<PAGE> 1
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENZIE LOGO]
IVY INTERNATIONAL FUND
OVERVIEW
The Ivy International Fund returned 21.05% for the 12-month period ending
December 31, 1999, slightly underperforming its benchmark index, the Morgan
Stanley Capital International Europe, Australasia, Far East (MSCI EAFE) Index,
which returned 26.96% over the same time period. The Fund benefited by its
overweighting in Sweden (10% of assets as compared to 2.7% for EAFE), as well as
by its holdings in certain emerging markets. The Fund's underweighting in Japan
(12% as compared to 27% for the Index), where stocks performed well during the
period, and the Fund's over-weighting in Switzerland (11% versus 5.7% for the
Index) negatively impacted the Fund's performance. It should be noted, however,
that our research confirms that the Japanese stocks held by the Fund performed
well in 1999, out-performing the broad Japanese market. (For the Fund's total
return with sales charge and performance commentary, please refer to page 4.)
The manager of the Ivy International Fund has positioned the Fund to
benefit from several themes he believes to be developing in the world economic
scene. The Fund's commitment to Europe is based on the manager's belief that
Europe's economy will imitate the trends of the US economy, including merger and
acquisition activity, as companies amalgamate to withstand competitive pressure
and to prepare for world competition. The manager expects that the companies
held by the Fund will begin to realize savings, enhance earnings, and increase
their distribution to ultimately boost their revenues.
According to the manager's research, prospects exist for solid economic
growth worldwide. Growth estimates range from 7% to 8% in China, 3% to 4% in
Europe, and 3% in the US. Such figures may provide real evidence of the growing
demand for raw materials, including oil and gas.
The Fund's weighting in consumer stocks reflects the manager's
expectation that the growth in Europe and the Far East may result in increased
confidence by consumers. Accordingly, a French automobile stock was added to the
portfolio during the year to take advantage of this theme. Other consumer
investments include a French hotel company, a UK leisure company, Japanese
exporters, and tire stocks.
The Fund manager expects a reversal of some of the investor fervor for
high tech and "dot com" stocks in the US, as the Federal Reserve Board may
continue to raise interest rates in the future to combat potential inflation. A
rise in US interest rates may have a negative effect on the world's stock
markets. However, the manager believes that
<PAGE> 2
2
because the Fund tends to favor companies that have a strong asset base or a
core franchise, which gives them a competitive advantage, it could withstand the
effects of an interest rate hike in the US.
The manager believes that the euro will strengthen against the
dollar, reversing the trend of 1999. He also expects that the Japanese yen will
weaken against the dollar, as the strong foreign investment trends of 1999
decline and Japan's central government takes action against an overly strong
yen. Consequently, it is expected that the Fund will continue to focus on the
export-related stocks in Japan.
THE FUND'S COMMITMENT TO EUROPE IS BASED ON THE MANAGER'S
BELIEF THAT EUROPE'S ECONOMY WILL IMITATE THE TRENDS OF THE US ECONOMY,
INCLUDING MERGER AND ACQUISITION ACTIVITY, AS COMPANIES AMALGAMATE TO
WITHSTAND COMPETITIVE PRESSURE AND TO PREPARE FOR WORLD COMPETITION.
MARKET COMMENTARY
In 1999, markets around the globe rebounded from their lows of 1998, changing
the global investment environment dramatically from a year ago.
THE FAR EAST.
The Japanese market performed well in 1999, generating a 61% return for the
12-month period ending December 31, 1999, as measured by the Nikkei 225 Index.
The Ivy International Fund was invested in companies in export businesses, such
as consumer electronics, photo film, and tires. The manager believes, however,
that Japan still needs further restructuring before committing a larger portion
of the portfolio to the country. The manager believes that dividends are small
and price to earnings ratios are high, indicating that even after nine years of
weak market conditions, the market as a whole still lacks good value. The total
return of the Japanese portion of the Fund exceeded 100%, indicating, however,
that the Fund's holdings performed well.
In our view, the acceptance of China into the World Trade Organization
(WTO) is a significant event. Hence, the Fund has reestablished positions in
Hong Kong to take advantage of the opportunities the manager now believes exist.
The manager believes that Hong Kong will be the focal point for foreign
companies doing business in China. The Fund's investments in China are in
companies involved in the airlines, property management businesses, and cellular
phone franchises.
In Singapore, the Fund is invested in banking, consumer-directed
bottling, and other consumer goods companies. The manager believes Singapore
continues to be a significant player in the Far East manufacturing economy,
benefiting from the world's need for high-tech items. Fueled by what the manager
sees as an improving political and investment landscape, the Fund's Malaysian
investments gained momentum in 1999. In the opinion of the manager, this new
environment was a result of the Malaysian government's effective reaction to the
regional monetary crisis.
A LOOK AT EUROPE.
Dominated by the performance of Sweden's premier mobile phone and telephone
system manufacturer, the Swedish stock market performed well in 1999. This
strong performance benefited the Ivy International Fund. The value of this
company's position in the Fund more than doubled on market performance alone.
The Fund's investments in the United Kingdom (UK) underperformed the EAFE UK
stock index, as strong performance by the Fund's UK resource stocks was
overshadowed by the negative influence of UK consumer and tobacco stocks. The
manager's analysis shows that the strong results of a luxury goods stock, in
which the Fund is invested, was negated by poor performance of the
pharmaceutical and financial services sectors.
The Fund's investments in countries that joined the Economic and
Monetary Union (EMU) experienced negative currency return for the year. Our
research shows that these countries encountered significant merger and
acquisition activity during 1999. In France, we believe the banking sector was
<PAGE> 3
3
roiled when a friendly merger between two banks was interrupted by a hostile
takeover attempt by a third bank. What's more, two major French oil companies
merged in a hostile takeover, only to be followed by a "pac-man" reverse
takeover attempt by the target company.
Research by the manager indicates that the banking sector in Spain and
Italy is undergoing fundamental restructuring. Last year, cross-border mergers
and acquisitions occurred as companies positioned themselves within the industry
and the locale to compete. Two French and Spanish tobacco companies combined to
form a single industrial complex, with increased distribution for each other's
products and rationalization of the manufacturing facilities also on the
agenda. A French and German company, each with pharmaceutical and chemical
interests, merged to focus more on research and development, and to concentrate
on the pharmaceutical side of the business.
OTHER MARKETS.
According to the Fund manager, non-EAFE countries responded well to the rebound
in the Far East and to the recovery of commodity prices. South African mining
companies led the way by increasing their exposure to world markets through
listing their stock on the London Exchange, while they enjoyed the stock price
rise caused by investor response to the increase in metal prices.
South America showed mixed results, with Argentine stocks up for the
year, while the Brazilian market fell.
LOOKING AHEAD.
The Fund manager believes that the prospects for strong world growth suggest
that an international portfolio made up of selected world-class companies should
prosper. Long term, investments in shares of companies with aggressive
management, solid franchises, and/or substantial assets should provide global
investors with solid prospects for future growth.
<PAGE> 4
4
Performance Comparison of the Fund Since
Inception (4/86) of a $10,000 Investment
[CHART]
Ivy International Fund
Performance Commentary
The Ivy International Fund generated a positive return of 21.05% for the
12-month period ending December 31, 1999, underperforming its benchmark
index, the Morgan Stanley Capital International (MSCI) Europe, Australasia, Far
East (EAFE) Index, which returned 26.96% over the same time period. The Fund's
underweighting in Japan, where stocks performed well during the period, and an
over-weighting in Switzerland, where the market was down for the year, offset
gains from investments in certain emerging markets and an overweighting in
Sweden.
The Lipper Average International Fund represents the performance of the average
international fund as measured by Lipper Inc. It is not possible to invest in a
benchmark. The Morgan Stanley Capital International (MSCI) Europe, Australasia,
Far East (EAFE) Index is an unmanaged index of stocks which assumes reinvestment
of dividends and, unlike Fund returns, does not reflect any fees or expenses. It
is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Class I(4)
---------------- ------------ ------------ ----------------
IVY INTERNATIONAL FUND w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING ------ ------ ----- ----- ----- ------ ------ ------
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
15.15% 20.15% 15.15% 20.15%
1 year C: C: C: C:
14.09% 14.09% 19.16% 20.16% 19.16% 20.16% 21.66% 21.66%
------ ------ ----- ----- ----- ------ ----- -----
B: B: B: B:
12.92% 13.17% 12.92% 13.17%
5 year C: C: C: C:
12.76% 12.76% n/a n/a n/a n/a 14.51% 14.51%
------ ------ ----- ----- ----- ------ ----- -----
B: B: B: B:
n/a n/a n/a n/a
10 year C: C: C: C:
11.09% 11.08% n/a n/a n/a n/a n/a n/a
------ ------ ----- ----- ----- ------ ------ ------
B: B: B: B:
12.35% 12.35% 12.35% 12.35%
C: C: C: C:
Since Inception(5) 14.43% 14.43% 12.90% 12.90% 12.90% 12.90% 13.31% 13.31%
------ ------ ----- ----- ----- ------ ----- -----
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Class I shares are not subject to an initial sales charge or a CDSC.
(5) Class A commenced operations November 15, 1985 (performance here is
calculated based on the date the Fund first became available for sale
to the public, April 30, 1986); Class B commenced operations October
22, 1993; Class C commenced operations April 30, 1996; Class I commenced
operations October 6, 1994.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of Ivy
International Fund will fluctuate and at redemption shares may be worth
more or less than the amount of the original investment.
<PAGE> 5
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- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 97.61% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 1.49%
- -------------------------------
SOUTH AFRICA -- 1.49%
Anglo American plc.............. 26,900 $ 1,734,346
Anglo American plc Sponsored
ADR........................... 443,250 28,866,656
Gencor Limited.................. 95,280 413,922
Gencor Limited ADR.............. 1,200,000 5,212,800
------------
36,227,724
------------
ASIA -- 19.55%
- -------------------------------
HONG KONG -- 1.22%
China Telecom (Hong Kong)
Limited....................... 2,650,000 16,567,761
Swire Pacific Ltd............... 2,200,000 12,990,236
------------
29,557,997
------------
JAPAN -- 11.71%
Bridgestone Corp................ 1,200,000 26,378,772
Canon Inc....................... 1,200,000 47,599,029
Fuji Photo Film ORD............. 850,000 30,975,518
Sharp Corporation............... 3,500,000 89,419,153
Sony Corporation................ 302,000 89,400,590
------------
283,773,062
------------
MALAYSIA -- 2.74%
Malayan Banking Berhad.......... 4,600,000 16,341,998
Sime Darby Berhad............... 21,500,000 27,270,873
Telekom Malaysia Berhad......... 5,875,000 22,726,824
------------
66,339,695
------------
SINGAPORE -- 3.88%
Fraser & Neave Ltd. ORD......... 8,000,000 29,531,724
Oversea-Chinese Banking
Corporation Ltd............... 3,675,000 33,749,899
United Overseas Bank Ltd. --
Foreign Registered............ 3,497,901 30,863,740
------------
94,145,363
------------
AUSTRALIA -- 1.58%
- -------------------------------
News Corp. Ltd. ADR............. 1,000,000 38,250,000
------------
EUROPE -- 69.39%
- -------------------------------
DENMARK -- 1.20%
Novo Nordisk A/S -- Class B..... 220,000 29,039,638
------------
FRANCE -- 15.95%
Accor S.A....................... 500,000 24,040,189
Altadis(a)...................... 2,189,959 30,993,373
Aventis S.A..................... 567,790 32,836,867
Axa............................. 300,000 41,615,537
Banque Nationale de Paris....... 290,000 26,625,124
Compagnie de Saint Gobain....... 130,000 24,326,848
Compagnie Generale des
Etablissements Michelin Class
B REGD........................ 356,752 13,945,343
Eurotunnel S.A. Units........... 16,870,454 19,783,849
Eurotunnel S.A. Warrants
2001(a)....................... 10,000,000 300,690
Eurotunnel S.A. Warrants
2003(a)....................... 10,000,000 902,071
Pechiney S.A. Class A........... 715,700 50,895,757
Peugeot Citroen................. 135,700 30,657,160
Suez Lyonnaise des Eaux......... 222,611 35,498,906
Total S.A. -- "B" Shares........ 407,995 54,183,728
------------
386,605,442
------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
ITALY -- 5.29%
Assicurazioni Generali.......... 1,392,000 $ 45,762,658
Banca Commericale Italiana...... 1,569,271 8,493,562
Banca Intesa S.p.A.............. 9,851,702 39,793,714
Banca Intesa S.p.A.
Warrants(a)................... 554,325 966,745
Instituto Bancario San Paolo di
Torino........................ 2,455,700 33,203,619
------------
128,220,298
------------
NETHERLANDS -- 4.79%
ABN Amro Holding NV............. 1,520,600 37,797,653
ING Groep NV.................... 659,948 39,648,304
Royal Dutch Petroleum ADR....... 640,000 38,680,000
------------
116,125,957
------------
NORWAY -- 0.00%
Frontline Limited Warrants(a)... 804,393 --
------------
PORTUGAL -- 1.72%
Banco Comercial Portugues, S.A.
Preferred..................... 400,000 41,800,000
------------
SPAIN -- 4.55%
Banco Bilbao Vizcaya REGD....... 900,000 12,755,283
Bankinter, S.A.................. 700,000 35,185,777
Repsol S.A...................... 2,700,000 62,297,016
------------
110,238,076
------------
SWEDEN -- 9.78%
Autoliv, Inc. Swedish Depository
Receipt....................... 800,000 23,317,257
Ericsson LM Telephone Series B
Free.......................... 2,000,000 128,057,625
Svenska Cellulosa AB (SCA) --
Series B...................... 1,400,000 41,296,828
Swedish Match AB................ 9,000,000 31,288,668
Volvo AB B Free................. 505,070 13,006,558
------------
236,966,936
------------
SWITZERLAND -- 11.30%
Compagnie Financiere Michelin... 45,000 18,019,881
Compagnie Financiere
Richemont AG.................. 37,000 87,834,816
Credit Suisse Group REGD........ 77,035 15,231,518
Nestle AG REGD.................. 20,000 36,445,826
Novartis AG REGD................ 18,096 26,430,688
Sairgroup....................... 75,000 15,016,567
UBS AG -- REGD.................. 109,976 29,542,534
Zurich Versicherungsgesellschaft
REGD (Zurich Allied AG)(a).... 80,000 45,379,239
------------
273,901,069
------------
UNITED KINGDOM -- 14.81%
Allied Zurich plc............... 2,057,244 24,336,946
BG Group plc.................... 5,490,196 35,106,615
Billiton plc.................... 476,400 2,734,980
Billiton plc ADR................ 6,000,000 34,446,000
BP Amoco plc.................... 4,861,616 48,854,134
British American Tobacco plc.... 2,057,244 11,480,473
Diageo plc...................... 3,497,433 28,043,144
Imperial Tobacco Group plc...... 5,500,000 43,878,532
Rio Tinto plc................... 1,670,228 40,055,568
Smithkline Beecham plc ADR...... 500,000 32,218,750
Standard Chartered plc.......... 2,756,446 42,870,743
Whitbread plc................... 1,500,000 15,109,687
------------
359,135,572
------------
</TABLE>
<PAGE> 6
[IVY LEAF LOGO]
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IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
6
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
SOUTH AMERICA -- 5.60%
- -----------------------------
ARGENTINA -- 1.82%
Telecom de Argentina S.A.
Class B..................... 3,300,000 $ 22,706,816
Telefonica de Argentina S.A.
Class B..................... 7,000,000 21,492,665
--------------
44,199,481
--------------
BRAZIL -- 3.78%
Centrais Electricas
Brasileiras S.A.
(Electrobras) Preferred..... 1,030,000,000 24,752,023
Centrais Geradoras do Sul do
Brazil S.A. (Gerasul)
Preferred B................. 600,000,000 659,043
Petroleo Brasileiro S.A.
(Petrobras)................. 187,300,000 48,038,762
Telecomunicacoes de Sao Paulo
Preferred(a)................ 92,900,000 2,268,747
Telecomunicacoes de Sao Paulo
Rights(a)................... 673,697,324 15,964,302
--------------
91,682,877
--------------
TOTAL EQUITY SECURITIES
(Cost -- $1,558,141,092).... 2,366,209,187
--------------
CONVERTIBLE BONDS -- 0.27% PRINCIPAL
- ----------------------------- -------------
Liberty Life International BV
144A REGD, 6.50%, 09/30/04
(Cost -- $6,500,000)........ $ 6,500,000 6,662,500
--------------
CORPORATE BONDS -- 0.16%
- -----------------------------
BG Transco Holdings plc,
7.06%, 12/14/09(b).......... 787,815 1,277,530
BG Transco Holdings plc,
4.1875%, 12/24/22........... 787,815 1,266,547
BG Transco Holdings plc,
7.00%, 12/15/24............. 787,815 1,233,661
--------------
TOTAL CORPORATE BONDS
(Cost -- $1,770,497)........ 3,777,738
--------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 1.78%
- -----------------------------
American Express, 2.50%,
01/03/00.................... $ 11,293,569 $ 11,293,569
Exxon Credit Corp., 4.60%,
01/04/00.................... 11,970,530 11,970,530
Exxon Credit Corp., 4.60%,
01/05/00.................... 20,002,557 20,002,557
--------------
TOTAL COMMERCIAL PAPER
(Cost -- $43,266,656)....... 43,266,656
--------------
TOTAL INVESTMENTS -- 99.82%
(Cost -- $1,609,678,245)(c).. 2,419,916,081
OTHER ASSETS, LESS LIABILITIES -- 0.18% 4,348,929
--------------
NET ASSETS -- 100%............ $2,424,265,010
==============
ADR -- American Depository Receipt
ORD -- Ordinary
REGD -- Registered
(a) Non-income producing security
(b) Floating rate note; reflects variable
rate as of the latest reset date,
December 14, 1999.
(c) Cost is approximately the same for
Federal income tax purposes.
