic of South Africa, 12%,
02/28/05............................. 200,000 27,862
-----------
SOUTH KOREA -- 4.6%
Republic of Korea, 8.875%, 04/15/08.... 50,000 51,813
-----------
SUPRANATIONAL -- 3.8%
European Investment Bank, 4.00%,
04/15/09............................. 50,000 42,467
-----------
TURKEY -- 2.3%
Republic of Turkey, 12%, 12/15/08(a)... 25,000 26,156
-----------
TOTAL GOVERNMENT OBLIGATIONS
(Cost -- $619,601)................... 606,138
-----------
TOTAL INVESTMENTS -- 85.4%
(Cost -- $1,006,119)(b).............. 966,366
OTHER ASSETS, LESS
LIABILITIES -- 14.6%................. 165,222
-----------
NET ASSETS -- 100%..................... $ 1,131,588
===========
(a) Below investment grade security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At June 30, 2000, net unrealized depreciation based on cost for
financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation................. $ 9,771
Gross unrealized depreciation................. (49,524)
-----------
Net unrealized depreciation............... $ (39,753)
===========
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $464,736 and
$595,316, respectively, for the period ended June 30, 2000.
</TABLE>
Forward foreign currency exchange contracts at June 30, 2000 were:
<TABLE>
<CAPTION>
CONTRACTS TO SELL
----------------------------------- UNREALIZED
CURRENCY EXPIRATION LOCAL VALUE IN EXCHANGE APPRECIATION
SOLD DATE CURRENCY IN U.S.$ FOR U.S.$ (DEPRECIATION)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New Zealand Dollar August 25, 2000 51,000 $23,567 $ 24,013 $ (446)
Singapore Dollar August 02, 2000 101,000 59,685 58,622 1,063
South African Rand July 18, 2000 192,546 29,028 28,358 670
------
Net unrealized loss on forward foreign currency exchange contracts $1,287
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 205
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IVY INTERNATIONAL STRATEGIC BOND FUND
--------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $1,006,119)....... $ 966,366
Cash........................................................ 184,078
Receivables
Interest.................................................. 18,288
Manager for expense reimbursement......................... 12,963
Unrealized appreciation on open forward foreign currency
contracts................................................. 1,733
Other assets................................................ 21,756
----------
Total assets............................................ 1,205,184
----------
LIABILITIES
Payables
Management fee............................................ 655
Other payables to related parties......................... 53,415
Unrealized depreciation on open forward foreign currency
contracts................................................. 446
Accrued expenses............................................ 19,080
----------
Total liabilities....................................... 73,596
----------
NET ASSETS.................................................. $1,131,588
==========
CLASS A
Net asset value and redemption price per share
($108,701/11,636 shares outstanding)...................... $ 9.34
==========
Maximum offering price per share ($9.34 X 100/95.25)*....... $ 9.81
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($1,022,887/108,575 shares outstanding)............. $ 9.42
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,164,821
Accumulated net realized loss on investments and foreign
currency transactions................................... (33,606)
Undistributed net investment income....................... 38,866
Net unrealized depreciation on investments and foreign
currency transactions................................... (38,493)
----------
NET ASSETS.................................................. $1,131,588
==========
</TABLE>
* On sales of more than $100,000 the offering price is reduced.
The accompanying notes are an integral part of the financial statements.