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............ $ 905,611,668
Gross unrealized depreciation............ (95,373,832)
--------------
Net unrealized appreciation.......... $ 810,237,836
==============
Purchases and sales of securities other than short-term
obligations aggregated $158,772,033 and $643,626,783,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $1,609,678,245)... $2,419,916,081
Cash........................................................ 99,955
Receivables
Investments sold.......................................... 1,265,457
Fund shares sold.......................................... 2,703,118
Dividends and interest.................................... 8,766,243
Other assets................................................ 84,603
--------------
Total assets.............................................. 2,432,835,457
--------------
LIABILITIES
Payables
Fund shares repurchased................................... 4,751,977
Management fee............................................ 1,998,474
12b-1 service and distribution fees....................... 858,306
Other payables to related parties......................... 481,708
Accrued expenses............................................ 479,982
--------------
Total liabilities......................................... 8,570,447
--------------
NET ASSETS.................................................. $2,424,265,010
==============
CLASS A
Net asset value and redemption price per share
($1,573,614,571/33,415,244 shares outstanding)............ $ 47.09
==============
Maximum offering price per share ($47.09 x 100/94.25)*...... $ 49.96
==============
CLASS B
Net asset value, offering price and redemption price** per
share ($540,514,255/11,554,393 shares outstanding)........ $ 46.78
==============
CLASS C
Net asset value, offering price and redemption price*** per
share ($143,320,170/3,077,504 shares outstanding)......... $ 46.57
==============
CLASS I
Net asset value, offering price and redemption price per
share ($166,816,014/3,542,744 shares outstanding)......... $ 47.09
==============
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,597,664,872
Undistributed net realized gain on investments and foreign
currency transactions................................... 15,604,939
Undistributed net investment income....................... 893,054
Net unrealized appreciation on investments and foreign
currency transactions................................... 810,102,145
--------------
NET ASSETS.................................................. $2,424,265,010
==============
</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> 8
[IVY LEAF LOGO]
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IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $3,998,945 foreign taxes withheld....... $ 50,502,631
Interest.................................................. 3,418,846
------------
53,921,477
------------
EXPENSES
Management fee............................................ $23,577,176
Transfer agent............................................ 4,713,633
Administrative services fee............................... 2,216,778
Custodian fees............................................ 1,786,637
Blue Sky fees............................................. 53,235
Auditing and accounting fees.............................. 56,397
Shareholder reports....................................... 366,615
Fund accounting........................................... 220,210
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 10,148,063
Legal..................................................... 61,664
Other..................................................... 176,852
------------
Total expenses........................................ 43,386,500
------------
NET INVESTMENT INCOME....................................... 10,534,977
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 149,803,389
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 286,502,925
------------
Net gain on investment transactions................... 436,306,314
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $446,841,291
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 9
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- --------------------------------------------------------------------------------
9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-------------------------------
1999 1998
-------------------------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment income..................................... $ 10,534,977 $ 16,050,836
Net realized gain on investments and foreign currency
transactions............................................ 149,803,389 13,086,365
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 286,502,925 133,784,460
-------------- --------------
Net increase resulting from operations................ 446,841,291 162,921,661
-------------- --------------
Class A distributions
Dividends from net investment income...................... (7,591,186) (13,536,256)
Distributions
From capital gains...................................... (79,453,345) (8,545,034)
In excess of capital gains.............................. -- (5,018,512)
-------------- --------------
Total distributions to Class A shareholders........... (87,044,531) (27,099,802)
-------------- --------------
Class B distributions
Dividends in excess of net investment income.............. (28,805) --
Distributions
From capital gains...................................... (26,528,332) (2,888,018)
In excess of capital gains.............................. -- (1,696,137)
-------------- --------------
Total distributions to Class B shareholders........... (26,557,137) (4,584,155)
-------------- --------------
Class C distributions
Dividends in excess of net investment income.............. (3,539) --
Distributions
From capital gains...................................... (7,061,141) (828,687)
In excess of capital gains.............................. -- (486,689)
-------------- --------------
Total distributions to Class C shareholders........... (7,064,680) (1,315,376)
-------------- --------------
Class I distributions
Dividends from net investment income...................... (1,415,063) (1,959,855)
Distributions
From capital gains...................................... (8,540,450) (810,329)
In excess of capital gains.............................. -- (475,907)
-------------- --------------
Total distributions to Class I shareholders........... (9,955,513) (3,246,091)
-------------- --------------
Fund share transactions (Note 4)
Class A................................................... (246,372,544) (174,806,618)
Class B................................................... (71,889,837) (54,146,360)
Class C................................................... (29,745,075) (28,691,544)
Class I................................................... (12,118,396) 34,921,011
-------------- --------------
Net decrease resulting from Fund share transactions... (360,125,852) (222,723,511)
-------------- --------------
TOTAL DECREASE IN NET ASSETS................................ (43,906,422) (96,047,274)
NET ASSETS
Beginning of period....................................... 2,468,171,432 2,564,218,706
-------------- --------------
END OF PERIOD............................................. $2,424,265,010 $2,468,171,432
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 893,054 $ 144,612
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 10
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 41.20 $ 39.03 $ 35.89 $ 30.67 $ 27.60
------------------------------------------------------------
Income from investment operations
Net investment income................................. .30 .37 .24 .20 .25
Net gains on securities (both realized and
unrealized)......................................... 8.31 2.50 3.47 5.85 3.22
------------------------------------------------------------
Total from investment operations...................... 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 gains.................................. 2.48 .22 .26 .64 .12
In excess of capital gains.......................... -- .13 .10 -- .03
------------------------------------------------------------
Total distributions................................. 2.72 .70 .57 .83 .40
------------------------------------------------------------
Net asset value, end of period.......................... $ 47.09 $ 41.20 $ 39.03 $ 35.89 $ 30.67
============================================================
Total return (%)(a)..................................... 21.05 7.34 10.38 19.72 12.65
RATIOS AND SUPPLEMENTAL DATA
Net asset value, end of period (in thousands)........... $1,573,615 $1,613,797 $1,705,772 $989,254 $475,989
Ratio of expenses to average net assets (%)............. 1.66 1.58 1.59 1.65 1.52
Ratio of net investment income to average net
assets (%)............................................ .63 .83 .68 .76 .97
Portfolio turnover rate (%)............................. 7 15 8 14 6
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS B December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 40.97 $ 38.82 $ 35.73 $ 30.67 $ 27.60
------------------------------------------------------------
Income from investment operations
Net investment (loss) income.......................... (.06) -- (.06) (.01) .01
Net gains on securities (both realized and
unrealized)......................................... 8.27 2.50 3.44 5.76 3.20
------------------------------------------------------------
Total from investment operations...................... 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 gains.................................. 2.40 .22 .21 .64 .10
In excess of capital gains.......................... -- .13 .08 -- .03
------------------------------------------------------------
Total distributions................................. 2.40 .35 .29 .69 .14
------------------------------------------------------------
Net asset value, end of period.......................... $ 46.78 $ 40.97 $ 38.82 $ 35.73 $ 30.67
============================================================
Total return (%)(a)..................................... 20.15 6.43 9.46 18.76 11.62
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 540,514 $ 542,997 $ 568,521 $312,161 $ 74,650
Ratio of expenses to average net assets (%)............. 2.42 2.41 2.42 2.45 2.44
Ratio of net investment (loss) income to average net
assets (%)............................................ (.13) (.01) (.15) (.04) .05
Portfolio turnover rate (%)............................. 7 15 8 14 6
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 11
11
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 40.79 $ 38.64 $ 35.58 $ 32.68
----------------------------------------------------
Income from investment operations
Net investment loss................................... (.05) -- (.05) --
Net gains on securities (both realized and
unrealized)......................................... 8.23 2.50 3.42 3.74
----------------------------------------------------
Total from investment operations...................... 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 gains.................................. 2.40 .22 .21 .64
In excess of capital gains.......................... -- .13 .09 --
----------------------------------------------------
Total distributions................................. 2.40 .35 .31 .84
----------------------------------------------------
Net asset value, end of period.......................... $ 46.57 $ 40.79 $ 38.64 $ 35.58
====================================================
Total return (%)........................................ 20.16(a) 6.46(a) 9.50(a) 11.45(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $143,320 $154,378 $174,880 $44,450
Ratio of expenses to average net assets (%)............. 2.42 2.40 2.41 2.44(c)
Ratio of net investment (loss) income to average net
assets (%)............................................ (.13) .01 (.14) (.03)(c)
Portfolio turnover rate (%)............................. 7 15 8 14
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS I December 31,
- ----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 41.21 $ 39.06 $ 35.89 $ 30.67 $ 27.60
------------------------------------------------------
Income from investment operations
Net investment income................................. .52 .55 .32 .27 .30
Net gains on securities (both realized and
unrealized)......................................... 8.34 2.48 3.56 5.88 3.22
------------------------------------------------------
Total from investment operations...................... 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 gains.................................. 2.56 .22 .28 .64 .12
In excess of capital gains.......................... -- .13 .11 -- .03
------------------------------------------------------
Total distributions............................... 2.98 .88 .71 .93 .45
------------------------------------------------------
Net asset value, end of period.......................... $ 47.09 $ 41.21 $ 39.06 $ 35.89 $ 30.67
======================================================
Total return (%)(a)..................................... 21.66 7.75 10.87 20.06 12.85
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $166,816 $156,999 $115,046 $53,344 $13,020
Ratio of expenses to average net assets (%)............. 1.18 1.18 1.18 1.25 1.35
Ratio of net investment income to average net assets
(%)................................................... 1.11 1.23 1.08 1.16 1.14
Portfolio turnover rate (%)............................. 7 15 8 14 6
</TABLE>
<TABLE>
<S> <C> <C>
(a) Total return does not reflect (b) Total return represents (c) Annualized
a sales charge. aggregate total return and does
not reflect a sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 12
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
12
NOTES TO FINANCIAL STATEMENTS
Ivy International Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Class I are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities, or on the basis of
dealer quotes. All other securities are valued at their fair value as determined
in good faith by the Valuation Committee of the Board; as of December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund earned foreign source dividends of $54,501,576. These dividends were
subject to foreign withholding tax in the amount of $3,998,945. The Fund intends
to elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may report their share of foreign taxes paid as either a tax
credit or itemized deduction.
Pursuant to Code Section 852, the Fund designates $118,070,071 as long-term
capital gain distributions for its taxable year ended December 31, 1999.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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 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.
<PAGE> 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's first $2.5 billion in average net assets and .90% of the Fund's average
net assets in excess of $2.5 billion. Northern Cross Investments Limited is the
subadviser of the Fund. IMI, not the Fund, is obligated to compensate the
subadviser.
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 year ended December 31, 1999, the net amount of underwriting
discounts retained by IMDI was $26,294.
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 $3,508,936, $5,222,779 and $1,416,348, for Class A, Class
B and Class C, respectively, are reflected as 12b-1 service and distribution
fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $3,315,087, $1,057,873, $259,978 and $80,695, for Class A, Class B,
Class C and Class I, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Class I were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 6,826,244 $ 298,269,386 9,861,782 $ 405,629,284
Issued on
reinvestment of
distributions....... 1,395,706 64,345,562 490,806 20,221,191
Repurchased.......... (13,975,871) (608,987,492) (14,882,098) (600,657,093)
----------- ------------- ----------- -------------
Net decrease......... (5,753,921) $(246,372,544) (4,529,510) $(174,806,618)
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 581,682 $ 25,766,700 768,565 $ 31,626,287
Issued on
reinvestment of
distributions....... 284,831 13,050,929 54,506 2,233,625
Repurchased.......... (2,564,193) (110,707,466) (2,215,469) (88,006,272)
----------- ------------- ----------- -------------
Net decrease......... (1,697,680) $ (71,889,837) (1,392,398) $ (54,146,360)
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 222,501 $ 9,801,533 389,550 $ 15,972,472
Issued on
reinvestment of
distributions....... 56,781 2,590,305 11,181 456,136
Repurchased.......... (986,391) (42,136,913) (1,141,755) (45,120,152)
----------- ------------- ----------- -------------
Net decrease......... (707,109) $ (29,745,075) (741,024) $ (28,691,544)
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
CLASS I SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 913,209 $ 40,125,637 1,327,805 $ 53,170,870
Issued on
reinvestment of
distributions....... 187,307 8,636,739 66,618 2,745,340
Repurchased.......... (1,367,227) (60,880,772) (530,519) (20,995,199)
----------- ------------- ----------- -------------
Net (decrease)/
increase............ (266,711) $ (12,118,396) 863,904 $ 34,921,011
=========== ============= =========== =============
</TABLE>
Effective April 18, 1997, the Fund suspended the offer of its shares to new
investors. Shares are available for purchase only by existing shareholders of
the Fund. Once a shareholder's account is liquidated, the shareholder may not
invest in the Fund at a later date.
<PAGE> 14
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY INTERNATIONAL FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot......... 26,819,528 605,390
Keith J. Carlson........... 26,814,643 610,275
Stanley Channick........... 26,780,065 644,853
Roy J. Glauber............. 26,793,696 631,221
Edward M. Tighe............ 26,814,469 610,449
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------
FOR: AGAINST: ABSTAIN:
- -------------------------------
<S> <C> <C>
26,733,609 126,401 564,908
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
19,117,106 856,612 1,203,595 6,247,605
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
18,767,375 1,173,663 1,236,276 6,247,605
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
19,063,586 861,755 1,251,972 6,247,605
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
18,888,158 1,062,656 1,226,499 6,247,605
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
19,124,547 831,693 1,221,073 6,247,605
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
18,797,058 1,140,194 1,240,061 6,247,605
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
18,614,428 1,337,768 1,225,117 6,247,605
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
19,082,001 865,386 1,229,926 6,247,605
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- -----------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -----------------------------------------------
<S> <C> <C> <C>
18,673,703 1,222,924 1,280,686 6,247,605
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 16
02IIFX123199
<PAGE> 17
[IVY GROWTH FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
We believe the Ivy Growth Fund benefited from its three-pronged approach during
1999. For the 12 months ended December 31, 1999, the Ivy Growth Fund returned
31.87%, outperforming the S&P 500 Index, which returned 21.10% for the same
period. (For the Fund's total return with sales charge, and performance
commentary, please refer to page 5.)
The core portion.
The core portion of the Fund (approximately 42% of assets) was invested
primarily in high-quality, large-cap companies that hold leading positions in
their industry or that we expect to be leaders in the future. This portion of
the Fund continues to be managed in accordance with a disciplined investment
philosophy, the key to which is stock selection. The manager of the core portion
of the Fund ignores short-term market volatility and makes no attempt to time
the market. Excess cash positions in the core portion are typically less than
2%. There are no sector bets made by the Fund. The manager divides the stock
market into nine broad economic sectors, and the weightings within the Fund
approximate the weighting of each sector within the market, as measured by the
S&P 500 Index. The Fund is invested in companies that history shows have a
proven and consistent record of earnings profitability, but whose prices do not
appear to the Fund manager to adequately reflect the underlying profitability of
the company. The profitability of each company is compared to the patterns of
its industry to account for normal cyclicality. In addition, the manager prefers
companies that have a dominant market position with high-quality management. By
following this investment philosophy and equity style, we believe the core
portion of the Ivy Growth Fund is well positioned for, and should benefit from,
the long-term positive trends of the stock market.
US emerging growth stocks.
The emerging growth component (approximately 37% of the Fund) is positioned to
provide long-term capital growth through investment in common stocks of small-
and medium-sized companies that are in the early stages of their life cycle and
may have the potential for rapid growth of sales and earnings. In our search for
high-growth companies, we focus on what we believe are fertile sectors of the
economy--technology, business and consumer services, healthcare, and
entertainment.
A change in strategy.
We recognize that the vast majority of investors prefer to achieve international
diversification by owning one or more international funds, such as Ivy
International Fund II. Accordingly, in the future, the investment strategy
utilized in managing the Ivy Growth Fund will be to focus on US companies. Given
the solid performance of the international
<PAGE> 18
2
component of the Ivy Growth Fund, we thought this was a good time to begin an
orderly liquidation of the Fund's foreign component. Most of the proceeds from
these sales will be reinvested in small- and mid-cap growth stocks. For the
foreseeable future, the emphasis of the Fund will be on US companies--large,
medium and small--with good prospects for strong earnings growth. Previously,
the core portion of the Fund had been invested in a blend of high-quality growth
and value stocks. In the future, it will continue to have a blue chip
orientation, but with more emphasis on growth. The decision to eliminate the
separate foreign component of the Fund does not, by any means, signal diminished
enthusiasm for international diversification as an investment strategy. We
continue to believe there are many attractive investment opportunities outside
the US and that investors would be well served by diversifying their portfolios
internationally.
"We continue to believe that the increasing need for baby
boomers to plan and invest for retirement should provide a
significant positive influence on the financial
markets, particularly on stock prices."
Market Commentary
US large caps perform well.
The US stock market continued to perform well in 1999, extending its multiyear
bull-market trend. After undergoing a brief correction in the fall, stocks
surged in the final months of the year, propelled higher by technology
companies. The NASDAQ Composite Index, the Dow Jones Industrial Average, and the
Standard & Poor's 500 Index all closed the year at all-time highs. The
performance of the NASDAQ Composite was so strong that it generated the highest
return of any US index in the 20th century, ending the year up an impressive
85.6%. During the year, the Dow Jones Industrial Average moved well past
10,000, ending the year up 25.22% at 11,497.12. The core portion of the Ivy
Growth Fund benefited from this market strength. The Fund invested in a number
of high-quality, large-capitalization stocks that performed well and are members
of one or more of the popular averages. In addition, technology stocks were
particularly strong in 1999. Given the core manager's belief in diversification
across all major sectors, the Fund held positions in technology companies that
performed well in 1999.
Investors shed market concerns.
It appears that many of the concerns expressed by investors early in 1999
dissipated as the year progressed. Our research confirms that earnings growth
did not slow, narrow market participation broadened, and weakness in foreign
economies did not cause the US economy to slow. In fact, we believe the strength
in the US economy and US stock market served to bolster overseas economies and
markets. Our analysis indicates that the fear of deflation disappeared, the fear
of a financial market collapse was replaced by the fear of a possible financial
market bubble, and the fear of Y2K proved to be overblown. And, once again, fear
that the market was overvalued, which we believe has existed since the Dow
passed 6,000, was proven to be unfounded.
During the year, long-term interest rates rose as the Federal Reserve
Board increased short-term interest rates three times. Although these increases
did not derail the market averages, interest-rate-sensitive stocks performed
poorly, including many banks and insurance companies. The core portion of the
Fund was exposed to the finance sector through investments in large, well-known
banks. Although we believe these to be high-quality finance companies, they
performed poorly, which, according to our research, was in line with the rest of
the sector. We believe that the sector will recover when interest rates begin to
decline.
In 1999, the investment community began to focus on the upcoming
presidential election and its possible impact on the market. According to our
research, healthcare was one sector that was particularly hurt by the political
situation. We believe that investors became concerned that political
<PAGE> 19
' 3
candidates would urge medical cost-controls. The core portion of the Fund was
exposed to the healthcare sector through investments in pharmaceutical
companies. Although we believe these to be high-quality healthcare companies,
they performed poorly with the rest of the sector. We believe that the
long-term prospects for healthcare companies are particularly strong given the
demographics in the US and the aging of the baby boomers.
Oil prices rose sharply in 1999, causing many energy-related companies
to do well. The Fund was exposed to this area through investments in
high-quality energy companies.
There is an old market adage that states "the market likes to climb a
wall of worry." Looking back, that appears to be what the market did in 1999,
and it seems the investment community has given birth to new fears. We now
witness the fear of an overheated economy, the fear of inflation, and the fear
of higher interest rates. We believe that any one of these concerns can easily
cause the market to correct 10% or more, and that the investment landscape is
filled with unsuccessful investors who tried to time the short-term movements of
the market. We believe it is best to keep focused on the long-term trend of the
market and to view corrections as major buying opportunities that may enhance
long-term returns.
Looking ahead.
In our view, long-term investors have many reasons to remain optimistic. We
believe the threat of a significant rise in inflation is fairly remote.
Inflation is a monetary phenomenon caused by too much money chasing too few
goods. In our view, the productive capacity of the United States should not have
a problem producing sufficient goods to meet expanding demand and that world
economies are awash in excess capacity. Moreover, according to our research,
monetary growth in the US, as measured by high-powered bank reserves, indicates
that inflation is likely to remain under control. We believe the recent rise in
interest rates may easily reverse once the markets accept and reflect a low
inflation environment.
We expect that the economy will continue to grow and will soon mark the
longest uninterrupted period of expansion in US history. This may result in
further growth of corporate profits. Over the long term, we believe that higher
earnings should be reflected in higher stock prices. Finally, the demographics
in the US can be a powerful force that, in our view, could lead to higher stock
prices. We continue to believe that the increasing need for baby boomers to plan
and invest for retirement should provide a significant positive influence on the
financial markets, particularly on stock prices.
Emerging growth stocks gain momentum.
Last year was the first year since 1994 that emerging growth stocks, as measured
by the Russell 2000 Growth Index, outperformed the broader US market. The
Russell 2000 Growth Index surged 43.09% for the 12-month period ending December
31, 1999, compared to the Standard & Poor's 500 Index, which was up 21.10% over
the same time period. Thus came the welcome end to a long interval during which
small-cap growth stocks lagged the S&P 500 Index.