<PAGE> 206
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 56,631
---------
EXPENSES
Management fee............................................ $ 4,816
Transfer agent............................................ 371
Administrative services fee............................... 642
Custodian fees............................................ 15,642
Blue Sky fees............................................. 13,891
Auditing and accounting fees.............................. 9,463
Shareholder reports....................................... 553
Amortization of deferred offering costs................... 18,234
Fund accounting........................................... 8,857
Trustees' fees............................................ 2,575
12b-1 service and distribution fees....................... 32
Legal..................................................... 13,827
Other..................................................... 1,638
---------
90,541
Expenses reimbursed by Manager............................ (82,479)
---------
Net expenses.......................................... 8,062
---------
NET INVESTMENT INCOME....................................... 48,569
---------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (33,606)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... (26,223)
---------
Net loss on investment transactions................... (59,829)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (11,260)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 207
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IVY INTERNATIONAL STRATEGIC BOND FUND
--------------------------------------------------------------------------------
6
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MAY 3, 1999
MONTHS ENDED (COMMENCEMENT)
JUNE 30, TO DECEMBER 31,
------------ ---------------
2000 1999
------------ ---------------
(UNAUDITED)
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 48,569 $ 48,014
Net realized (loss) gain on investments and foreign
currency transactions................................... (33,606) 5,339
Net change in unrealized depreciation on investments and
foreign currency transactions........................... (26,223) (12,270)
---------- ----------
Net (decrease) increase resulting from operations..... (11,260) 41,083
---------- ----------
Class A distributions
Dividends
From net investment income.............................. (1,397) (121)
In excess of net investment income...................... (199) --
---------- ----------
Total distributions to Class A shareholders........... (1,596) (121)
---------- ----------
Advisor Class distributions
Dividends
From net investment income.............................. (47,172) (47,893)
In excess of net investment income...................... -- (2,141)
---------- ----------
Total distributions to Advisor Class shareholders..... (47,172) (50,034)
---------- ----------
Fund share transactions (Note 4)
Class A................................................... 102,955 6,059
Advisor Class............................................. (308,334) 1,400,008
---------- ----------
Net (decrease) increase resulting from Fund share
transactions......................................... (205,379) 1,406,067
---------- ----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (265,407) 1,396,995
NET ASSETS
Beginning of period....................................... 1,396,995 --
---------- ----------
END OF PERIOD............................................. $1,131,588 $1,396,995
========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 38,866 $ 39,064
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 208
7
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
for the six for the period
months ended October 19, 1999
June 30, (commencement)
CLASS A (unaudited) to December 31,
--------------------------------------------------------------------------------------------------
2000 1999
SELECTED PER SHARE DATA -----------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.83 $ 9.70
-----------------------------------
(Loss) income from investment operations
Net investment income(a).................................. .33 .85
Net loss on securities (both realized and unrealized)..... (.49) (.56)
-----------------------------------
Total from investment operations.......................... (.16) .29
-----------------------------------
Less distributions
Dividends
From net investment income.............................. .29 .16
In excess of net investment income...................... .04 --
-----------------------------------
Total distributions..................................... .33 .16
-----------------------------------
Net asset value, end of period.............................. $ 9.34 $ 9.83
===================================
Total return(%)(b).......................................... (1.66) 3.04
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 109 $ 7
Ratio of expenses to average net assets(c)
With expense reimbursement(%)............................. 2.24 1.73
Without expense reimbursement(%).......................... 15.08 13.96
Ratio of net investment income to average net
assets(%)(a)(c)........................................... 6.58 5.71
Portfolio turnover rate(%).................................. 42 3
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
for the six for the period
months ended May 3, 1999
June 30, (commencement)
ADVISOR CLASS (unaudited) to December 31,
-------------------------------------------------------------------------------------------------
2000 1999
SELECTED PER SHARE DATA ----------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.90 $ 10.01
----------------------------------
(Loss) income from investment operations
Net investment income(a).................................. .39 .40
Net loss on securities (both realized and unrealized)..... (.49) (.09)
----------------------------------
Total from investment operations.......................... (.10) .31
----------------------------------
Less distributions
Dividends
From net investment income.............................. .38 .40
In excess of net investment income...................... -- .02
----------------------------------
Total distributions..................................... .38 .42
----------------------------------
Net asset value, end of period.............................. $ 9.42 $ 9.90
==================================
Total return(%)(b).......................................... (.98) 3.19
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 1,023 $ 1,390
Ratio of expenses to average net assets(c)
With expense reimbursement(%)............................. 1.23 1.25
Without expense reimbursement(%).......................... 14.07 13.48
Ratio of net investment income to average net
assets(%)(a)(c)........................................... 7.58 6.19
Portfolio turnover rate(%).................................. 42 3
</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.
<PAGE> 209
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IVY INTERNATIONAL STRATEGIC BOND FUND
--------------------------------------------------------------------------------
8
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy International Strategic Bond Fund (the "Fund"), is a non-diversified series
of shares of Ivy Fund. The Fund was initially seeded on April 26, 1999,
commenced operations on May 3, 1999 and received initial subscriptions beginning
May 3, 1999. Performance is calculated beginning May 12, 1999, the date proceeds
from share sales were invested according to the Fund's investment objectives.
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,
2000, 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 on foreign securities are recorded on the ex date. If such
information is not available on the ex 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,
2000, the interest rate was 6.0%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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 capital gain, if any, are declared in
December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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, 2000. 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
<PAGE> 210
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--------------------------------------------------------------------------------
9
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.
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 were amortized over a one year period
which began 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.
RECLASSIFICATIONS -- The timing and characterization of certain income and net
capital gain distributions are determined annually in accordance with Federal
tax regulations which may differ from generally accepted accounting principles.
These differences primarily relate to foreign denominated securities and
non-deductible organization expenses. As a result, Net investment income 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 .75% of the
Fund's average net assets. Currently, IMI limits the Fund's total operating
expenses (excluding 12b-1 fees and certain other expenses) to an annual rate of
1.25% 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, 2000, MIMI owned 90.3% 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, 2000, the net amount of underwriting
discount retained by IMDI was $760.
Under Service and Distribution Plans, the Fund reimburses IMDI for service fee
payments made to brokers at an annual rate of .25% of its average net assets,
excluding Class I and Advisor Class. Class B and Class C shares are also subject
to an ongoing distribution fee at an annual rate of .75% of the average net
assets attributable to Class B and Class C. IMDI may use such distribution fee
for purposes of advertising and marketing shares of the Fund. Such fees of $32
for Class A shares are reflected as 12 b-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 $101 and $270 for Class A and Advisor Class shares, respectively,
are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
<PAGE> 211
[IVY LEAF LOGO]
--------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
--------------------------------------------------------------------------------
10
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A and Advisor Class were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 9, 1999
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
-----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.......................... 10,723 $ 101,410 50,838 $ 507,150
Issued on reinvestment of
distributions................ 164 1,545 12 121
Repurchased................... -- -- (50,101) (501,212)
------- --------- ------- ----------
Net increase.................. 10,887 $ 102,955 749 $ 6,059
======= ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 9, 1999
SIX MONTHS ENDED (COMMENCEMENT)
JUNE 30, 2000 TO DECEMBER 31,
(UNAUDITED) 1999
-----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.......................... 8,641 $ 85,050 136,460 $1,361,035
Issued on reinvestment of
distributions................ 4,906 47,171 5,070 50,034
Repurchased................... (45,373) (440,555) (1,129) (11,061)
------- --------- ------- ----------
Net (decrease)/increase....... (31,826) $(308,334) 140,401 $1,400,008
======= ========= ======= ==========
</TABLE>
<PAGE> 212
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
11
<PAGE> 213
03IISBF063000
<PAGE> 214
<TABLE>
<CAPTION>
IVY CUNDILL VALUE FUND
Portfolio of Investments
June 30, 2000 (unaudited)
------------------------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES - 98.6% SHARES VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AFRICA - 6.6%
---------------------------------------------
SOUTH AFRICA - 6.6%
De Beers Consolidated Mines Ltd. 2,000 $ 48,625
---------
ASIA/PACIFIC - 63.7%
---------------------------------------------
HONG KONG - 11.7%
China Hong Kong Photo Products Holdings, Ltd. 338,000 42,060
Jardine Matheson Holdings Ltd. 10,000 43,800
---------
85,860
---------
JAPAN - 46.5%
Asahi Broadcasting Corporation 500 44,895
Descente, Ltd. 19,000 36,994
Gakken Co., Ltd.(a) 18,000 37,088
Horipro Inc. 4,000 29,829
Koa Fire & Marine Insurance Company Limited 13,000 40,548
Lion Corporation 8,000 33,194
Mitsui Marine and Fire Insurance Company, Ltd.(a) 9,000 43,383
Shiseido Company, Limited 2,000 31,002
Tokyo Broadcasting System, Inc. 1,000 43,289
---------
340,222
---------
SINGAPORE - 5.5%
DelGro Corporation Limited (a) 14,000 40,486
--------- ---------
EUROPE - 4.5%
---------------------------------------------
UNITED KINGDOM - 4.5%
Sibir Energy plc (a) 200,000 32,549
---------
LATIN AMERICA - 5.5%
---------------------------------------------
BRAZIL - 5.5%
Uniao de Bancos Brasileiras S.A. (Unibanco) Sponsored GDR 1,400 40,250
--------- ---------
NORTH AMERICA - 18.3%
---------------------------------------------
CANADA - 13.5%
Brascan Corporation 3,000 35,231
International Forest Products Limited (Interfor) (a) 13,000 31,147