Over the last five years, small growth companies generally experienced
satisfactory earnings progress, which we believe was largely offset by a sharp
contraction in their earnings multiples relative to the broader market. Although
relative price to earnings ratios (P/E) remain in the low end of their historic
range, the contraction appears to have run its course. Our research indicates
that during 1999, superior earnings growth led to superior returns, validating
our investment thesis in this sector of the marketplace.
Technology stocks take centerstage.
For emerging growth investors, the real story of 1999 was technology stocks,
particularly those with a link to the Internet--whether it was through
e-commerce, infrastructure, consulting, communications, or data storage. Those
investors who failed to participate in this sector of
<PAGE> 20
4
the market found it was difficult to compete with those who did.
During the past year, we have seen billions of dollars of new capital
flow into this sector, accompanied by a steady migration of management talent
from old-line companies. In this new era of technological innovation, we believe
business-to-business commerce could more than double every year for at least the
next several years, putting corporations under severe pressure to "webify" their
businesses. As a result, there may be the potential for considerable growth
opportunities for many companies in the portfolio. Our research shows that over
the last year several companies in the portfolio grew their revenues at a
compounded quarterly rate of 25% and higher. To put this in perspective, 10
years ago compound annual growth rates of 25% were considered quite high.
Valuations continue to rise.
In our view, because many of these young technology companies are spending
aggressively to secure market share and gain first-mover advantage, most have
yet to achieve operating profitability. As a result, we believe analysts and
investors alike are moving more and more to valuing these companies on a
multiple of revenue. This approach makes us somewhat cautious, particularly
since valuations, even by this standard, seem extraordinarily high. However, in
our view, this may be preferable to being left behind, since technology,
particularly the Internet, promises to be an unusually fertile growth area for
many years to come.
Outside of technology, particularly in areas like consumer goods and
services, healthcare, and business services, growth rates are less impressive,
but valuations are also much less daunting. In these areas, our analysis
indicates that many good, small companies have grown their earnings consistently
over the last three or four years, only to see their stock prices languish as
shrinking P/Es have all but offset robust earnings growth. We believe that a
number of these companies are long overdue for better market performance.
Looking ahead.
As usual, we believe that near-term performance for many emerging growth
companies is unpredictable, particularly with the possibility that the Federal
Reserve Board will raise interest rates, which often is negative for these kinds
of companies. But longer term, we believe there may be many reasons for
optimism. With the enormous momentum of the Internet and e-commerce serving as
major drivers, we believe the US economy should be well positioned for continued
growth and low inflation. In addition, we believe the earnings outlook for many
companies is favorable, particularly those in the technology sector, now that
the Y2K spending lockdown is behind us. Additionally, a major upgrade cycle to
Windows(R) 2000 should be a catalyst for strong demand. Outside of
technology, we believe relative valuations are very attractive by historic
standards.
<PAGE> 21
5
10-Year Performance Comparison of
the Fund of a $10,000 Investment
[CHART]
Ivy Growth Fund
Performance Commentary
For the 12 months ended December 31, 1999, the Ivy Growth Fund returned 31.87%.
Relative to the S&P 500 Index, an unmanaged index of stocks, the Ivy Growth Fund
outperformed the Index, which returned 21.10% for the same time period.
Contributing to this outperformance was the Fund's emerging growth and
international stocks, two segments of the equity market (as measured by the
Russell 2000 Growth Index and the Morgan Stanley Capital International Europe,
Australasia and Far East Index) that outperformed the S&P 500 Index in 1999.
The Lipper Average Growth Fund represents the performance of the average growth
fund as measured by Lipper Inc. It is not possible to invest in a benchmark. The
S&P 500 Index, the Russell 2000 Growth Index, and the Morgan Stanley Capital
International Europe, Australasia and Far East Index are unmanaged indices of
stocks which assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4)
---------------- ----------------------- ----------------
IVY GROWTH FUND w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
------ ------ ------ ------ ------ ------
FOR PERIODS ENDING
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
25.63% 30.63% 25.63% 30.63%
C: C: C: C:
1 year 24.28% 24.28% 29.43% 30.43% 29.43% 30.43% 31.78% 31.78%
----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
18.85% 19.05% 18.85% 19.05%
C: C: C: C:
5 year 18.77% 18.77% n/a n/a n/a n/a n/a n/a
----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
n/a n/a n/a n/a
C: C: C: C:
10 year 13.05% 13.02% n/a n/a n/a n/a n/a n/a
----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
14.80% 14.80% 14.77% 14.77%
C: C: C: C:
Since Inception(5) 11.37% 11.37% 15.74% 15.74% 15.74% 15.74% 17.86% 17.86%
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class A commenced operations January 12, 1960; Class B commenced
operations October 22, 1993; Class C commenced operations April 30,
1996; Advisor Class commenced operations April 30, 1998.
Total returns in some periods were higher due to reimbursement of certain Fund
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy Growth Fund will fluctuate and
at redemption shares may be worth more or less than the amount of the original
investment.
5
<PAGE> 22
[IVY LEAF LOGO]
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IVY GROWTH FUND
- --------------------------------------------------------------------------------
6
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 91.66% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 2.99%
Akzo Nobel NV(a)................ 21,139 $ 1,055,145
AssiDoman AB(a)................. 26,800 434,483
Billiton plc(a)................. 107,624 627,916
Broken Hill Proprietary Company
Limited(a).................... 28,800 376,917
Fletcher Challenge
Building(a)................... 108,750 159,931
Fletcher Challenge Paper(a)..... 109,500 76,519
Georgia-Pacific Group........... 35,000 1,776,250
Holderbank Financiere Glaris
AG(a)......................... 459 625,102
Pilkington plc(a)............... 632,282 850,906
PPG Industries, Inc............. 35,000 2,189,687
Praxair, Inc.................... 50,000 2,515,625
Rio Tinto plc(a)................ 19,776 474,270
------------
11,162,751
------------
BUSINESS SERVICES -- 3.63%
CBT Group plc -- Spon
ADR(a)(b)..................... 26,700 894,450
Corporate Services Group
plc(a)........................ 147,500 243,669
CSG Systems International,
Inc.(b)....................... 21,400 853,325
Dendrite International,
Inc.(b)....................... 40,200 1,361,775
FactSet Research Systems Inc.... 23,300 1,855,262
Lason Holdings, Inc.(b)......... 20,000 220,000
NOVA Corporation(b)............. 44,900 1,417,156
Paychex, Inc.................... 33,750 1,350,000
ProBusiness Services, Inc.(b)... 21,600 777,600
Profit Recovery Group
International, Inc.
(The)(b)...................... 39,300 1,043,906
SGS Societe Generale de
Surveillance Holding
S.A.(a)....................... 1,088 1,379,769
Sykes Enterprises, Inc.(b)...... 48,900 2,145,488
------------
13,542,400
------------
CAPITAL GOODS -- 2.86%
Briggs & Stratton Corporation... 15,000 804,375
General Electric Company........ 35,000 5,416,250
Honeywell International Inc..... 40,000 2,307,500
Tyco International Ltd.......... 54,760 2,128,795
------------
10,656,920
------------
COMPUTER EQUIPMENT &
STORAGE -- 6.08%
Dell Computer Corporation(b).... 30,000 1,530,000
EMC Corporation(b).............. 15,000 1,638,750
Hewlett-Packard Company......... 12,500 1,424,219
International Business Machines
Corp.......................... 32,500 3,510,000
Network Appliance, Inc.(b)...... 35,400 2,940,412
PC-Tel, Inc.(b)................. 13,300 698,250
Sun Microsystems, Inc.(b)....... 141,200 10,934,175
------------
22,675,806
------------
CONGLOMERATES -- 0.89%
Cheung Kong Holdings Ltd.(a).... 69,500 882,884
Genting Berhad(a)............... 70,000 248,683
Investor AB(a).................. 102,572 1,440,781
Pacific Dunlop Limited(a)....... 185,000 260,989
Sime Darby Berhad(a)............ 387,000 490,876
------------
3,324,213
------------
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
CONSUMER CYCLICAL -- 4.54%
Dollar Tree Stores, Inc.(b)..... 29,400 $ 1,424,062
Gap, Inc.(The).................. 45,000 2,070,000
General Motors Corporation...... 35,000 2,544,063
Home Depot, Inc................. 30,000 2,056,875
Hornbach Holding AG
Preferred(a).................. 10,685 514,060
Lowe's Companies, Inc........... 40,000 2,390,000
May Department Stores
Company (The)................. 30,000 967,500
Next plc(a)..................... 21,000 201,043
Tommy Hilfiger Corporation(b)... 62,500 1,457,031
Volvo AB -- B Shares(a)......... 28,000 721,056
Wal-Mart Stores, Inc............ 37,500 2,592,187
------------
16,937,877
------------
CONSUMER NON-DURABLES -- 4.94%
Anheuser-Busch Companies,
Inc........................... 40,000 2,835,000
Colgate-Palmolive Company....... 40,000 2,600,000
Compagnie Financiere
Richemont AG(a)............... 220 522,261
Cutter & Buck, Inc.(b).......... 42,300 639,787
Fraser & Neave Ltd. ORD(a)...... 130,000 479,890
Gallaher Group plc(a)........... 134,000 569,075
General Mills, Inc.............. 40,000 1,430,000
H.J. Heinz Company.............. 35,000 1,393,438
Kimberly-Clark Corporation...... 35,000 2,283,750
Lion Nathan Limited(a).......... 116,000 269,199
Nestle AG Registered(a)......... 100 182,229
Panamerican Beverages Inc.(a)... 10,000 205,625
PepsiCo, Inc.................... 55,000 1,938,750
Swatch Group AG, (The)(a)....... 600 687,436
Tate & Lyle plc(a).............. 109,000 713,242
Wm. Wrigley Jr. Company......... 20,000 1,658,750
------------
18,408,432
------------
CONSUMER SERVICES -- 1.92%
Apollo Group, Inc. -- Class
A(b).......................... 32,000 642,000
British Airways plc(a).......... 185,000 1,201,603
International Speedway Corp. --
Class A....................... 17,800 896,675
Lusomundo -- SGPS S.A. Preferred
Shares(a)..................... 51,200 456,729
Premier Parks, Inc.(b).......... 48,900 1,411,987
Sara Lee Corporation............ 30,000 661,875
Speedway Motorsports, Inc.(b)... 25,200 700,875
Tourism Holdings Limited(a)..... 632,044 1,180,009
------------
7,151,753
------------
ELECTRONICS -- 2.26%
Clipsal Industries Limited(a)... 131,000 144,682
Elec & Eltek International Co.
Ltd.(a)....................... 99,500 322,380
Emerson Electric Co............. 25,400 1,457,325
Flextronics International
Ltd.(a)(b).................... 50,800 2,336,800
Jabil Circuit, Inc.(b).......... 15,400 1,124,200
Koninklijke Philips
Electronics NV(a)............. 12,588 1,703,290
Sanmina Corporation(b).......... 13,100 1,308,363
------------
8,397,040
------------
</TABLE>
<PAGE> 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
ENERGY -- 3.74%
Atlantic Richfield Company
(ARCO)...................... 5,000 $ 432,500
BJ Services Company(b)........ 13,000 543,563
BP Amoco plc(a)............... 56,750 570,278
Chevron Corporation........... 20,000 1,732,500
Core Laboratories N.V.(b)..... 26,700 535,669
Exxon Mobil Corporation....... 39,604 3,190,597
Fletcher Challenge
Energy(a)................... 73,750 192,303
Hanover Compressor
Company(b).................. 15,300 577,575
Nabors Industries, Inc.(b).... 17,600 544,500
Noble Drilling
Corporation(b).............. 16,700 546,925
Royal Dutch Petroleum
NY Shares(a)................ 27,500 1,662,031
Shell Transport & Trading Co.
plc(a)...................... 113,699 942,356
Texaco Inc.................... 35,000 1,900,938
Weatherford International,
Inc.(b)..................... 14,100 563,119
--------------
13,934,854
--------------
FINANCIAL SERVICES -- 9.00%
A.F.P. Provida S.A.-Sponsored
ADR(a)...................... 10,300 221,450
Allied Zurich plc(a).......... 41,000 485,025
American International Group,
Inc......................... 15,000 1,621,875
Australia & New Zealand
Banking Group Ltd.(a)....... 43,000 311,781
Bank of America Corporation... 25,000 1,254,687
Bank of Ireland(a)............ 119,350 945,037
Bank of New York Company,
Inc., (The)................. 60,000 2,400,000
Barclay's Bank ORD(a)......... 24,109 693,977
Chase Manhattan Corporation,
(The)....................... 25,000 1,942,188
Concord EFS, Inc.(b).......... 36,000 927,000
Fannie Mae.................... 30,000 1,873,125
Federal Agricultural Mortgage
Corp. Class C(b)............ 24,000 484,500
Federal Home Loan Mortgage
Corporation................. 25,000 1,176,562
Fortis NL NV(a)............... 26,414 946,473
HSBC Holdings plc(a).......... 30,491 427,543
Mellon Financial
Corporation................. 50,000 1,703,125
Merrill Lynch & Co., Inc...... 20,000 1,670,000
Morgan Stanley Dean Witter &
Co.......................... 27,500 3,925,625
National Australia Bank
Ltd.(a)..................... 28,291 431,327
National Westminster Bank
plc(a)...................... 31,500 676,745
Nava Finance Public Company
Limited-Foreign(a)(b)(c).... 40,000 --
Providian Financial
Corporation................. 20,000 1,821,250
Royal & Sun Alliance Insurance
Group plc(a)................ 118,000 879,585
State Street Corporation...... 27,500 2,009,219
UBS AG -- Registered(a)....... 2,400 644,705
United Technologies
Corporation................. 30,000 1,950,000
Wells Fargo Corporation....... 45,000 1,819,687
Westpac Banking Corp.
Ltd.(a)..................... 44,000 302,506
--------------
33,544,997
--------------
HEALTHCARE -- 6.95%
Abbott Laboratories........... 17,500 635,469
Alkermes, Inc.(b)............. 14,400 707,400
Bristol-Myers Squibb
Company..................... 37,500 2,407,031
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Cytyc Corporation(b).......... 16,800 $ 1,025,850
Eclipsys Corporation(b)....... 34,300 878,938
Eli Lilly and Company......... 37,500 2,493,750
Johnson & Johnson............. 35,000 3,259,375
Medicis Pharmaceutical
Corporation -- Class A(b)... 47,200 2,008,950
MedQuist Inc.(b).............. 53,600 1,383,550
Merck & Co, Inc............... 40,000 2,682,500
Merck KGaA(a)................. 10,548 327,740
MiniMed Inc.(b)............... 12,300 900,975
Novartis AG Registered(a)..... 946 1,381,710
Pfizer Inc.................... 20,000 648,750
Pharmacyclics, Inc.(b)........ 7,700 317,625
Renal Care Group, Inc.(b)..... 57,500 1,344,063
Schering-Plough Corporation... 62,500 2,636,719
Sepracor, Inc.(b)............. 8,700 862,931
--------------
25,903,326
--------------
INTERNET & ELECTRONIC
COMMERCE -- 6.26%
About.com, Inc.(b)............ 14,200 1,274,450
Amazon.com, Inc.(b)........... 5,100 388,237
America Online, Inc.(b)....... 70,000 5,280,625
CNET, Inc.(b)................. 15,800 896,650
Digex, Inc.(b)................ 12,500 859,375
EarthWeb Inc.(b).............. 23,500 1,182,344
F5 Networks, Inc.(b).......... 5,600 638,400
InfoSpace.com, Inc.(b)........ 9,300 1,990,200
Inktomi Corporation(b)........ 7,476 663,495
Intertrust Technologies
Corporation(b).............. 4,800 564,600
McAfee.com Corporation(b)..... 12,200 549,000
National Information
Consortium, Inc.(b)......... 27,200 870,400
Network Solutions Inc.(b)..... 8,300 1,805,769
Pilot Network Services,
Inc.(b)..................... 32,800 787,200
QRS Corporation(b)............ 27,100 2,826,869
RADWARE Ltd.(b)............... 14,300 616,688
RoweCom Inc.(b)............... 13,500 612,563
Stamps.com Inc.(b)............ 15,100 628,537
WebTrends Corporation(b)...... 11,000 891,000
--------------
23,326,402
--------------
NETWORK EQUIPMENT &
SOFTWARE -- 9.19%
American Power Conversion
Corporation(b).............. 79,400 2,094,175
Cisco Systems, Inc.(b)........ 216,500 23,192,563
Clarent Corporation(b)........ 17,600 1,368,400
Concord Communications,
Inc.(b)..................... 24,200 1,073,875
Extreme Networks, Inc.(b)..... 17,000 1,419,500
Micromuse Inc.(b)............. 17,600 2,992,000
Visual Networks, Inc.(b)...... 26,800 2,123,900
--------------
34,264,413
--------------
PROPERTY DEVELOPERS AND
INVESTMENT -- 0.08%
Sime UEP Properties
Berhad(a)................... 200,000 281,577
--------------
SEMICONDUCTOR EQUIPMENT --
2.90%
Applied Materials, Inc.(b).... 27,500 3,483,906
ASM Lithography Holding
NV(a)(b).................... 5,800 659,750
Etec Systems(b)............... 12,800 574,400
KLA-Tencor Corporation(b)..... 11,400 1,269,675
</TABLE>
<PAGE> 24
[IVY LEAF LOGO]
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IVY GROWTH FUND
- --------------------------------------------------------------------------------
8
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Novellus Systems, Inc.(b)..... 28,100 $ 3,443,128
Photronics, Inc.(b)........... 13,700 392,163
Teradyne, Inc.(b)............. 14,800 976,800
--------------
10,799,822
--------------
SEMICONDUCTORS -- 4.53%
Altera Corporation(b)......... 56,500 2,800,281
Galileo Technology
Ltd.(a)(b).................. 20,000 482,500
Integrated Device Technology,
Inc.(b)..................... 23,600 684,400
Intel Corporation............. 76,000 6,255,750
Linear Technology
Corporation................. 16,000 1,145,000
Maxim Integrated Products,
Inc.(b)..................... 29,400 1,387,313
PMC-Sierra, Inc.(a)(b)........ 5,300 849,656
Texas Instruments
Incorporated................ 20,000 1,937,500
Xilinx, Inc.(b)............... 30,000 1,364,063
--------------
16,906,463
--------------
SOFTWARE -- 5.79%
Adobe Systems Incorporated.... 10,000 672,500
BMC Software Inc.(b).......... 7,000 559,563
Citrix Systems, Inc.(b)....... 19,600 2,410,800
Legato Systems, Inc.(b)....... 29,900 2,057,494
Microsoft Corporation(b)...... 97,600 11,394,800
Peregrine Systems, Inc.(b).... 14,800 1,222,850
Siebel Systems, Inc.(b)....... 10,200 856,800
Symantec Corporation(b)....... 12,900 756,262
Veritas Software Corp.(b)..... 11,550 1,653,094
--------------
21,584,163
--------------
SYSTEM INTEGRATORS -- 0.84%
First Consulting Group,
Inc.(b)..................... 69,200 1,072,600
Luminant Worldwide
Corporation(b).............. 1,000 45,500
Whittman-Hart, Inc.(b)........ 37,800 2,027,025
--------------
3,145,125
--------------
TELECOMMUNICATION
EQUIPMENT -- 3.83%
Advanced Fibre Communications,
Inc.(b)..................... 18,800 840,125
Comverse Technology,
Inc.(b)..................... 15,650 2,265,337
E-Tek Dynamics, Inc.(b)....... 12,300 1,655,888
JDS Uniphase Corporation(b)... 17,200 2,774,575
Lucent Technologies Inc....... 27,500 2,057,344
Netopia, Inc.(b).............. 11,200 608,300
Nortel Networks
Corporation(a).............. 17,500 1,767,500
Tellabs, Inc.(b).............. 36,200 2,323,587
--------------
14,292,656
--------------
TELECOMMUNICATION
SERVICES -- 8.44%
ALLTEL Corporation............ 47,500 3,927,656
AT&T Corporation.............. 57,500 2,918,125
Bell Atlantic Corporation..... 37,500 2,308,594
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
BellSouth Corporation......... 45,000 $ 2,106,563
Cia de Telecomunicaciones de
Chile S.A. Sponsored
ADR(a)...................... 10,625 193,906
Global Crossing Ltd.(a)(b).... 16,292 814,600
Koninklijke KPN NV(a)......... 11,961 1,161,688
MCI WorldCom, Inc.(b)......... 22,500 1,193,906
McLeodUSA Incorporated(b)..... 39,700 2,337,337
MediaOne Group, Inc.(b)....... 12,500 960,156
Metromedia Fiber Network,
Inc.(b)..................... 34,600 1,658,638
Nextel Communications,
Inc.(b)..................... 21,600 2,227,500
NEXTLINK Communications,
Inc.(b)..................... 9,400 780,787
Pac-West Telecomm, Inc.(b).... 50,000 1,325,000
PowerGen plc(a)............... 68,210 485,084
PSINet Inc.(b)................ 28,085 1,734,249
Rhythms NetConnections
Inc.(b)..................... 21,000 651,000
SBC Communications Inc........ 47,500 2,315,625
Telecom Corporation of New
Zealand Limited(a).......... 119,000 558,528
Telefonica S.A. -- Sponsored
ADR(a)...................... 0 13
WinStar Communications,
Inc.(b)..................... 24,000 1,797,000
--------------
31,455,955
--------------
TOTAL INVESTMENTS -- 91.66%
(Cost -- $197,178,303)
(Cost on Federal income tax
basis -- $197,575,258).... 341,696,945
OTHER ASSETS, LESS LIABILITIES -- 8.34% 31,110,177
--------------
NET ASSETS -- 100%............ $ 372,807,122
==============
ADR -- American Depository Receipt
NY Shares -- New York Shares
ORD -- Ordinary
(a) Foreign security
(b) Non-income producing security
(c) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............ $ 149,805,115
Gross unrealized depreciation............ (5,286,473)
--------------
Net unrealized appreciation for
financial statement purposes..... 144,518,642
Less: tax basis adjustments.............. (396,955)
--------------
Net unrealized appreciation for
Federal income tax purposes...... $ 144,121,687
==============
</TABLE>
<TABLE>
<CAPTION>
Purchases and sales of securities other than short-term obligations
aggregated $159,714,838 and $233,514,468, respectively, for the
period ended December 31, 1999.
<S> <C> <C>
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $197,178,303)..... $341,696,945
Cash........................................................ 42,716,017
Receivables
Fund shares sold.......................................... 6,126
Dividends and interest.................................... 278,888
Other assets................................................ 40,976
------------
Total assets.............................................. 384,738,952
------------
LIABILITIES
Payables
Investments purchased..................................... 11,493,135
Fund shares repurchased................................... 17,273
Management fee............................................ 256,818
12b-1 service and distribution fees....................... 22,963
Other payables to related parties......................... 105,325
Accrued expenses............................................ 36,316
------------
Total liabilities......................................... 11,931,830
------------
NET ASSETS.................................................. $372,807,122
============
CLASS A
Net asset value and redemption price per share
($363,723,052/16,420,549 shares outstanding).............. $ 22.15
============
Maximum offering price per share ($22.15 x 100/94.25)*...... $ 23.50
============
CLASS B
Net asset value, offering price and redemption price** per
share ($8,070,363/371,636 shares outstanding)............. $ 21.72
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($575,634/27,045 shares outstanding)................ $ 21.28
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($438,073/19,751 shares outstanding)................ $ 22.18
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $228,466,455
Undistributed net realized gain on investments and foreign
currency transactions................................... 129,814
Accumulated net investment loss........................... (303,906)
Net unrealized appreciation on investments and foreign
currency transactions................................... 144,514,759
------------
NET ASSETS.................................................. $372,807,122
============
</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> 26
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
10
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 3,729,792
Interest.................................................. 276,258
-----------
4,006,050
-----------
EXPENSES
Management fee............................................ $2,731,358
Transfer agent............................................ 778,713
Administrative services fee............................... 321,469
Custodian fees............................................ 107,384
Blue Sky fees............................................. 33,647
Auditing and accounting fees.............................. 46,435
Shareholder reports....................................... 62,698
Fund accounting........................................... 113,237
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 234,816
Legal..................................................... 32,224
Other..................................................... 23,257
-----------
Total expenses........................................ 4,494,478
-----------
NET INVESTMENT LOSS......................................... (488,428)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 58,569,033
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 34,926,244
-----------
Net gain on investment transactions................... 93,495,277
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $93,006,849
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment (loss) income.............................. $ (488,428) $ 60,787
Net realized gain (loss) on
Investments and foreign currency transactions........... 58,569,033 1,904,081
Written options......................................... -- (771,173)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 34,926,244 40,776,096
------------ ------------
Net increase resulting from operations................ 93,006,849 41,969,791
------------ ------------
Class A distributions
Dividends
From net investment income.............................. -- (237,344)
In excess of net investment income...................... -- (24,015)
Distributions from capital gains.......................... (56,548,027) (6,250,567)
------------ ------------
Total distributions to Class A shareholders........... (56,548,027) (6,511,926)
------------ ------------
Class B distributions
Dividends
From net investment income.............................. -- (3,953)
In excess of net investment income...................... -- (400)
Distributions from capital gains.......................... (1,211,582) (104,113)
------------ ------------
Total distributions to Class B shareholders........... (1,211,582) (108,466)
------------ ------------
Class C distributions
Dividends
From net investment income.............................. -- (201)
In excess of net investment income...................... -- (20)
Distributions from capital gains.......................... (54,912) (5,297)
------------ ------------
Total distributions to Class C shareholders........... (54,912) (5,518)
------------ ------------
Advisor Class distributions
Dividends
From net investment income.............................. -- (255)
In excess of net investment income...................... -- (26)
Distributions from capital gains.......................... (66,750) (6,708)
------------ ------------
Total distributions to Advisor Class shareholders..... (66,750) (6,989)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... 10,824,381 (36,404,872)
Class B................................................... 2,569,837 (5,127)
Class C................................................... 291,220 (167,500)
Advisor Class............................................. 53,759 349,248
------------ ------------
Net increase (decrease) resulting from Fund share
transactions......................................... 13,739,197 (36,228,251)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 48,864,775 (891,359)
NET ASSETS
Beginning of period....................................... 323,942,347 324,833,706
------------ ------------
END OF PERIOD............................................. $372,807,122 $323,942,347
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 28
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
12
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- ----------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 19.88 $ 17.80 $ 17.76 $ 16.75 $ 13.91
-----------------------------------------------------------
Income from investment operations
Net investment (loss) income..................... (.32) .01 .02 .02(a) .05(a)
Net gain on securities (both realized and
unrealized).................................... 6.61 2.49 1.98 2.86 3.73
-----------------------------------------------------------
Total from investment operations................. 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 gains............................. 4.02 .40 1.81 1.74 .89
In excess of capital gains..................... -- -- -- -- .03
-----------------------------------------------------------
Total distributions............................ 4.02 .42 1.96 1.87 .94
-----------------------------------------------------------
Net asset value, end of period..................... $ 22.15 $ 19.88 $ 17.80 $ 17.76 $ 16.75
===========================================================
Total return (%)(b)................................ 31.87 14.05 11.69 17.22 27.33
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $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 (%)................ 1.38 1.38 1.38 1.45 1.60
Ratio of net investment (loss) income to
average net assets (%)........................... (.13) .03 .13 .13(a) .32(a)
Portfolio turnover rate (%)........................ 51 59 39 72 41
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS B December 31,
- ----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 19.60 $ 17.72 $ 17.69 $ 16.75 $ 13.91
-----------------------------------------------------------
Income from investment operations
Net investment loss.............................. (.21) (.16) (.14) (.13)(a) (.08)(a)
Net gain on securities (both realized and
unrealized).................................... 6.17 2.46 1.96 2.81 3.71
-----------------------------------------------------------
Total from investment operations................. 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 gains............................. 3.84 .40 1.72 1.74 .73
In excess of capital gains..................... -- -- -- -- .06
-----------------------------------------------------------
Total distributions............................ 3.84 .42 1.79 1.74 .79
-----------------------------------------------------------
Net asset value, end of period..................... $ 21.72 $ 19.60 $ 17.72 $ 17.69 $ 16.75
===========================================================
Total return (%)(b)................................ 30.63 12.99 10.69 16.02 26.13
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 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 (%)................ 2.34 2.32 2.30 2.37 2.56
Ratio of net investment loss to average net assets
(%).............................................. (1.09) (.90) (.79) (.79)(a) (.64)(a)
Portfolio turnover rate (%)........................ 51 59 39 72 41
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 29
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
13
<TABLE>
<CAPTION>
for the period
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $19.27 $17.47 $17.59 $18.46
----------------------------------------------------
Income from investment operations
Net investment loss.............................. (.25) (.16) (.07) (.06)(a)
Net gain on securities (both realized and
unrealized).................................... 6.08 2.38 1.86 1.02
----------------------------------------------------
Total from investment operations................. 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 gains................. 3.82 .40 1.78 1.74
----------------------------------------------------
Total distributions............................ 3.82 .42 1.91 1.83
----------------------------------------------------
Net asset value, end of period..................... $21.28 $19.27 $17.47 $17.59
====================================================
Total return (%)................................... 30.43(b) 12.72(b) 10.58(b) 5.20 (c
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 576 $ 263 $ 400 $ 90
Ratio of expenses to average net assets
With expense reimbursement (%)................... -- -- -- 2.44 (d
Without expense reimbursement (%)................ 2.47 2.53 2.33 2.44 (d
Ratio of net investment loss to average net assets
(%).............................................. (1.22) (1.11) (.82) (.86)(a)(d)
Portfolio turnover rate (%)........................ 51 59 39 72
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year April 30, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- -----------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA -----------------------------------
<S> <C> <C>
Net asset value, beginning of period............... $19.91 $20.36
-----------------------------------
Income (loss) from investment operations
Net investment (loss) income..................... (.04) .03
Net gain (loss) on securities (both realized and
unrealized).................................... 6.33 (.06)
-----------------------------------
Total from investment operations................. 6.29 (.03)
-----------------------------------
Less distributions
Dividends from net investment income............. -- .02
Distributions from capital gains................. 4.02 .40
-----------------------------------
Total distributions............................ 4.02 .42
-----------------------------------
Net asset value, end of period..................... $22.18 $19.91
===================================
Total return (%)................................... 31.78(b) (.14)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 438 $ 347
Ratio of expenses to average net assets
Without expense reimbursement (%)................ 1.42 1.18 (d
Ratio of net investment (loss) income to
average net assets (%)........................... (.17) .24 (d
Portfolio turnover rate (%)........................ 51 59
</TABLE>
<TABLE>
<S> <C> <C> <C>
(a) Net investment income (b) Total return does not (c) Total return represents (d) Annualized
(loss) is net of expenses reflect a sales charge. aggregate total return and
reimbursed by Manager. does not reflect a sales
charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 30
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
14
NOTES TO FINANCIAL STATEMENTS
Ivy Growth Fund (the "Fund"), is a diversified series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B, Class C and Advisor Class are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market Inc. ("Nasdaq") system are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities, or on the basis of
dealer quotes. All other securities are valued at their fair value as determined
in good faith by the Valuation Committee of the Board. As of December 31, 1999,
such securities were determined to have no value by the Valuation Committee and
have been noted as such in the Portfolio of Investments.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on ex-dividend date. If
such information is not available on the ex-dividend date, corporate actions are
recorded as soon as reliable information is available from the Fund's sources.
Realized gains and losses from security transactions are calculated on an
identified cost basis.
OPTIONS -- The Fund may invest in option contracts for the purpose of increasing
or decreasing its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect the value of the
Fund's securities. An option is a right to buy or sell a particular security at
a specified price within a limited period of time. The buyer of the option, in
return for a premium paid to the seller, has the right to buy, in the case of a
call option, or sell, in the case of a put option, the underlying security of
the contract. An option on a stock index gives the purchaser the right to
receive from the seller cash equal to the difference between the closing price
of the index and the exercise price of the option.
When the Fund writes or purchases an option, an amount equal to the premium
received or paid by the Fund is recorded as a liability or an asset and is
subsequently adjusted to the current market value of the option written or
purchased. Premiums received or paid from writing or purchasing options which
expire unexercised are treated by the Fund on the expiration date as realized
gains or losses. The difference between the premium and the amount paid or
received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the cost of the purchase
or proceeds of the sale in determining whether the Fund has realized a gain or
loss on the transaction. For options on indices, cash settlement by the Fund is
required if the option is exercised. The Fund, as writer of an option, has no
control over whether the underlying securities may be sold (call) or purchased
(put) and a result bears the market risk of an unfavorable change in the price
of the securities underlying the written option. Exchange traded written options
are valued daily at the last sale price or, in the absence of a sale, at the
calculated means of the bid and asked prices, subject to certain reasonability
criteria on the spread between the bid and asked prices.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
Pursuant to Code Section 852, the Fund designates $49,277,017 as long-term
capital gain distributions for its taxable year ended December 31, 1999.
<PAGE> 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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 investments in 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.
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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $10,389.
Under Service and Distribution Plans, the Fund reimburses IMDI for service fee
payments made to brokers at an annual rate not to exceed .25% of its average net
assets of shares issued after December 31, 1991, excluding Advisor Class. Class
B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net assets of Class B and Class C . IMDI may
use such distribution fee for purposes of advertising and marketing shares of
the Fund. Such fees of $170,946, $61,058 and $2,812, for Class A, Class B and
Class C, respectively, are reflected as 12b-1 service and distribution fees in
the Statement of Operations.
Ivy Mackenzie Services Corp.(IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $760,736, $15,688, $1,078 and $1,211, for Class A, Class B, Class C
and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 767,960 $ 16,672,824 865,388 $ 15,843,739
Issued on
reinvestment of
distributions....... 2,388,070 52,346,427 305,995 5,966,659
Repurchased.......... (2,750,549) (58,194,870) (3,129,049) (58,215,270)
---------- ------------ ---------- ------------
Net increase/
(decrease).......... 405,481 $ 10,824,381 (1,957,666) $(36,404,872)
========== ============ ========== ============
</TABLE>
<PAGE> 32
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
16
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 183,614 $ 3,834,229 87,314 $ 1,611,127
Issued on
reinvestment of
distributions....... 47,990 1,031,781 4,946 95,108
Repurchased.......... (109,427) (2,296,173) (92,930) (1,711,362)
---------- ------------ ---------- ------------
Net increase/
(decrease).......... 122,177 $ 2,569,837 (670) $ (5,127)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 16,764 $ 356,582 9,823 $ 171,281
Issued on
reinvestment of
distributions....... 1,881 39,625 176 3,330
Repurchased.......... (5,236) (104,987) (19,282) (342,111)
---------- ------------ ---------- ------------
Net increase/
(decrease).......... 13,409 $ 291,220 (9,283) $ (167,500)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 4,549 $ 98,336 20,466 $ 408,401
Issued on
reinvestment of
distributions....... 3,041 66,750 358 6,989
Repurchased.......... (5,250) (111,327) (3,413) (66,142)
---------- ------------ ---------- ------------
Net increase......... 2,340 $ 53,759 17,411 $ 349,248
========== ============ ========== ============
</TABLE>
<PAGE> 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY GROWTH FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 34
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH FUND
- --------------------------------------------------------------------------------
18
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot......... 8,451,671 345,839
Keith J. Carlson........... 8,446,589 350,921
Stanley Channick........... 8,395,594 401,916
Roy J. Glauber............. 8,413,653 383,857
Edward M. Tighe............ 8,442,413 355,097
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------
FOR: AGAINST: ABSTAIN:
- ------------------------------
<S> <C> <C>
8,375,547 86,627 355,337
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,313,875 438,351 631,672 413,612
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,198,175 552,429 633,294 413,612
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,317,699 433,875 632,324 413,612
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,306,722 444,199 632,976 413,612
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,303,308 447,145 633,445 413,612
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,244,409 506,628 632,861 413,612
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,251,595 501,981 630,322 413,612
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,315,028 436,833 632,037 413,612
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
7,259,970 489,168 634,760 413,612
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 35
19
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 36
02IGFX123199
<PAGE> 37
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31,1999
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
[MACKENZIE LOGO]
IVY INTERNATIONAL FUND II
OVERVIEW
For the 12-month period ending December 31, 1999, the Ivy International Fund II
returned 27.79%, outperforming its benchmark, the Morgan Stanley Capital
International Europe, Australasia, Far East (MSCI EAFE) Index, which was up
26.96% for the same period. (For the Fund's total return with sales charge and
performance commentary, please refer to page 4.) We believe the Fund's
outperformance can be attributed to two primary factors: its overweighting (as
compared to the MSCI EAFE Index) in Asian equities and exposure to cyclical
stocks in Europe. Our research confirms that Asian equities posted a strong
recovery in 1999 following one and a half years of economic crisis; and European
cyclical stocks rebounded in 1999 reflecting a more normalization of global
economic growth.
The Ivy International Fund II is designed to provide investors with
exposure to high-quality, large-cap companies located in countries outside the
United States. The Fund employs a disciplined, value-driven investment style
that focuses on a company's long-term earnings capacity and asset values. The
management team evaluates opportunities on a variety of measures; buying stocks
at a price our research indicates is a discount to the fair value.
MARKET COMMENTARY
The magnitude of the turnaround in the world's stock markets surprised even
optimistic global investors. In 1999, foreign equity markets (as measured by the
MSCI EAFE Index) outperformed the S&P 500 Index for the first time since 1994.
In our view, improving economic activity in Asia, Latin America and Europe,
which unfolded during the first several months of the year, caused investors to
refocus their attention overseas in anticipation of a recovery in foreign equity
markets. This caused the MSCI EAFE Index to move higher - outperforming the S&P
500 by almost six percentage points. According to our research, virtually every
major economic zone in the world is in a strong or improving stage in the
economic cycle, thereby supporting the foreign equity markets as we move into
2000.
GROWTH IN EUROPE CONTINUES.
We believe Europe remains the most attractive investment area at this time.
Accordingly, 64% of the Ivy International Fund II is invested in Europe. Our
research shows that in recent months there were a number of encouraging signs of
growth coming from the 11 nations that comprise the Economic and Monetary Union
(EMU), particularly from Germany and France. On average, gross domestic product
(GDP) in
<PAGE> 38
Europe grew more than 4% in the third quarter of 1999, on a seasonally adjusted
basis, and unemployment fell below 10% for the first time in years. We
anticipate that upgrades in earnings and GDP estimates across continental Europe
may continue to drive the markets through 2000.
"WE EXPECT THE EURO TO GAIN STRENGTH AS ECONOMIC GROWTH ACCELERATES ON THE
CONTINENT, WHICH SHOULD PROVIDE INCREMENTAL RETURNS FOR US DOLLAR-BASED
INVESTORS IN THE COMING YEAR."
Within this environment, we believe that an interest-rate hike is
likely from the European Central Bank (ECB), but that interest rates and
inflation should remain relatively low. In our view, the ECB's half-point rise
in short-term interest rates in early November was precautionary and leaves real
short-term rates at over 1%. We believe that concern about rising interest rates
throughout 1999 put severe pressure on rate-sensitive sectors, particularly
financial stocks. Beginning in the fourth quarter of the year, banks and
insurance companies began appearing with regularity on our research screens as
representing good long-term value. In response, we increased the size of
existing holdings in this sector, and added a few new positions, including three
Swiss financial firms.