PanAfrican Energy Corp. Ltd. (a) 20,000 32,396
---------
98,774
---------
UNITED STATES - 4.8%
LTV Corporation 12,200 35,075
---------
TOTAL INVESTMENTS - 98.6%
(Cost - $704,238) (b) 721,841 721,841
OTHER ASSETS, LESS LIABILITIES - 1.4% 10,398
---------
NET ASSETS - 100% $ 732,239
=========
GDR - Global Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal income tax purposes
OTHER INFORMATION:
At June 30, 2000, net unrealized appreciation based on cost for financial
statement and
Federal income tax purposes is as follows:
Gross unrealized appreciation $ 51,394
Gross unrealized depreciation (33,791)
---------
Net unrealized appreciation $ 17,603
=========
Purchases and sales of securities other than short-term obligations
aggregated $804,107 and $105,079, respectively,
for the period ended June 30, 2000.
</TABLE>
Forward foreign currency exchange contracts at June 30, 2000 were:
<TABLE>
<CAPTION>
CONTRACTS TO SELL
----------------------------------------------------
CURRENCY EXPIRATION LOCAL VALUE IN EXCHANGE UNREALIZED
SOLD DATE CURRENCY IN U.S. $ FOR U.S. $ DEPRECIATION
---- ---- -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Japanese Yen January 23, 2001 26,951,590 $257,000 $ 264,123 $ (7,123)
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 215
<TABLE>
<CAPTION>
Ivy Cundill Value Fund
Statement of Assets and Liabilities
June 30, 2000 (unaudited)
ASSETS
<S> <C>
Investments, at value (identified cost - $704,238) ........................................................ $ 721,841
Cash ...................................................................................................... 20,120
Receivables
Dividends and interest .................................................................................. 559
Manager for expense reimbursement ....................................................................... 23,027
Deferred offering costs ................................................................................... 11,379
Other assets .............................................................................................. 494
---------
Total assets ............................................................................................ 777,420
---------
LIABILITIES
Payables
Management fee ......................................................................................... 588
Other payables to related parties ...................................................................... 15,693
Unrealized depreciation on open forward foreign currency contracts ........................................ 7,123
Accrued expenses .......................................................................................... 21,777
---------
Total liabilities ....................................................................................... 45,181
---------
NET ASSETS ................................................................................................ $ 732,239
=========
ADVISOR CLASS
Net asset value, offering price and redemption price per share
($732,239 / 71,392 shares outstanding) ........................................................... $ 10.26
=========
NET ASSETS CONSIST OF
Capital paid-in ......................................................................................... $ 715,009
Undistributed net realized gain on investments and foreign
currency transactions ................................................................................. 7,286
Accumulated net investment loss ......................................................................... (536)
Net unrealized appreciation on investments and foreign
currency transactions ................................................................................. 10,480
---------
NET ASSETS ................................................................................................ $ 732,239
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 216
<TABLE>
<CAPTION>
Ivy Cundill Value Fund
Statement of Operations
For the period April 19, 2000 (commencement) to June 30, 2000 (unaudited)
<S> <C>
INVESTMENT INCOME
Dividends .......................................................................... $ 1,590
Interest ........................................................................... 536
--------
2,126
--------
EXPENSES
Management fee ..................................................................... $ 1,365
Transfer agent ..................................................................... 86
Administrative services fee ........................................................ 137
Custodian fees ..................................................................... 9,999
Blue Sky fees ...................................................................... 165
Auditing and accounting fees ....................................................... 3,000
Amortization of deferred offering costs ............................................ 2,993
Shareholder reports ................................................................ 1,000
Fund accounting .................................................................... 3,328
Trustees' fees ..................................................................... 281
Legal .............................................................................. 7,101
Other .............................................................................. 68
--------