Our research shows that, in general, exports from Europe remained weak
throughout 1999. However, we believe a recovery in Asian demand benefited some
of the Fund's European holdings. Luxury goods companies, for example, showed a
strong rebound in sales growth as Japanese and other Asian consumers returned to
the stores.
We think that weakness in the euro, which lost about 16% of its value
relative to the dollar and even more relative to the yen, should result in a
sizable pickup in export growth in 2000. Our recent economic data supports this,
with third-quarter exports from France showing the strongest increase in 10
years. Purchasing-power analysis, which compares the cost to buy a basket of
goods in one currency versus another, indicates that exchange rates for deutsche
mark-linked currencies, including the euro (since its introduction in January
1999) are at their cheapest levels in 25 years relative to the dollar and the
yen. We expect the euro to gain strength if economic growth on the Continent
continues to accelerate, which may provide incremental returns for US
dollar-based investors in the coming year.
We believe that we are just starting to see the impact of EMU on
European corporate profitability. Consolidation activity is taking place in
virtually every industry throughout continental Europe and the UK, including
telecoms, pharmaceuticals, autos, energy, utilities, banks, and insurance
companies. And, we believe there is more to come. Recently proposed tax changes
in Germany--effectively eliminating capital gains tax on asset sales for
corporations--could clear the way for long-overdue corporate restructuring in
that market. We expect these trends to continue across the Continent over the
next three to five years. In the short run, we believe equity prices should
continue to respond favorably to takeover announcements, while longer term,
equity prices should benefit from strong earnings growth as costs decline,
productivity rises, and economies of scale are realized.
ASIA'S RECOVERY.
We also found attractive investment opportunities in Asia, where regional
economies staged a recovery in 1999. According to our research, in less than two
years, industrial production in the crisis economies in Asia is back to its
precrisis levels. Our analysis shows that a combination of looser monetary
conditions and a strong recovery in exports aided in the first stage of economic
growth throughout Asia. We expect that the second stage of the recovery may be
driven by domestic demand. Recent economic statistics coming out of Asia
indicate that domestic conditions are improving across the region. We believe a
rebound in consumer confidence is critical to dri-
2
<PAGE> 39
ving the regional recovery further. We anticipate that domestic demand will, in
turn, fuel an increase in intraregional trade, and may be an important step in
returning Asia's economies to the virtuous circle of growth that was experienced
in the late 1980s and early 1990s.
We are encouraged by the change taking place in corporate Japan.
Japanese managers, across a variety of industries, are announcing aggressive
restructuring programs aimed at reducing costs, increasing profitability, and
improving transparency. While the majority of this type of activity is occurring
in industries where foreign competition is most fierce, we think that pressure
on restructuring should only intensify as the Japanese economy continues to open
up to the outside world. In our view, Japanese corporations still suffer from
dismal returns; so on a current earnings basis, equities in Japan still look
expensive. However, we believe the potential reward for investing in companies
that make the necessary changes could be significant.
COMMODITY PRICES RISE IN LATIN AMERICA.
In our opinion, stronger growth in the developed world leads to higher demand
for emerging-market exports and higher commodity prices. We believe that Latin
America, in particular, should benefit from higher commodity prices, as primary
materials make up a large portion of the region's economic output. Our research
shows that this year's increases in oil prices have already benefited oil
exporters in Argentina, Venezuela, and Peru. If iron ore and copper prices
improve as we anticipate, it should provide an economic boost in Brazil and
Chile.
THE TECHNOLOGY STORY.
As we approached the end of 1999, the technology mania that was pervasive in US
equity markets spread to the rest of the world. It seemed as though any company
with hopes of becoming an Internet player was suddenly awarded very lofty
valuations based on projections of cash flows to be generated 25 years hence.
Because Ivy International Fund II is managed with a disciplined, value approach,
we looked at the high valuations of these companies with great skepticism. The
Internet is undeniably changing the way business is conducted around the globe.
However, with the absence of profits and the presence of a high level of
speculation, we believe these companies are more suitable for funds managed with
a more growth-oriented investment style or that specialize in the technology
sector, such as the Ivy Global Science & Technology Fund.
A CHANGE IN MARKET LEADERSHIP.
In our view, valuations in international markets highlight the attractiveness of
overseas opportunities, particularly when compared to the US market. Despite
recent strong performance, we feel emerging markets equities are still trading
at a substantial discount to US equities. In the developed world, Europe and
Asia may offer considerable value, with earnings growth estimates substantially
higher than those expected in the US. While some investors might argue that
foreign markets should trade at a discount to the US, we believe this has not
always been the case. Our research shows that, on average, European markets have
traded in line with US equity valuations and at a premium between 1976 and 1979,
1982 and 1989, and 1994 and 1996. In the early 1990s, high-growth economies in
Asia, such as Singapore and Hong Kong, traded at significant premiums.
In our view, 1999's strong performance in foreign markets provides a
pointed reminder to domestic investors that the US market is not the only game
in town. While US equities may continue to perform well, history tells us that
nothing lasts forever. We believe that a normalization of US stock prices may
provide a catalyst for a change in market leadership in favor of international
markets. In addition, in our view, an ongoing economic recovery in Asia, as well
as corporate restructuring, should be supportive to stocks in the region. We
believe that Europe, with its large and improving domestic economy, may surprise
investors as we move into the new millennium.
3
<PAGE> 40
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (5/97) OF A $10,000 INVESTMENT
[CHART]
IVY INTERNATIONAL FUND II
PERFORMANCE COMMENTARY
For the 12 months ended December 31, 1999, the Ivy International Fund II
returned 27.79%, outpacing its benchmark, the Morgan Stanley Capital
International (MSCI) Europe, Australasia, Far East (EAFE) Index, which gained
26.96% for the same period. With 23% of the Fund invested in Asian stocks at the
start of 1999, we believe the Fund was well positioned to benefit as economies
and stock markets in the region rebounded. In addition, following a large
sell-off in the second half of 1998, our research showed that European cyclicals
staged a strong recovery as global economic growth normalized during 1999.
The Lipper Average International Fund represents the performance of the average
international fund as measured by Lipper Inc. It is not possible to invest in a
benchmark. The Morgan Stanley Capital International (MSCI) Europe, Australasia,
Far East (EAFE) Index is an unmanaged index of stocks which assumes reinvestment
of dividends and, unlike Fund returns, does not reflect any fees or expenses. It
is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4) Class 1(5)
---------------- ---------------------------------- ---------------- ----------------
IVY INTERNATIONAL FUND II w/ w/o w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING ------ ------ --------------- -------------- ------- ------ ------ ------
DECEMBER 31,1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
----- ----- ----- ----- ----- ----- ----- ----- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
21.81% 26.81% 21.58% 26.58%
1 year C: C: C: C:
20.44% 20.33% 25.91% 26.91% 25.66% 26.66% 28.30% 28.18% n/a n/a
----- ----- ----- ----- ----- ----- ----- ----- --- ---
B: B: B: B:
6.04% 7.07% 5.90% 6.93%
Since Inception(6) C: C: C: C:
5.51% 5.42% 7.08% 7.08% 6.94% 6.94% 14.33% 14.21% n/a n/a
----- ----- ----- ----- ----- ----- ----- ----- --- ---
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class I shares are not subject to an initial sales charge or a
CDSC. There were no Class I shares outstanding.
(6) Class A, Class B and Class C commenced operations May 13, 1997. Advisor
Class commenced operations February 23, 1998.
Total returns were higher due to reimbursement of certain Fund
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of Ivy
International Fund II will fluctuate and at redemption shares may be
worth more or less than the amount of the original investment.
4
<PAGE> 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 96.42% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 1.94%
- -------------------------------
SOUTH AFRICA -- 1.94%
Anglo American plc.............. 16,126 $ 1,039,705
Liberty International plc....... 21,310 160,062
Liberty Life Association of
Africa Limited................ 45,707 527,029
Nampak Limited.................. 200,948 603,738
South African Breweries plc..... 81,682 830,412
Standard Bank Investment
Corporation Limited........... 53,604 222,424
------------
3,383,370
------------
ASIA/PACIFIC -- 24.52%
- -------------------------------
AUSTRALIA -- 3.78%
Australia & New Zealand Banking
Group Ltd..................... 201,700 1,462,470
Broken Hill Proprietary Company
Limited....................... 108,200 1,416,058
National Australia Bank Ltd..... 104,123 1,587,467
Pacific Dunlop Limited.......... 717,520 1,012,243
Westpac Banking Corp. Ltd....... 164,000 1,127,521
------------
6,605,759
------------
HONG KONG -- 2.94%
Cheung Kong Holdings Ltd........ 204,000 2,591,486
HSBC Holdings plc............... 66,200 928,253
Jardine Matheson Holdings
Ltd........................... 219,600 865,224
Jardine Strategic Holdings
Ltd........................... 378,000 752,220
------------
5,137,183
------------
JAPAN -- 9.53%
Canon Inc....................... 62,000 2,459,283
Fuji Photo Film ORD............. 49,000 1,785,648
Matsushita Electric Industrial
Co............................ 87,000 2,405,451
Sharp Corporation............... 134,000 3,423,476
Sony Corporation................ 22,200 6,571,831
------------
16,645,689
------------
MALAYSIA -- 1.08%
Berjaya Sports Toto Berhad(a)... 202,000 435,892
Genting Berhad.................. 119,000 422,760
Sime Darby Berhad............... 610,000 773,732
Sime UEP Properties Berhad...... 187,000 263,275
------------
1,895,659
------------
NEW ZEALAND -- 3.33%
Fletcher Challenge Building..... 253,123 372,251
Fletcher Challenge Energy....... 85,488 222,910
Fletcher Challenge
Forestry(a)................... 320,962 128,884
Fletcher Challenge Paper........ 160,540 112,187
Lion Nathan Limited............. 360,000 835,445
Telecom Corporation of New
Zealand Limited............... 420,000 1,971,274
Tourism Holdings Limited........ 1,163,769 2,172,726
------------
5,815,677
------------
PHILIPPINES -- 0.19%
Benpres Holdings Corporation
Sponsored GDR(a).............. 109,900 336,569
------------
SINGAPORE -- 3.67%
Clipsal Industries Limited...... 377,000 416,373
DBS Land Ltd.................... 305,000 600,478
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Elec & Eltek International Co.
Ltd........................... 183,300 $ 593,892
Fraser & Neave Ltd. ORD......... 245,000 904,409
Overseas Union Bank Ltd......... 373,205 2,184,116
Singapore Airlines
Ltd. -- Foreign Registered.... 38,000 431,091
United Overseas Bank Ltd. --
Foreign Registered............ 144,672 1,276,514
------------
6,406,873
------------
THAILAND -- 0.00%
Nava Finance Public Company
Limited -- Foreign(a)(b)...... 7,300 --
------------
EUROPE -- 64.40%
- -------------------------------
DENMARK -- 1.74%
Den Danske Bank Group........... 13,462 1,468,713
Unidanmark A/S.................. 22,500 1,575,899
------------
3,044,612
------------
FINLAND -- 1.17%
Metso Oyj(a).................... 79,182 1,023,798
Stora Enso Oyj -- R Shares...... 58,958 1,022,911
------------
2,046,709
------------
FRANCE -- 13.83%
Alcatel S.A..................... 9,600 2,193,836
Banque Nationale de Paris....... 36,119 3,316,113
Compagnie Generale des
Etablissements Michelin Class
B............................. 40,000 1,563,590
Groupe Danone................... 4,900 1,149,238
Pernod-Ricard................... 28,100 1,599,753
Peugeot Citroen................. 9,122 2,060,830
Schneider S.A................... 18,709 1,461,722
Scor S.A........................ 39,000 1,712,131
Societe Generale................ 13,100 3,033,063
Societe Generale d'Enterprises
S.A........................... 13,500 629,194
Suez Lyonnaise des Eaux......... 9,664 1,541,080
Total S.A. ADR.................. 25,100 1,738,175
Total S.A. -- B Shares.......... 16,321 2,167,508
------------
24,166,233
------------
GERMANY -- 4.56%
Adidas-Salomon AG............... 19,600 1,463,560
DaimlerChrysler AG.............. 20,467 1,598,048
Deutsche Lufthansa AG........... 13,739 323,609
Hornbach Holding AG Preferred... 32,994 1,587,356
Merck KGaA...................... 49,555 1,539,740
Volkswagen AG................... 26,040 1,461,595
------------
7,973,908
------------
IRELAND -- 1.14%
Bank of Ireland................. 251,252 1,989,458
------------
ITALY -- 1.11%
Banca Popolare di Milano........ 250,000 1,936,947
------------
NETHERLANDS -- 7.30%
Akzo Nobel NV................... 41,002 2,046,598
Fortis NL NV.................... 52,910 1,895,885
Hunter Douglas NV............... 29,500 798,333
ING Groep NV.................... 28,800 1,730,244
Koninklijke KPN NV.............. 23,895 2,320,753
</TABLE>
<PAGE> 42
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
- --------------------------------------------------------------------------------
6
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Koninklijke (Royal) Philips
Electronics NV.............. 21,975 $ 2,973,451
Unilever NV -- NY Shares...... 18,214 991,525
--------------
12,756,789
--------------
NORWAY -- 0.66%
Norsk Hydro A.S. Sponsored
ADR......................... 27,000 1,154,250
--------------
PORTUGAL -- 1.68%
Lusomundo -- SGPS S.A.
Preferred Shares............ 55,021 490,814
Portugal Telecom S.A. --
Sponsored ADR............... 224,500 2,441,438
--------------
2,932,252
--------------
SPAIN -- 3.64%
Endesa S.A. -- Sponsored
ADR......................... 64,900 1,310,169
Repsol S.A. -- Sponsored
ADR......................... 57,000 1,325,250
Telefonica S.A. -- Sponsored
ADR......................... 47,204 3,720,230
--------------
6,355,649
--------------
SWEDEN -- 4.15%
AssiDoman AB.................. 51,984 842,767
Electrolux AB -- Series B..... 95,585 2,394,372
Investor AB -- B Shares....... 191,765 2,693,635
Volvo AB -- B Shares.......... 51,483 1,325,790
--------------
7,256,564
--------------
SWITZERLAND -- 9.16%
Compagnie Financiere Richemont
AG.......................... 1,410 3,347,219
Holderbank Financiere Glaris
AG.......................... 927 1,262,460
Nestle AG Registered.......... 668 1,217,291
Novartis AG Registered........ 1,895 2,767,802
SGS Societe Generale de
Surveillance Holding S.A.... 2,179 2,763,342
Swatch Group, (The) AG........ 2,940 3,368,434
UBS AG -- Registered.......... 4,800 1,289,410
--------------
16,015,958
--------------
UNITED KINGDOM -- 14.26%
Allied Zurich plc............. 81,000 958,220
Barclay's Bank ORD............ 78,125 2,248,825
Barclays plc-Sponsored ADR.... 500 57,563
Billiton plc.................. 247,039 1,441,313
BP Amoco plc.................. 60,000 602,937
British Airways plc........... 343,000 2,227,837
Cadbury Schweppes plc......... 165,270 968,239
Corporate Services Group
plc......................... 485,000 801,216
Diageo plc.................... 156,463 1,254,553
Gallaher Group plc............ 359,000 1,524,612
Hanson plc Sponsored ADR...... 24,900 1,006,894
Imperial Chemical Industries
plc......................... 126,660 1,339,145
National Westminster Bank
plc......................... 49,194 1,056,882
Next plc...................... 68,000 650,998
Pilkington plc................ 1,504,320 2,024,468
PowerGen plc.................. 132,305 940,904
Rio Tinto plc................. 36,912 885,227
Royal & Sun Alliance Insurance
Group plc................... 220,000 1,639,905
Shell Transport & Trading Co.
plc......................... 220,539 1,827,864
Tate & Lyle plc............... 223,000 1,459,201
--------------
24,916,803
--------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
LATIN AMERICA -- 5.52%
- -----------------------------
ARGENTINA -- 0.68%
Telecom Argentina S.A. --
Sponsored ADR............... 18,000 $ 616,500
Telefonica de Argentina
S.A. -- Sponsored ADR....... 18,600 574,275
--------------
1,190,775
--------------
BRAZIL -- 3.67%
Centrais Electricas
Brasileiras S.A.
(Electrobras) Preferred..... 24,400,000 586,359
Companhia Vale do Rio Doce --
Preferred A................. 53,000 1,477,550
Petroleo Brasileiro S.A.
(Petrobras)................. 4,000,000 1,025,921
Telecomunicacoes Brasileiras
S.A. (Telebras) -- Sponsored
ADR Preferred Block......... 25,800 3,315,300
--------------
6,405,130
--------------
CHILE -- 0.57%
A.F.P. Provida S.A. --
Sponsored ADR............... 23,900 513,850
Cia de Telecomunicaciones de
Chile S.A. Sponsored ADR.... 18,200 332,150
Empresa Nacional Electricidad
S.A. -- Sponsored ADR....... 11,239 159,453
--------------
1,005,453
--------------
MEXICO -- 0.60%
Panamerican Beverages Inc..... 50,700 1,042,519
--------------
NORTH AMERICA -- 0.04%
- -----------------------------
CANADA -- 0.04%
Boliden Limited -- Swedish
Depository Receipt(a)....... 20,556 62,801
--------------
TOTAL INVESTMENTS -- 96.42%
(Cost -- $138,893,501)
(Cost on Federal income tax
basis -- $139,865,948).... 168,479,589
OTHER ASSETS, LESS LIABILITIES -- 3.58% 6,250,190
--------------
NET ASSETS -- 100%............ $ 174,729,779
==============
ADR -- American Depository Receipt
GDR -- Global Depository
Receipt
NY Shares -- New York Shares
ORD -- Ordinary
(a) Non-income producing security
(b) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............ $ 43,549,322
Gross unrealized depreciation............ (13,963,234)
--------------
Net unrealized appreciation for
financial
statement purposes................. 29,586,088
Less: tax basis adjustments.............. (972,447)
--------------
Net unrealized appreciation for
Federal
income tax purposes................ $ 28,613,641
==============
Purchases and sales of securities other than short-term
obligations aggregated $31,182,739 and $41,162,165,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $138,893,501)..... $168,479,589
Cash........................................................ 7,240,933
Receivables
Fund shares sold.......................................... 427,108
Dividends and interest.................................... 399,288
Manager for expense reimbursement......................... 29,944
Deferred organization expenses.............................. 29,951
Other assets................................................ 10,928
------------
Total assets.............................................. 176,617,741
------------
LIABILITIES
Payables
Fund shares repurchased................................... 1,527,081
Management fee............................................ 142,271
12b-1 service and distribution fees....................... 119,548
Other payables to related parties......................... 53,265
Accrued expenses............................................ 45,797
------------
Total liabilities......................................... 1,887,962
------------
NET ASSETS.................................................. $174,729,779
============
CLASS A
Net asset value and redemption price per share
($32,623,990/2,721,751 shares outstanding)................ $ 11.99
============
Maximum offering price per share ($11.99 x 100/94.25)*...... $ 12.72
============
CLASS B
Net asset value, offering price and redemption price** per
share ($95,362,813/8,003,829 shares outstanding).......... $ 11.91
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($43,995,197/3,691,936 shares outstanding).......... $ 11.92
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($2,747,779/229,138 shares outstanding)............. $ 11.99
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $148,896,921
Accumulated net realized loss on investments and foreign
currency transactions................................... (3,419,241)
Accumulated net investment loss........................... (327,144)
Net unrealized appreciation on investments and foreign
currency transactions................................... 29,579,243
------------
NET ASSETS.................................................. $174,729,779
============
</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> 44
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
- --------------------------------------------------------------------------------
8
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $337,352 foreign taxes withheld......... $ 3,773,160
Interest.................................................. 270,750
-----------
4,043,910
-----------
EXPENSES
Management fee............................................ $1,533,107
Transfer agent............................................ 412,362
Administrative services fee............................... 153,311
Custodian fees............................................ 135,143
Blue Sky fees............................................. 34,026
Auditing and accounting fees.............................. 22,872
Shareholder reports....................................... 71,785
Amortization of organization expenses..................... 13,337
Fund accounting........................................... 102,828
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 1,310,790
Legal..................................................... 28,621
Other..................................................... 10,016
-----------
3,837,438
Expenses reimbursed by Manager............................ (226,984)
-----------
Net expenses.......................................... 3,610,454
-----------
NET INVESTMENT INCOME....................................... 433,456
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 2,938,637
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 34,240,270
-----------
Net gain on investment transactions................... 37,178,907
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $37,612,363
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 433,456 $ 351,883
Net realized gain (loss) on investments and foreign
currency transactions................................... 2,938,637 (6,356,123)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 34,240,270 8,408,731
------------ ------------
Net increase resulting from operations................ 37,612,363 2,404,491
------------ ------------
Class A distributions
Dividends from net investment income...................... (277,354) (201,553)
Distributions from capital gains.......................... (66,770) (50,056)
------------ ------------
Total distributions to Class A shareholders........... (344,124) (251,609)
------------ ------------
Class B distributions
Dividends from net investment income...................... (88,102) (108,829)
Distributions from capital gains.......................... (188,377) (162,528)
------------ ------------
Total distributions to Class B shareholders........... (276,479) (271,357)
------------ ------------
Class C distributions
Dividends from net investment income...................... (36,951) (34,675)
Distributions from capital gains.......................... (86,889) (81,212)
------------ ------------
Total distributions to Class C shareholders........... (123,840) (115,887)
------------ ------------
Advisor Class distributions
Dividends from net investment income...................... (44,386) (6,205)
Distributions from capital gains.......................... (7,240) (1,005)
------------ ------------
Total distributions to Advisor Class shareholders..... (51,626) (7,210)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... 814,377 8,457,795
Class B................................................... (5,763,951) 26,171,167
Class C................................................... (5,870,687) 13,054,497
Advisor Class............................................. 1,884,475 479,551
------------ ------------
Net (decrease) increase resulting from Fund share
transactions......................................... (8,935,786) 48,163,010
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 27,880,508 49,921,438
NET ASSETS
Beginning of period....................................... 146,849,271 96,927,833
------------ ------------
END OF PERIOD............................................. $174,729,779 $146,849,271
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 46
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
May 13, 1997
for the year ended (commencement)
CLASS A December 31, to December 31,
- -------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.48 $8.98 $10.01
-----------------------------------------
Income (loss) from investment operations
Net investment income (a)................................. .09 .08 -- (b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.54 .52 (1.03)(b)
-----------------------------------------
Total from investment operations.......................... 2.63 .60 (1.03)
-----------------------------------------
Less distributions
Dividends from net investment income...................... .10 .08 --
Distributions from capital gains.......................... .02 .02 --
-----------------------------------------
Total distributions..................................... .12 .10 --
-----------------------------------------
Net asset value, end of period.............................. $ 11.99 $ 9.48 $ 8.98
-----------------------------------------
-----------------------------------------
Total return (%)............................................ 27.79(c) 6.63(c) (10.29)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $32,624 $24,993 $ 16,202
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.72 1.74 1.80(e)
Without expense reimbursement (%)......................... 1.87 1.88 2.11(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .92 .80 .12(e)
Portfolio turnover rate (%)................................. 21 16 10
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
May 13, 1997
for the year ended (commencement)
CLASS B December 31, to December 31,
- -------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.42 $8.93 $ 10.01
-----------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .01 .01 (.02)(b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.51 .51 (1.06)(b)
-----------------------------------------
Total from investment operations.......................... 2.52 .52 (1.08)
-----------------------------------------
Less distributions
Dividends from net investment income...................... .01 .01 --
Distributions from capital gains.......................... .02 .02 --
-----------------------------------------
Total distributions..................................... .03 .03 --
-----------------------------------------
Net asset value, end of period.............................. $ 11.91 $ 9.42 $ 8.93
-----------------------------------------
-----------------------------------------
Total return (%)............................................ 26.81(c) 5.84(c) (10.29)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $95,363 $80,938 $53,652
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.51 2.49 2.63 (e)
Without expense reimbursement (%)......................... 2.66 2.63 2.94 (e)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .12 .05 (.71)(e)
Portfolio turnover rate (%)................................. 21 16 10
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 47
11
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
May 13, 1997
for the year ended (commencement)
CLASS C December 31, to December 31,
- -------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-----------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.42 $ 8.93 $ 10.01
-----------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .02 .01 (.02)(b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.51 .51 (1.06)(b)
-----------------------------------------
Total from investment operations.......................... 2.53 .52 (1.08)
-----------------------------------------
Less distributions
Dividends from net investment income...................... .01 .01 --
Distributions from capital gains.......................... .02 .02 --
-----------------------------------------
Total distributions..................................... .03 .03 --
-----------------------------------------
Net asset value, end of period.............................. $ 11.92 $ 9.42 $ 8.93
-----------------------------------------
-----------------------------------------
Total return (%)............................................ 26.91(c) 5.79(c) (10.79)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $43,995 $40,408 $27,074
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.49 2.52 2.63 (e)
Without expense reimbursement (%)......................... 2.64 2.66 2.94 (e)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .14 .03 (.71)(e)
Portfolio turnover rate (%)................................. 21 16 10
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year February 23, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
--------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.48 $ 9.63
--------------------------------------
Income (loss) from investment operations
Net investment income(a).................................. .04 .11
Net gains or losses on securities (both realized and
unrealized)............................................. 2.64 (.13)
--------------------------------------
Total from investment operations.......................... 2.68 (.02)
--------------------------------------
Less distributions
Dividends from net investment income...................... .10 .11
Distributions from capital gains.......................... .07 .02
--------------------------------------
Total distributions..................................... .17 .13
--------------------------------------
Net asset value, end of period.............................. $11.99 $ 9.48
--------------------------------------
--------------------------------------
Total return (%)............................................ 28.30(c) (.15)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,748 $ 510
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.38 1.32(e)
Without expense reimbursement (%)......................... 1.53 1.45(e)
Ratio of net investment income (loss) to
average net assets (%)(a)................................. 1.25 1.23(e)
Portfolio turnover rate (%)................................. 21 16
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net investment income(loss) is (c) Total return does not reflect a (e) Annualized.
net of expenses reimbursed by sales charge.
Manager.
(d) Total return represents aggregate
(b) Based on average shares total return and does not reflect a
outstanding. sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 48
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
- --------------------------------------------------------------------------------
12
NOTES TO FINANCIAL STATEMENTS
Ivy International Fund II (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C, Class I and Advisor
Class are authorized. Ivy Fund was organized as a Massachusetts business trust
under a Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities, or on the basis of
dealer quotes. All other securities are valued at their fair value as determined
in good faith by the Valuation Committee of the Board. As of December 31, 1999,
securities valued by the Valuation Committee have no value and have been noted
as such in the Portfolio of Investments.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund earned foreign source dividends of $4,110,512. These dividends were
subject to foreign withholding tax in the amount of $337,352. The Fund intends
to elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may report their share of foreign taxes paid as either a tax
credit or itemized deduction.
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.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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> 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
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, 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 limits the Fund's total operating
expenses (excluding 12b-1 fees and certain other expenses) to an annual rate of
1.50% of its 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $17,300.
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
$70,497, $843,424 and $396,869, 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 $67,412, $237,930, $105,370 and $1,650, for Class A, Class B, Class
C and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 7,059,211 $ 73,053,749 3,061,303 $ 29,570,905
Issued on
reinvestment of
distributions....... 17,489 204,448 15,261 144,365
Repurchased.......... (6,992,250) (72,443,820) (2,243,793) (21,257,475)
---------- ------------ ---------- ------------
Net increase......... 84,450 $ 814,377 832,771 $ 8,457,795
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,600,633 $ 16,532,012 4,025,742 $ 39,206,826
Issued on
reinvestment of
distributions....... 8,847 102,806 10,410 97,963
Repurchased.......... (2,197,427) (22,398,769) (1,449,615) (13,133,622)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (587,947) $ (5,763,951) 2,586,537 $ 26,171,167
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,054,307 $ 10,931,588 2,507,595 $ 24,353,309
Issued on
reinvestment of
distributions....... 3,301 38,360 2,941 27,679
Repurchased.......... (1,655,685) (16,840,635) (1,251,137) (11,326,491)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (598,077) $ (5,870,687) 1,259,399 $ 13,054,497
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 23, 1998
YEAR ENDED (COMMENCEMENT) TO
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 648,709 $ 7,198,030 153,684 $ 1,513,323
Issued on
reinvestment of
distributions....... 4,023 47,030 442 4,188
Repurchased.......... (477,410) (5,360,585) (100,310) (1,037,960)
---------- ------------ ---------- ------------
Net increase......... 175,322 $ 1,884,475 53,816 $ 479,551
========== ============ ========== ============
</TABLE>
<PAGE> 50
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL FUND II
- --------------------------------------------------------------------------------
14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY INTERNATIONAL FUND II (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ----------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ----------------------------------------------------
<S> <C> <C>
James W. Broadfoot........... 7,080,082 188,221
Keith J. Carlson............. 7,078,272 190,032
Stanley Channick............. 7,073,711 194,593
Roy J. Glauber............... 7,075,392 192,912
Edward M. Tighe.............. 7,081,197 187,107
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------
FOR: AGAINST: ABSTAIN:
- -------------------------------
<S> <C> <C>
7,013,608 59,019 195,677
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,457,180 107,100 287,471 2,416,552
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,406,404 149,492 295,856 2,416,552
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,422,178 131,281 298,294 2,416,511
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,420,038 134,821 296,893 2,416,552
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,442,044 112,160 297,550 2,416,551
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,417,691 126,874 307,188 2,416,551
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,391,774 153,302 306,678 2,416,551
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,424,436 126,883 300,434 2,416,552
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
4,410,131 135,398 306,224 2,416,552
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 52
02IIF2123199
<PAGE> 53
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENZIE LOGO]
IVY US EMERGING GROWTH FUND
OVERVIEW
The Ivy US Emerging Growth Fund's investment objective is to provide long-term
capital growth through investment in common stocks of small- and medium-sized
companies that are in the early stages of their life cycle and may have the
potential for rapid growth of sales and earnings. For the 12 months ended
December 31, 1999,the Ivy US Emerging Growth Fund posted a return of
62.47%,making this the best year for the Fund since its inception in 1993. The
Fund beat its benchmark--the Russell 2000 Growth Index, which was up 43.09%--by
a wide margin for the second consecutive year. (For the Fund's total return with
sales charge and performance commentary, please refer to page 3.)
In our search for high-growth companies, we focus on what we believe
are fertile sectors of the economy--technology, business and consumer services,
healthcare, and entertainment. The manager of the Ivy US Emerging Growth Fund
strives to keep a well-balanced portfolio, usually investing in about 200 stocks
to help minimize the impact of unexpected company-specific events. When the
manager adds a new security to the portfolio, the strategy is to hold on to this
stock for at least two to three years, thereby minimizing the Fund's turnover.
MARKET COMMENTARY
Last year was the first year since 1994 that emerging growth stocks, as measured
by the Russell 2000 Growth Index, outperformed the broader US market. The
Russell 2000 Growth Index surged 43.09% for the 12-month period ending December
31, 1999 compared to the S&P 500 Index, which was up 21.10% over the same time
period. Thus came the welcome end to a long interval during which small-cap
growth stocks lagged the S&P 500 Index.
Over the last five years, small growth companies generally experienced
satisfactory earnings progress, which we believe was largely offset by a sharp
contraction in their earnings multiples relative to the broader market. Although
relative price to earnings ratios (P/E) remain in the low end of their historic
range, the contraction appears to have run its course. Our research indicates
that during 1999,superior earnings growth led to superior returns, validating
our investment thesis in this sector of the marketplace.
TECHNOLOGY STOCKS TAKE CENTERSTAGE.
For emerging growth investors, the real story of 1999 was technology stocks,
particularly those with a link to the Internet--whether it was through
<PAGE> 54
2
e-commerce, infrastructure, consulting, communications, or data storage. Those
investors who failed to participate in this sector of the market found it was
difficult to compete with those who did.
"WITH THE ENORMOUS MOMENTUM OF THE INTERNET AND E-COMMERCE SERVICE AS MAJOR
DRIVERS, WE BELIEVE THE US ECONOMY SHOULD BE WELL POSITIONED FOR CONTINUED
GROWTH AND LOW INFLATION."
In last year's annual report, we wrote:"... it became apparent that the
Internet had not only become mainstream, but was also creating solid
opportunities for many young companies." In retrospect, we believe this was an
understatement. During the past year, we have seen billions of dollars of new
capital flow into this sector, accompanied by a steady migration of management
talent from old-line companies. In this new era of technological innovation, we
believe business-to-business commerce could more than double every year for at
least the next several years, putting corporations under severe pressure to
"webify" their businesses. As a result, there may be the potential for
considerable growth opportunities for many companies in our portfolio. Our
research shows that over the last year several companies in the Ivy US Emerging
Growth Fund portfolio grew their revenues at compound quarterly rates of 25% and
higher. To put this in perspective, 10 years ago compound annual growth rates of
25% were considered quite high.
VALUATIONS CONTINUE TO RISE.
In our view, because many of these young technology companies are spending
aggressively to secure market share and gain first mover advantage, most have
yet to achieve operating profitability. As a result, we believe analysts and
investors alike are moving more and more to valuing these companies on a
multiple of revenue. This approach makes us somewhat cautious, particularly
since valuations, even by this standard, seem extraordinarily high. However, in
our view, this may be preferable to being left behind, since technology,
particularly the Internet, promises to be an unusually fertile growth area for
many years to come.
Outside of technology, particularly in areas like consumer goods and
services, healthcare, and business services, growth rates are less impressive,
but valuations are also much less daunting. In these areas, our analysis
indicates that many good, small companies have grown their earnings consistently
over the last three or four years, only to see their stock prices languish as
shrinking P/Es have all but offset robust earnings growth. We believe that a
number of these companies are long overdue for better market performance.
LOOKING AHEAD.
As usual, we believe that near-term performance for many emerging growth
companies is unpredictable, particularly with the possibility that the Federal
Reserve Board will raise interest rates, which often is negative for these kinds
of companies. But longer term, we believe there may be many reasons for
optimism. With the enormous momentum of the Internet and e-commerce serving as
major drivers, we believe the US economy should be well positioned for continued
growth and low inflation. In addition, we believe the earnings outlook for many
companies is favorable, particularly those in the technology sector, now that
the Y2K spending lockdown is behind us. Additionally, a major upgrade cycle to
Windows(R) 2000 should be a catalyst for strong demand. Outside of technology,
we believe relative valuations are very attractive by historic standards.
All in all, we are looking forward to the next several years with great
anticipation and believe these are exciting times for emerging growth investors.
<PAGE> 55
3
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (4/93) OF A $10,000 INVESTMENT
[CHART]
IVY US EMERGING GROWTH FUND
PERFORMANCE SUMMARY
For the 12 months ended December 31, 1999, the Ivy US Emerging Growth Fund was
up 62.47%. This compares favorably to its benchmark, the Russell 2000 Growth
Index, which returned 43.09% for the same period. The Fund's outperformance is
directly attributed to its weighting in the technology sector (62.23% of net
assets) as compared to the Index's technology weighting of 23.57% at year-end.
The Russell 2000 Growth Index is an unmanaged index of stocks which assumes
reinvestment of dividends and, unlike Fund returns, does not reflect any fees or
expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4)
---------------- ----------------------------------- ----------------
IVY US EMERGING GROWTH FUND w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING ------ ------ --------------- --------------- ------ ------
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
56.27% 61.27% 56.27% 61.27%
C: C: C: C:
1 year 53.13% 53.13% 60.32% 61.32% 60.32% 61.32% 62.85% 62.85%
----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
26.39% 26.54% 26.39% 26.54%
C: C: C: C:
5 year 25.97% 25.97% n/a n/a n/a n/a n/a n/a
----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
21.40% 21.40% 21.39% 21.39%
C: C: C: C:
Since Inception(5) 26.36% 26.34% 18.60% 18.60% 18.60% 18.60% 39.17% 39.17%
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class A commenced operations March 3, 1993 (performance here is
calculated based on the date the Fund first became available for sale
to the public, April 30, 1993); Class B commenced operations October
22, 1993; Class C commenced operations April 30, 1996; Advisor Class
commenced operations February 18, 1998.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of Ivy
US Emerging Growth Fund will fluctuate and at redemption shares may be
worth more or less than the amount of the original investment.
<PAGE> 56
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 99.23% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
CONSUMER -- 5.50%
- -------------------------------
EDUCATIONAL SERVICES -- 0.91%
Apollo Group, Inc. -- Class
A(a).......................... 40,200 $ 806,513
CBT Group plc -- Spon
ADR(a)(b)..................... 29,700 994,950
------------
1,801,463
------------
ENTERTAINMENT -- 2.84%
Insight Communications Company,
Inc.(a)....................... 30,000 888,750
International Speedway Corp. --
Class A....................... 9,700 488,637
Premier Parks, Inc.(a).......... 58,900 1,700,738
Radio Unica Corp.(a)............ 18,100 522,637
Spanish Broadcasting System,
Inc.(a)....................... 31,300 1,259,825
Speedway Motorsports, Inc.(a)... 27,700 770,406
------------
5,630,993
------------
MISCELLANEOUS CONSUMER -- 0.31%
Cutter & Buck, Inc.(a).......... 40,050 605,756
------------
RESTAURANTS -- 0.49%
P.F. Chang's China Bistro,
Inc.(a)....................... 21,500 534,813
The Cheesecake Factory
Incorporated(a)............... 12,500 437,500
------------
972,313
------------
SPECIALTY RETAIL -- 0.95%
Dollar Tree Stores, Inc.(a)..... 31,675 1,534,258
Hibbet Sporting Goods,
Inc.(a)....................... 20,600 350,200
------------
1,884,458
------------
ENERGY -- 4.01%
- -------------------------------
OIL SERVICES -- 4.01%
BJ Services Company(a).......... 26,500 1,108,031
Core Laboratories N.V.(a)....... 41,500 832,594
ENSCO International
Incorporated.................. 16,900 386,587
Global Marine Inc.(a)........... 23,600 392,350
Hanover Compressor Company(a)... 18,100 683,275
Helmerich & Payne, Inc.......... 23,300 508,231
Marine Drilling Companies,
Inc.(a)....................... 19,100 428,556
Nabors Industries, Inc.(a)...... 27,010 835,622
Noble Drilling Corporation(a)... 24,300 795,825
Patterson Energy, Inc.(a)....... 38,100 495,300
Rowan Companies, Inc.(a)........ 22,700 492,306
Weatherford International,
Inc.(a)....................... 25,000 998,438
------------
7,957,115
------------
HEALTHCARE -- 9.68%
- -------------------------------
HEALTHCARE INFORMATION SYSTEMS -- 3.04%
Allscripts, Inc.(a)............. 44,000 1,936,000
Eclipsys Corporation(a)......... 37,700 966,063
First Consulting Group,
Inc.(a)....................... 72,800 1,128,400
MedicaLogic, Inc.(a)............ 16,200 340,200
MedQuist Inc.(a)................ 63,900 1,649,419
------------
6,020,082
------------
HEALTHCARE SERVICES -- 1.07%
Renal Care Group, Inc.(a)....... 91,200 2,131,800
------------
MEDICAL DEVICES & INSTRUMENTS -- 1.42%
Cytyc Corporation(a)............ 19,100 1,166,294
MiniMed Inc.(a)................. 22,400 1,640,800
------------
2,807,094
------------
PHARMACEUTICALS & BIOTECHNOLOGY -- 4.15%
Alkermes, Inc.(a)............... 15,400 756,525
Anesta Corp.(a)................. 44,800 770,000
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Medicis Pharmaceutical
Corporation -- Class A(a)..... 58,800 $ 2,502,675
MedImmune, Inc.(a).............. 6,825 1,132,097
Pharmacyclics, Inc.(a).......... 12,700 523,875
Sepracor, Inc.(a)............... 8,300 823,256
Shire Pharmaceuticals Group plc
ADR(a)(b)..................... 59,400 1,730,025
------------
8,238,453
------------
SERVICES -- 17.81%
- -------------------------------
BUSINESS SERVICES -- 4.61%
Concord EFS, Inc.(a)............ 55,900 1,439,425
CSG Systems International,
Inc.(a)....................... 22,900 913,137
NOVA Corporation(a)............. 48,307 1,524,690
ProBusiness Services, Inc.(a)... 26,600 957,600
Profit Recovery Group
International, Inc.