Total expenses ................................................................... 29,523
Expenses reimbursed by Manager ..................................................... (26,861)
--------
Net expenses ..................................................................... 2,662
--------
NET INVESTMENT LOSS .................................................................. (536)
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT
TRANSACTIONS
Net realized gain on investments and foreign
currency transactions ............................................................ 7,286
Net unrealized appreciation on investments and foreign
currency transactions ............................................................ 10,480
--------
Net gain on investment transactions ............................................. 17,766
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................................................... $ 17,230
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 217
<TABLE>
<CAPTION>
Ivy Cundill Value Fund
Statement of Changes in Net Assets
(unaudited) For the period
April 19, 2000
(commencement)
to June 30,
---------------
2000
---------------
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss ......................................................... $ (536)
Net realized gain on investments and foreign currency transactions .......... 7,286
Net unrealized appreciation on
investments and foreign currency transactions ............................. 10,480
---------
Net increase resulting from operations ............................... 17,230
---------
Fund share transactions (Note 4)
Class A ..................................................................... --
Class B ..................................................................... --
Class C ..................................................................... --
Class I ..................................................................... --
Advisor Class ............................................................... 715,009
---------
Net increase resulting from
Fund share transactions .............................................. 715,009
---------
NET ASSETS AT END OF PERIOD ................................................... $ 732,239
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 218
IVY CUNDILL VALUE FUND
Financial Highlights
for the period
April 19, 2000
(commencement)
to June 30,
ADVISOR CLASS (unaudited)
---------------
SELECTED PER SHARE DATA 2000
---------------
Net asset value, beginning of period .......................... $ 10.00
-------
Income from investment operations
Net investment loss (a) ..................................... (.01)
Net gain on securities (both realized and unrealized) ....... .27
-------
Total from investment operations ............................ .26
-------
Net asset value, end of period ................................ $ 10.26
=======
Total return (%) (b) .......................................... 2.60
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ...................... $ 732
Ratio of expenses to average net assets (c)
With expense reimbursement (%) .............................. 1.95
Without expense reimbursement (%) ........................... 21.63
Ratio of net investment loss
to average net assets (%) (a) (c) ........................... (.39)
Portfolio turnover rate (%) ................................... 17
(a) Net investment loss is net of expenses reimbursed by Manager.
(b) Total return represents aggregate total return and does not reflect a sales
charge.
(c) Annualized
The accompanying notes are an integral part of the financial statements.
<PAGE> 219
IVY CUNDILL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Cundill Value 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 were no sales on the exchange
on which the security is traded most extensively and the security is traded on
more than one exchange, or on one or more exchanges in the over-the-counter
market, the exchange reflecting the last quoted sale will be used. Otherwise,
the security is valued at the calculated mean between the last bid and asked
price on the exchange on which the security is traded most extensively.
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, 2000,
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 on
foreign securities, 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, as
amended (the "Code"), 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
capital gain, if any,
<PAGE> 220
IVY CUNDILL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
are declared in December.
FOREIGN CURRENCY TRANSLATIONS - Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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, Code Section 988 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, 2000. 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.
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
<PAGE> 221
IVY CUNDILL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 April 19, 2000, 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. Cundill is the sub-advisor of the Fund. IMI, not the
Fund, is obligated to compensate the sub-advisor. Currently, IMI limits the
Fund's total operating expenses (excluding 12b-1 fees and certain other
expenses) to an annual rate of 1.95% 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, 2000, MIMI owned 70% of the Fund's
shares outstanding.