(The)(a)...................... 48,050 1,276,328
TMP Worldwide Inc.(a)........... 21,300 3,024,600
------------
9,135,780
------------
FINANCIAL SERVICES -- 0.29%
Federal Agricultural Mortgage
Corp. Class C(a).............. 28,050 566,259
------------
INFORMATION SERVICES -- 3.16%
Dendrite International,
Inc.(a)....................... 48,700 1,649,712
FactSet Research Systems Inc.... 25,250 2,010,531
Forrester Research, Inc.(a)..... 20,400 1,405,050
Lason Holdings, Inc.(a)......... 37,300 410,300
Meta Group, Inc.(a)............. 41,900 796,100
------------
6,271,693
------------
SOCIAL SERVICES -- 1.12%
Cornell Corrections, Inc.(a).... 53,100 444,713
Maximus, Inc.(a)................ 52,100 1,768,144
------------
2,212,857
------------
TELECOMMUNICATION SERVICES -- 7.49%
Covad Communications Group,
Inc.(a)....................... 10,700 598,531
GRIC Communications, Inc.(a).... 12,100 307,037
iBasis, Inc.(a)................. 15,800 454,250
ITXC Corp.(a)................... 18,400 618,700
McLeodUSA Incorporated(a)....... 45,600 2,684,700
Metromedia Fiber Network,
Inc.(a)....................... 34,600 1,658,637
Net2Phone, Inc.(a).............. 5,300 243,469
NEXTLINK Communications,
Inc.(a)....................... 10,200 847,238
Pac-West Telecomm, Inc.(a)...... 86,000 2,279,000
PSINet Inc.(a).................. 20,551 1,269,024
Rhythms NetConnections
Inc.(a)....................... 30,300 939,300
Viatel, Inc.(a)................. 15,300 820,463
WinStar Communications,
Inc.(a)....................... 28,500 2,133,937
------------
14,854,286
------------
TELESERVICES -- 1.14%
Sykes Enterprises, Inc.(a)...... 51,400 2,255,175
------------
TECHNOLOGY -- 62.23%
- -------------------------------
COMPUTER EQUIPMENT & STORAGE -- 2.24%
Network Appliance, Inc.(a)...... 35,800 2,973,638
PC-Tel, Inc.(a)................. 27,900 1,464,750
------------
4,438,388
------------
</TABLE>
<PAGE> 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
ELECTRONIC COMMERCE -- 2.58%
Pegasus Systems, Inc.(a)........ 38,100 $ 2,297,906
QRS Corporation(a).............. 27,100 2,826,869
------------
5,124,775
------------
ELECTRONIC MANUFACTURING SERVICES -- 2.27%
Flextronics International
Ltd.(a)(b).................... 50,800 2,336,800
Jabil Circuit, Inc.(a).......... 11,600 846,800
Sanmina Corporation(a).......... 13,300 1,328,338
------------
4,511,938
------------
INTERNET -- 17.46%
About.com, Inc.(a).............. 20,900 1,875,775
Accrue Software(a).............. 11,500 622,438
Art Technology Group, Inc.(a)... 15,500 1,985,938
CNET, Inc.(a)................... 15,500 879,625
Critical Path, Inc.(a).......... 7,700 726,687
Digex, Inc.(a).................. 13,100 900,625
EarthWeb Inc.(a)................ 32,000 1,610,000
E-Stamp Corporation(a).......... 12,500 278,125
Excite@Home Corporation --
Series A(a)................... 5,500 235,813
Exodus Communications,
Inc.(a)....................... 30,800 2,735,425
F5 Networks, Inc.(a)............ 8,000 912,000
ImageX.com, Inc.(a)............. 35,000 1,465,625
InfoSpace.com, Inc.(a).......... 9,400 2,011,600
Inktomi Corporation(a).......... 7,600 674,500
Intertrust Technologies
Corporation(a)................ 6,000 705,750
InterVU Inc.(a)................. 12,000 1,260,000
Keynote Systems, Inc.(a)........ 7,400 545,750
McAfee.com Corporation(a)....... 15,200 684,000
N2H2, Inc.(a)................... 48,200 1,132,700
National Information Consortium,
Inc.(a)....................... 37,900 1,212,800
NBC Internet, Inc.(a)........... 8,800 679,800
Net Perceptions, Inc.(a)........ 19,900 835,800
Network Solutions Inc.(a)....... 9,500 2,066,844
nFront, Inc.(a)................. 35,000 700,000
Pilot Network Services,
Inc.(a)....................... 30,700 736,800
Portal Software, Inc.(a)........ 6,000 617,250
RADWARE Ltd.(a)................. 10,000 431,250
RoweCom Inc.(a)................. 28,400 1,288,650
ShopNow.com Inc.(a)............. 43,000 814,312
Stamps.com Inc.(a).............. 21,100 878,287
VeriSign, Inc.(a)............... 9,100 1,737,531
WebTrends Corporation(a)........ 17,200 1,393,200
------------
34,634,900
------------
MISCELLANEOUS TECHNOLOGY -- 1.49%
Gemstar International Group
Ltd.(a)....................... 41,600 2,964,000
------------
NETWORK EQUIPMENT & SOFTWARE -- 6.56%
American Power Conversion
Corporation(a)................ 84,600 2,231,325
Clarent Corporation(a).......... 15,800 1,228,450
Concord Communications,
Inc.(a)....................... 23,900 1,060,562
Extreme Networks, Inc.(a)....... 15,600 1,302,600
Micromuse Inc.(a)............... 16,200 2,754,000
Packeteer, Inc.(a).............. 15,700 1,114,700
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
SonicWall, Inc.(a).............. 16,100 $ 648,025
Visual Networks, Inc.(a)........ 33,700 2,670,725
------------
13,010,387
------------
OPERATIONAL SUPPORT SYSTEMS -- 1.04%
DSET Corporation(a)............. 55,100 2,059,363
------------
SEMICONDUCTOR EQUIPMENT -- 3.84%
ASM Lithography Holding
NV(a)(b)...................... 17,000 1,933,750
Etec Systems, Inc.(a)........... 14,400 646,200
KLA-Tencor Corporation(a)....... 13,400 1,492,425
Novellus Systems, Inc.(a)....... 4,100 502,378
Photronics, Inc.(a)............. 26,300 752,837
PRI Automation, Inc.(a)......... 15,300 1,027,013
Teradyne, Inc.(a)............... 19,000 1,254,000
------------
7,608,603
------------
SEMICONDUCTORS -- 4.87%
Altera Corporation(a)........... 20,000 991,250
Applied Micro Circuits
Corporation(a)................ 10,600 1,348,850
Artisan Components, Inc.(a)..... 11,100 229,111
Galileo Technology Ltd.(a)(b)... 36,900 890,213
Genesis Microchip Inc.(a)(b).... 35,100 741,488
Integrated Device Technology,
Inc.(a)....................... 29,700 861,300
Maxim Integrated Products,
Inc.(a)....................... 25,600 1,208,000
NETsilicon, Inc.(a)............. 54,100 1,085,381
PMC-Sierra, Inc.(a)............. 7,100 1,138,219
RF Micro Devices, Inc.(a)....... 16,900 1,156,594
------------
9,650,406
------------
SOFTWARE -- 8.80%
Actuate Software
Corporation(a)................ 27,600 1,183,350
Best Software, Inc.(a).......... 27,100 799,450
Citrix Systems, Inc.(a)......... 21,900 2,693,700
Great Plains Software,
Inc.(a)....................... 9,500 710,125
Legato Systems, Inc.(a)......... 35,700 2,456,606
Mercury Interactive
Corporation(a)................ 8,900 960,644
Mission Critical Software,
Inc.(a)....................... 8,800 616,000
Peregrine Systems, Inc.(a)...... 20,500 1,693,812
Project Software & Development,
Inc.(a)....................... 18,000 999,000
SalesLogix Corporation(a)....... 38,400 1,576,800
Siebel Systems, Inc.(a)......... 11,600 974,400
Symantec Corporation(a)......... 16,600 973,175
Veritas Software Corp.(a)....... 12,750 1,824,844
------------
17,461,906
------------
SYSTEM INTEGRATORS -- 4.19%
C-bridge Internet Solutions,
Inc.(a)....................... 6,000 291,750
iXL Enterprises, Inc.(a)........ 28,200 1,565,100
Luminant Worldwide
Corporation(a)................ 25,000 1,137,500
Razorfish Inc.(a)............... 16,713 1,589,777
Sapient Corporation(a).......... 6,200 873,812
USWeb Corporation(a)............ 28,000 1,244,250
Whittman-Hart, Inc.(a).......... 30,100 1,614,113
------------
8,316,302
------------
</TABLE>
<PAGE> 58
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
6
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATION EQUIPMENT -- 6.26%
Aware, Inc.(a).................. 13,400 $ 487,425
Carrier Access Corporation(a)... 9,700 652,931
C-COR.net Corp.(a).............. 19,900 1,524,838
Comverse Technology, Inc.(a).... 15,350 2,221,912
E-Tek Dynamics, Inc.(a)......... 12,800 1,723,200
JDS Uniphase Corporation(a)..... 16,000 2,581,000
Netopia, Inc.(a)................ 25,700 1,395,831
Next Level Communications,
Inc.(a)....................... 14,700 1,100,662
PairGain Technologies,
Inc.(a)....................... 51,600 732,075
------------
12,419,874
------------
TELECOMMUNICATION SERVICES -- 0.63%
Globalstar Telecommunications
Limited(a).................... 28,500 1,254,000
------------
TOTAL INVESTMENTS -- 99.23%
(Cost -- $98,776,486)(c)...... 196,800,419
OTHER ASSETS, LESS LIABILITIES -- 0.77% 1,526,114
------------
NET ASSETS -- 100%.............. $198,326,533
============
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
VALUE
- --------------------------------------------------------------
<S> <C> <C>
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 December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation.............. $100,186,186
Gross unrealized depreciation.............. (2,162,253)
------------
Net unrealized appreciation............ $ 98,023,933
============
Purchases and sales of securities other than short-term
obligations aggregated $135,845,233 and $143,242,629,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $98,776,486)...... $196,800,419
Cash........................................................ 3,089,471
Receivable for Fund shares sold............................. 205,966
Other assets................................................ 14,236
------------
Total assets.............................................. 200,110,092
------------
LIABILITIES
Payables
Distributions to shareholders............................. 17,340
Investments purchased..................................... 1,327,617
Fund shares repurchased................................... 145,121
Management fee............................................ 131,561
12b-1 service and distribution fees....................... 94,018
Other payables to related parties......................... 54,030
Accrued expenses............................................ 13,872
------------
Total liabilities......................................... 1,783,559
------------
NET ASSETS.................................................. $198,326,533
============
CLASS A
Net asset value and redemption price per share
($101,797,848/2,152,580 shares outstanding)............... $ 47.29
============
Maximum offering price per share $47.29 X 100/94.25)*....... $ 50.18
============
CLASS B
Net asset value, offering price and redemption price** per
share ($79,659,207/1,731,377 shares outstanding).......... $ 46.01
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($15,437,902/335,725 shares outstanding)............ $ 45.98
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($1,431,576/30,093 shares outstanding).............. $ 47.57
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 99,645,761
Undistributed net realized gain on investments............ 656,839
Net unrealized appreciation on investments................ 98,023,933
------------
NET ASSETS.................................................. $198,326,533
============
</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> 60
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 8,863
Interest.................................................. 193,281
-----------
202,144
-----------
EXPENSES
Management fee............................................ $1,070,591
Transfer agent............................................ 333,603
Administrative services fee............................... 125,952
Custodian fees............................................ 31,589
Blue Sky fees............................................. 35,168
Auditing and accounting fees.............................. 24,438
Shareholder reports....................................... 37,587
Fund accounting........................................... 100,632
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 788,667
Legal..................................................... 27,755
Other..................................................... 7,700
-----------
Total expenses........................................ 2,592,922
-----------
NET INVESTMENT LOSS......................................... (2,390,778)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 26,371,155
Net change in unrealized appreciation on investments...... 52,034,319
-----------
Net gain on investment transactions................... 78,405,474
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $76,014,696
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (2,390,778) $ (2,134,695)
Net realized gain (loss) on
Investments............................................. 26,371,155 1,164,559
Written options......................................... -- (986,707)
Net change in unrealized appreciation on investments...... 52,034,319 21,048,849
------------ ------------
Net increase resulting from operations................ 76,014,696 19,092,006
------------ ------------
Distributions to shareholders from capital gains
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................................................... 10,324,776 (11,973,287)
Class B................................................... 4,662,639 (2,537,070)
Class C................................................... 1,477,323 (1,154,772)
Advisor Class............................................. 319,095 695,130
------------ ------------
Net increase (decrease) resulting from Fund share
transactions......................................... 16,783,833 (14,969,999)
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 72,021,453 4,122,007
NET ASSETS
Beginning of period....................................... 126,305,080 122,183,073
------------ ------------
END OF PERIOD............................................. $198,326,533 $126,305,080
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 62
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- -----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 32.65 $ 27.67 $ 26.54 $ 24.12 $ 18.38
------------------------------------------------------------
Income from investment operations
Net investment loss.............................. (.49) (.44)(a) (.41)(a) (.35) (.24)
Net gains on securities (both realized and
unrealized).................................... 20.70 5.42(a) 1.54(a) 4.84 7.90
------------------------------------------------------------
Total from investment operations................. 20.21 4.98 1.13 4.49 7.66
------------------------------------------------------------
Less distributions
Distributions from capital gains................. 5.57 -- -- 2.07 1.92
------------------------------------------------------------
Total distributions............................ 5.57 -- -- 2.07 1.92
------------------------------------------------------------
Net asset value, end of period..................... $ 47.29 $ 32.65 $ 27.67 $ 26.54 $ 24.12
------------------------------------------------------------
------------------------------------------------------------
Total return (%)(b)................................ 62.47 18.00 4.26 18.52 42.07
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 101,798 $ 62,961 $ 64,910 $ 55,944 $ 39,456
Ratio of expenses to average net assets (%)........ 1.69 1.70 1.67 1.76 1.95
Ratio of net investment loss to
average net assets (%)........................... (1.53) (1.48) (1.37) (1.31) (1.39)
Portfolio turnover rate (%)........................ 107 67 65 68 86
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS B December 31,
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 31.93 $ 27.26 $ 26.33 $ 24.12 $ 18.38
------------------------------------------------------------------
Income from investment operations
Net investment loss.............................. (.77) (.65)(a) (.33)(a) (.40) (.35)
Net gains on securities (both realized and
unrealized).................................... 20.15 5.32(a) 1.26(a) 4.68 7.85
------------------------------------------------------------------
Total from investment operations................. 19.38 4.67 .93 4.28 7.50
------------------------------------------------------------------
Less distributions
Distributions from capital gains................. 5.30 -- -- 2.07 1.76
------------------------------------------------------------------
Total distributions............................ 5.30 -- -- 2.07 1.76
------------------------------------------------------------------
Net asset value, end of period..................... $ 46.01 $ 31.93 $ 27.26 $ 26.33 $ 24.12
------------------------------------------------------------------
------------------------------------------------------------------
Total return (%)(b)................................ 61.27 17.13 3.53 17.65 41.03
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 79,659 $ 52,940 $ 47,789 $ 35,321 $ 13,985
Ratio of expenses to average net assets (%)........ 2.43 2.45 2.43 2.52 2.70
Ratio of net investment loss to
average net assets (%)........................... (2.27) (2.23) (2.13) (2.07) (2.14)
Portfolio turnover rate (%)........................ 107 67 65 68 86
</TABLE>
<PAGE> 63
11
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 31.91 $ 27.23 $ 26.29 $ 29.69
--------------------------------------------------------
Income (loss) from investment operations
Net investment loss.............................. (.80) (.63)(a) (.34)(a) (.14)
Net gains or losses on securities (both realized
and
unrealized).................................... 20.19 5.31(a) 1.28(a) (1.19)
--------------------------------------------------------
Total from investment operations................. 19.39 4.68 .94 (1.33)
--------------------------------------------------------
Less distributions
Distributions from capital gains................. 5.32 -- -- 2.07
--------------------------------------------------------
Total distributions............................ 5.32 -- -- 2.07
--------------------------------------------------------
Net asset value, end of period..................... $ 45.98 $ 31.91 $ 27.23 $ 26.29
--------------------------------------------------------
--------------------------------------------------------
Total return (%)................................... 61.32(b) 17.19(b) 3.58(b) (4.48)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 15,438 $ 9,664 $ 9,484 $ 4,018
Ratio of expenses to average net assets (%)........ 2.39 2.40 2.39 2.52 (d)
Ratio of net investment loss to
average net assets (%)........................... (2.23) (2.18) (2.09) (2.07)(d)
Portfolio turnover rate (%)........................ 107 67 65 68
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year February 18, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- -------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period............... $ 32.79 $ 28.82
-----------------------------------
Income from investment operations
Net investment loss.............................. (.44) (.23)(a)
Net gains on securities (both realized and
unrealized).................................... 20.85 4.20 (a)
-----------------------------------
Total from investment operations................. 20.41 3.97
-----------------------------------
Less distributions
Distributions from capital gains................. 5.63 --
-----------------------------------
Total distributions............................ 5.63 --
-----------------------------------
Net asset value, end of period..................... $ 47.57 $ 32.79
-----------------------------------
-----------------------------------
Total return (%)................................... 62.85(b) 13.78 (c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........... $ 1,432 $ 740
Ratio of expenses to average net assets (%)........ 1.46 1.22 (d)
Ratio of net investment loss to
average net assets (%)........................... (1.30) (1.00)(d)
Portfolio turnover rate (%)........................ 107 67
</TABLE>
<TABLE>
<S> <C> <C> <C>
(a) Based on average (b) Total return does not (c) Total return (d) Annualized
shares outstanding. reflect a sales charge. represents aggregate
total return and does not
reflect a sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 64
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
12
NOTES TO FINANCIAL STATEMENTS
Ivy US Emerging Growth Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of December 31, 1999, there were no Board
valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
OPTIONS -- The Fund may invest in option contracts for the purpose of increasing
or decreasing its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect the value of the
Fund's securities. An option is a right to buy or sell a particular security at
a specified price within a limited period of time. The buyer of the option, in
return for a premium paid to the seller, has the right to buy, in the case of a
call option, or sell, in the case of a put option, the underlying security of
the contract. An option on a stock index gives the purchaser the right to
receive from the seller cash equal to the difference between the closing price
of the index and the exercise price of the option.