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 $86 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:
<PAGE> 222
FOR THE PERIOD FROM
APRIL 19, 2000
(COMMENCEMENT) TO
JUNE 30, 2000
(UNAUDITED)
---------------------------------------------------------
Class A SHARES AMOUNT
---------------------------------------------------------
Sold................. 1 $ 10
Repurchased.......... (1) (10)
----- ----
Net change........... -- --
===== ====
FOR THE PERIOD FROM
APRIL 19, 2000
(COMMENCEMENT) TO
JUNE 30, 2000
(UNAUDITED)
---------------------------------------------------------
Class B SHARES AMOUNT
---------------------------------------------------------
Sold................. 1 $ 10
Repurchased.......... (1) (10)
----- ----
Net change........... -- --
===== ====
FOR THE PERIOD FROM
APRIL 19, 2000
(COMMENCEMENT) TO
JUNE 30, 2000
(UNAUDITED)
---------------------------------------------------------
Class C SHARES AMOUNT
---------------------------------------------------------
Sold................. 1 $ 10
Repurchased.......... (1) (10)
----- ----
Net change........... -- --
===== ====
FOR THE PERIOD FROM
APRIL 19, 2000
(COMMENCEMENT) TO
JUNE 30, 2000
(UNAUDITED)
---------------------------------------------------------
Class I SHARES AMOUNT
---------------------------------------------------------
Sold................. 1 $ 10
Repurchased.......... (1) (10)
----- ----
Net change........... -- --
===== ====
FOR THE PERIOD FROM
APRIL 19, 2000
(COMMENCEMENT) TO
JUNE 30, 2000
(UNAUDITED)
---------------------------------------------------------
Advisor Class SHARES AMOUNT
---------------------------------------------------------
Sold................. 71,392 $ 715,009
------- ---------
Net increase......... 71,392 $ 715,009
======= =========
<PAGE> 223
Ivy Next Wave Internet Fund
Statement of Assets and Liabilities
June 30, 2000 (unaudited)
<TABLE>
<S> <C>
Assets
Cash .......................................................... $ 50
Prepaid offering costs ........................................ 24,500
Prepaid blue sky fees ......................................... 42,000
----------
Total assets .............................................. 66,550
==========
Liabilities
Due to affiliate .............................................. 66,500
----------
Net assets ...................................................... $ 50
==========
Class A
Net asset value and redemption price per share
($10/1 shares outstanding) ................ $ 10.00
==========
Maximum offering price per share
($10.0 x 100/94.25)* .................................. $ 10.61
==========
Class B
Net asset value, offering price and redemption price** per share
($10/1 shares outstanding) ................ $ 10.00
==========
Class C
Net asset value, offering price and redemption price*** per share
($10/1 shares outstanding) ................ $ 10.00
==========
Class I
Net asset value, offering price and redemption price per share
($10/1 shares outstanding) ................ $ 10.00
==========
Advisor Class
Net asset value, offering price and redemption price per share
($10/1 shares outstanding) ................ $ 10.00
==========
Net assets consist of
Capital paid-in ............................................... $ 50
==========
</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> 224
IVY NEXT WAVE INTERNET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Next Wave Internet Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The Fund was initially seeded on March 10, 2000. 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.
FEDERAL INCOME TAXES - The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"), 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
capital gain, if any, are declared in December.
DEFERRED OFFERING COSTS - Offering costs will be amortized over a one year
period beginning on the date the Fund commences operations. Offering costs have
been paid by Mackenzie Investment Management Inc. ("MIMI") and will be
reimbursed by the Fund.
<PAGE> 225
2. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C, Class I and Advisor Class
were as follows:
For the period from
March 10, 2000 to
June 30, 2000
(unaudited)
--------------------------------------------------
Class A Shares Amount
--------------------------------------------------
Sold ............. 1 $ 10
------ ------
Net increase ..... 1 $ 10
====== ======
For the period from
March 10, 2000 to
June 30, 2000
(unaudited)
--------------------------------------------------
Class B Shares Amount
--------------------------------------------------
Sold ............. 1 $ 10
------ ------
Net increase ..... 1 $ 10
====== ======
For the period from
March 10, 2000 to
June 30, 2000
(unaudited)
--------------------------------------------------
Class C Shares Amount
--------------------------------------------------
Sold ............. 1 $ 10
------ ------
Net increase ..... 1 $ 10
====== ======
For the period from
March 10, 2000 to
June 30, 2000
(unaudited)
--------------------------------------------------
Class I Shares Amount
--------------------------------------------------
Sold ............. 1 $ 10
------ ------
Net increase ..... 1 $ 10
====== ======
For the period from
March 10, 2000 to
June 30, 2000
(unaudited)
--------------------------------------------------
Advisor Class Shares Amount
--------------------------------------------------
Sold ............. 1 $ 10
------ ------
Net increase ..... 1 $ 10
====== ======