When the Fund writes or purchases an option, an amount equal to the premium
received or paid by the Fund is recorded as a liability or an asset and is
subsequently adjusted to the current market value of the option written or
purchased. Premiums received or paid from writing or purchasing options which
expire unexercised are treated by the Fund on the expiration date as realized
gains or losses. The difference between the premium and the amount paid or
received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the cost of the purchase
or proceeds of the sale in determining whether the Fund has realized a gain or
loss on the transaction. For options on indices, cash settlement by the Fund is
required if the option is exercised. The Fund, as writer of an option, has no
control over whether the underlying securities may be sold (call) or purchased
(put) and as a result bears the market risk of an unfavorable change in the
price of the securities underlying the written option. Exchange traded written
options are valued daily at the last sale price or, in the absence of a sale, at
the calculated mean of the bid and asked prices, subject to certain
reasonability criteria on the spread between the bid and asked prices.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
Pursuant to Code Section 852, the Fund designates $13,263,685 as long-term
capital gain distributions for its taxable year ended December 31,1999.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
<PAGE> 65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $23,611.
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 $154,097,
$530,238 and $104,332, 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 $168,123, $139,956, $23,014 and $2,510 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") providing 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 458,475 $ 15,397,779 539,705 $ 15,118,932
Issued on
reinvestment of
distributions....... 216,321 9,890,187 -- --
Repurchased.......... (978,798) (33,152,346) (957,217) (27,092,219)
Issued on acquisition
of Hudson Capital
Appreciation Fund... 528,447 18,189,156 -- --
-------- ------------- -------- -------------
Net increase/
(decrease).......... 224,445 $ 10,324,776 (417,512) $ (11,973,287)
======== ============= ======== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 301,757 $ 10,453,142 362,359 $ 10,063,144
Issued on
reinvestment of
distributions....... 136,162 6,058,721 -- --
Repurchased.......... (420,088) (13,715,955) (457,766) (12,600,214)
Issued on acquisition
of Hudson Capital
Appreciation Fund... 55,773 1,866,731 -- --
-------- ------------- -------- -------------
Net increase/
(decrease).......... 73,604 $ 4,662,639 (95,407) $ (2,537,070)
======== ============= ======== =============
</TABLE>
<PAGE> 66
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
14
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 92,998 $ 3,191,755 141,705 $ 4,043,709
Issued on
reinvestment of
distributions....... 22,335 993,253 -- --
Repurchased.......... (82,462) (2,707,685) (187,175) (5,198,481)
-------- ------------- -------- -------------
Net increase/
(decrease).......... 32,871 $ 1,477,323 (45,470) $ (1,154,772)
======== ============= ======== =============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 18, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- --------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 12,808 $ 448,645 30,299 $ 897,744
Issued on
reinvestment of
distributions....... 3,086 141,967 -- --
Repurchased.......... (8,362) (271,517) (7,738) (202,614)
-------- ------------- -------- -------------
Net increase......... 7,532 $ 319,095 22,561 $ 695,130
======== ============= ======== =============
</TABLE>
<PAGE> 67
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY US EMERGING GROWTH FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 68
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
16
02IEGF123199
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot......... 1,880,590 74,024
Keith J. Carlson........... 1,880,590 74,024
Stanley Channick........... 1,879,430 75,185
Roy J. Glauber............. 1,879,486 75,129
Edward M. Tighe............ 1,880,762 73,852
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
off continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------
FOR: AGAINST: ABSTAIN:
- ------------------------------
<S> <C> <C>
1,881,445 9,045 64,115
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,412,910 25,807 100,940 414,957
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,391,480 42,110 106,068 414,957
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,398,889 35,135 105,634 414,957
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,400,103 34,221 105,334 414,957
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,409,640 26,480 103,537 414,957
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,396,661 38,714 104,282 414,957
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,403,447 32,150 104,060 414,957
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,399,830 35,615 104,212 414,957
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,393,818 39,013 106,826 414,957
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 69
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENZIE]
IVY GROWTH WITH INCOME FUND
OVERVIEW
We believe the Ivy Growth with Income Fund benefited from rising equity prices
during 1999. The Fund is invested primarily in high-quality, large-cap companies
that hold leading positions in their industry, or which we expect to be leaders
in the future. The Ivy Growth with Income Fund continues to be managed in
accordance with a disciplined investment philosophy, the key to which is stock
selection.
The manager of the Ivy Growth with Income Fund makes no attempt to time
the market, preferring to have the Fund remain fully invested at all times,
while ignoring short-term market volatility. Excess cash positions within the
Fund are held to a minimum, typically less than 2%. There are no sector bets
made by the Fund. The manager divides the stock market into nine broad economic
sectors, and the weightings within the Fund approximate the weighting of each
sector within the market as represented by the S&P 500 Index.
The manager utilizes an equity style that is a blend of growth and
value stocks. The Fund tends to be invested in companies that have a proven and
consistent record of earnings profitability, but whose prices do not appear to
the Fund manager to adequately reflect the underlying profitability of the
companies. The profitability of each company is compared to the patterns of its
industry to account for normal cyclicality. In addition, the manager prefers
companies that have a dominant market position with high-quality management.
By following this investment philosophy and equity style, we believe
the Ivy Growth with Income Fund is well positioned for, and should benefit from,
the long-term positive trends of the stock market.
For the 12 months ended December 31, 1999, the Ivy Growth with Income
Fund was up 10.98%, as compared to the S&P 500 Index, which returned 21.10% for
the same period. (For the Fund's total return with sales charge and performance
commentary, please refer to page 4.)
MARKET COMMENTARY
The US stock market continued to perform well in 1999, extending its multi-year
bull market trend. After undergoing a brief correction in the fall, stocks
surged in the final months of the year, propelled higher by technology
companies. The NASDAQ Composite Index, the Dow Jones Industrial Average, and the
S&P 500 Index all closed the year at all-time highs. The performance of the
NASDAQ Composite was so strong that it generated the highest return of
<PAGE> 70
2
any US index in the 20th century, ending the year up an impressive 85.6%. During
the year, the Dow Jones Industrial Average moved well past 10,000, ending the
year up 25.22% at 11,497.12.
The Ivy Growth with Income Fund benefited from this market strength.
The Fund invested in a number of high-quality, large-capitalization stocks, such
as General Electric, that our research confirms performed well and are members
of one or more of the popular averages. In addition, technology stocks were
particularly strong in 1999. Given the Fund manager's belief in diversification
across all major sectors, the Fund was exposed to technology and held positions
in large-capitalization companies like Intel and Sun Microsystems, as well as
some mid-cap companies such as Altera and Xilinx that, according to our
research, performed well in 1999.
"WE BELIEVE EXPERIENCED INVESTORS KNOW THAT IT IS BEST TO KEEP FOCUSED
ON THE LONG-TERM TREND OF THE MARKET AND TO VIEW CORRECTIONS AS MAJOR BUYING
OPPORTUNITIES THAT MAY ENHANCE LONG-TERM RETURNS."
INVESTORS SHED MARKET CONCERNS.
It appears that many of the concerns expressed by investors early in 1999
dissipated as the year progressed. Our research indicates that earnings growth
did not slow, narrow market participation broadened, and weakness in foreign
economies did not cause the US economy to slow. In fact, we believe the strength
in the US economy and US stock market served to bolster overseas economies and
markets. Our further analysis indicates that the fear of deflation disappeared,
the fear of a financial market collapse was replaced by the fear of a possible
financial market bubble, and the fear of Y2K proved to be overblown. And, once
again, it appears that the fear of overvaluation, which we believe has existed
since the market passed 6,000, was unfounded.
During the year, long-term interest rates rose and the Federal Reserve
increased short-term rates three times. Although these increases did not derail
the market averages, our research confirms that interest-rate-sensitive stocks
performed poorly, as did mid-cap financial companies, such as banks and
insurance companies. The Fund had investments in mid-capitalization companies
like Comerica and First Tennessee. Although we believe these are high-quality,
mid-cap finance companies, they performed poorly along with the rest of the
sector. We believe that the sector will recover when interest rates begin to
decline.
In our view, in 1999 the investment community began to focus on the
upcoming presidential election and its possible impact on the market. According
to our research, one sector that was particularly hurt by the political
situation was healthcare. We believe that investors became concerned that
political candidates would urge medical cost controls. The Fund was exposed to
the healthcare sector through investments in Merck and Bristol-Myers Squibb.
Although we believe these to be high-quality healthcare companies, our research
indicates that they performed poorly along with the rest of the sector. We
believe that the long-term prospects for healthcare companies are particularly
strong given the demographics in the US and the aging of the baby boomers.
Oil prices rose sharply last year, which caused the stock of many
energy-related companies to do well. The Fund was exposed to this area through
investments in high-quality companies such as Exxon Mobil Corp., as well as some
smaller companies such as Noble Drilling.
There is an old market adage that states "the market likes to climb a
wall of worry." Looking back, that appears to be what the market did in 1999. We
believe that the investment community has now given birth to new fears. We now
witness the fear of an overheated economy, the fear of inflation, and the fear
of higher interest rates. While we believe that any one of these concerns can
easily cause the market to correct 10% or more, it is important to note that the
investment landscape is filled with unsuccessful investors who
<PAGE> 71
3
tried to time the short-term movements of the market. We believe that it is best
to keep focused on the long-term trend of the market and to view corrections as
major buying opportunities that may enhance long-term returns.
LOOKING AHEAD.
In our view, long-term investors have many reasons to remain optimistic. We
believe the threat of a significant rise in inflation is fairly remote.
Inflation is a monetary phenomenon caused by too much money chasing too few
goods. In our view, the productive capacity of the United States should not have
a problem producing goods to meet expanding demand, and we believe the world
economies are awash in excess capacity. Moreover, monetary growth in the US, as
measured by high-powered bank reserves, indicates that inflation should remain
under control. We believe the recent rise in interest rates may easily reverse
when the markets accept and reflect a low inflation environment.
In our view, the economy will continue to grow and soon mark the
longest uninterrupted period of expansion in US history. This may result in
further growth of corporate profits. Over the long term, we believe that higher
earnings and the demographics in the US could lead to higher stock prices. The
increasing need for baby boomers to plan and invest for retirement should
provide a significant positive influence on the financial markets, particularly
on stock prices.
<PAGE> 72
4
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (4/84) OF A $10,000 INVESTMENT
[CHART]
IVY GROWTH WITH INCOME FUND
PERFORMANCE SUMMARY
For the 12 months ended December 31, 1999, the Ivy Growth with Income Fund
returned 10.98% as compared to the S&P 500 Index, which returned 21.10% for the
same period. The S&P 500 Index is oriented toward large-cap stocks, which our
research showed was one of the best performing sectors of the market in
1999--especially those companies in the technology arena. The Ivy Growth with
Income Fund consists of a combination of large- and mid-cap stocks. Over the
last 12 months, mid-cap stocks did not perform as well as larger companies, as
reflected by the S&P 400 Mid-Cap Index, which gained 14.72% over the same
12-month period. Therefore, in our view, the Fund's exposure to mid-cap
companies, particularly mid-sized financial institutions, such as banks and
insurance companies, contributed to the Fund's underperformance versus the S&P
500 Index. Moreover, the Fund was hurt by its exposure to large-cap healthcare
companies.
The Lipper Average Growth and Income Fund represents performance of the average
growth and income fund as measured by Lipper Inc. It is not possible to invest
in a benchmark. The S&P 500 Index and the S&P 400 Mid-Cap Index are unmanaged
indices of stocks which assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses. It is not possible to invest in an
index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4)
IVY GROWTH WITH INCOME FUND ---------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN w/ w/o w/ w/o w/ w/o
FOR PERIODS ENDING Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
DECEMBER 31, 1999 ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
----------------------------------------
B: B: B: B:
5.14% 10.14% 5.14% 10.14%
C: C: C: C:
1 year 4.60% 4.60% 8.91% 9.91% 8.91% 9.91% 11.18% 11.18%
- -------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
16.31% 16.53% 16.31% 16.53%
C: C: C: C:
5 year 16.02% 16.02% n/a n/a n/a n/a n/a n/a
- -------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
n/a n/a n/a n/a
C: C: C: C:
10 year 12.71% 12.70% n/a n/a n/a n/a n/a n/a
- -------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
12.72% 12.72% 12.72% 12.72%
C: C: C: C:
Since Inception(5) 14.80% 14.80% 14.18% 14.18% 14.18% 14.18% 6.31% 6.31%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5.00%.
(3) Class C performance figures are calculated with and without the applicable
CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a CDSC.
(5) Class A commenced operations April 1, 1984; Class B commenced operations
October 22, 1993; Class C commenced operations April 30, 1996; Advisor Class
commenced operations April 30, 1998.
Total returns in some periods were higher due to reimbursement of certain
Fund expenses.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of course, be
different. The investment return and principal value of Ivy Growth with
Income Fund will fluctuate and at redemption shares may be worth more or
less than the amount of the original investment.
<PAGE> 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 99.43% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 5.04%
Georgia-Pacific Group................... 27,500 $ 1,395,625
PPG Industries, Inc. ................... 15,000 938,438
Praxair, Inc. .......................... 40,000 2,012,500
-----------
4,346,563
-----------
CAPITAL GOODS -- 7.10%
Briggs & Stratton Corporation........... 29,000 1,555,125
General Electric Company................ 17,500 2,708,125
Honeywell International Inc. ........... 20,625 1,189,805
Kaydon Corporation...................... 25,000 670,313
-----------
6,123,368
-----------
CONSUMER DURABLES -- 2.09%
Armstrong World Industries, Inc. ....... 17,500 584,063
Maytag Corporation...................... 9,000 432,000
Whirlpool Corporation................... 12,000 780,750
-----------
1,796,813
-----------
CONSUMER CYCLICAL -- 7.37%
American Eagle Outfitters, Inc.(a)...... 35,000 1,575,000
Circuit City Stores-Circuit City
Group................................. 18,000 811,125
K-Mart Corporation...................... 45,000 452,813
Lowe's Companies, Inc. ................. 20,000 1,195,000
Tommy Hilfiger Corporation(a)........... 55,000 1,282,187
Wal-Mart Stores, Inc. .................. 15,000 1,036,875
-----------
6,353,000
-----------
CONSUMER STAPLES -- 7.04%
Anheuser-Busch Companies, Inc. ......... 17,500 1,240,313
Colgate-Palmolive Company............... 20,000 1,300,000
Hasbro, Inc. ........................... 22,000 419,375
Kimberly-Clark Corporation.............. 22,195 1,448,224
Wm. Wrigley Jr. Company................. 20,000 1,658,750
-----------
6,066,662
-----------
ENERGY -- 6.21%
Atlantic Richfield Company (ARCO)....... 10,000 865,000
Chevron Corporation..................... 11,500 996,187
Exxon Mobil Corporation................. 11,221 903,992
Noble Drilling Corporation(a)........... 27,500 900,625
Texaco Inc.............................. 17,500 950,469
Unocal Corporation...................... 22,000 738,375
-----------
5,354,648
-----------
FINANCIAL SERVICES -- 16.79%
AMBAC Financial Group, Inc. ............ 20,000 1,043,750
AmSouth Bancorporation.................. 30,000 579,375
BB&T Corporation........................ 20,000 547,500
Comerica Incorporated................... 27,500 1,283,906
Fannie Mae.............................. 13,000 811,688
Federal Home Loan Mortgage
Corporation........................... 12,500 588,281
First Tennessee National Corporation.... 37,500 1,068,750
First Virginia Banks, Inc. ............. 20,000 860,000
Legg Mason, Inc. ....................... 28,500 1,033,125
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Lincoln National Corporation............ 30,000 $ 1,200,000
Mellon Financial Corporation............ 20,000 681,250
Mercantile Bankshares Corporation....... 37,500 1,197,656
Old Kent Financial Corporation.......... 34,125 1,207,172
Paine Webber Group Inc. ................ 40,000 1,552,500
Torchmark Corporation................... 28,000 813,750
-----------
14,468,703
-----------
HEALTHCARE -- 8.86%
Abbott Laboratories..................... 10,000 363,125
Biomet, Inc. ........................... 22,000 880,000
Bristol-Myers Squibb Company............ 20,000 1,283,750
Eli Lilly and Company................... 20,000 1,330,000
Johnson & Johnson....................... 14,000 1,303,750
Merck & Co., Inc. ...................... 18,000 1,207,125
Schering-Plough Corporation............. 30,000 1,265,625
-----------
7,633,375
-----------
TECHNOLOGY -- 29.28%
Adobe Systems Incorporated.............. 18,000 1,210,500
Altera Corporation(a)................... 22,500 1,115,156
American Power Conversion
Corporation(a)........................ 65,000 1,714,375
Cisco Systems, Inc.(a).................. 17,500 1,874,687
Dionex Corporation(a)................... 27,500 1,132,656
Emerson Electric Co. ................... 7,500 430,313
Intel Corporation....................... 15,000 1,234,687
International Business Machines
Corp. ................................ 11,000 1,188,000
Lattice Semiconductor
Corporation(a)........................ 35,000 1,649,375
Linear Technology Corporation........... 14,000 1,001,875
LSI Logic Corporation(a)................ 24,000 1,620,000
Lucent Technologies Inc. ............... 15,000 1,122,187
Microsoft Corporation(a)................ 22,000 2,568,500
Nortel Networks Corporation(b).......... 10,000 1,010,000
Novellus Systems, Inc.(a)............... 14,000 1,715,438
Sun Microsystems, Inc.(a)............... 25,000 1,935,937
Vitesse Semiconductor
Corporation(a)........................ 27,500 1,442,031
Xilinx, Inc.(a)......................... 28,000 1,273,125
-----------
25,238,842
-----------
UTILITIES -- 9.65%
ALLTEL Corporation...................... 20,000 1,653,750
Bell Atlantic Corporation............... 20,000 1,231,250
BellSouth Corporation................... 10,000 468,125
DPL Inc................................. 70,000 1,211,875
MediaOne Group, Inc.(a)................. 20,000 1,536,250
Montana Power Company (The)............. 25,000 901,562
SBC Communications Inc. ................ 27,000 1,316,250
-----------
8,319,062
-----------
</TABLE>
<PAGE> 74
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
6
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS -- 99.43%
(Cost -- $63,089,399)(c).............. $85,701,036
OTHER ASSETS, LESS LIABILITIES -- 0.57% 488,403
-----------
NET ASSETS -- 100%...................... $86,189,439
===========
(a) Non-income producing security
(b) Foreign security
(c) Cost is approximately the same for Federal
income tax purposes.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
<S> <C> <C>
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............... $24,065,047
Gross unrealized depreciation............... (1,453,410)
-----------
Net unrealized appreciation............. $22,611,637
===========
Purchases and sales of securities other than short-term
obligations aggregated $72,616,634 and $90,297,328,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $63,089,399)...... $85,701,036
Cash........................................................ 601,060
Receivables
Fund shares sold.......................................... 2,886
Dividends and interest.................................... 76,881
Other assets................................................ 23,921
-----------
Total assets.............................................. 86,405,784
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 83,939
Management fee............................................ 54,959
12b-1 service and distribution fees....................... 29,454
Other payables to related parties......................... 36,377
Accrued expenses............................................ 11,616
-----------
Total liabilities......................................... 216,345
-----------
NET ASSETS.................................................. $86,189,439
===========
CLASS A
Net asset value and redemption price per share
($63,580,153/4,706,004 shares outstanding)................ $ 13.51
===========
Maximum offering price per share ($13.51 x 100/94.25)*...... $ 14.33
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($21,749,637/1,644,950 shares outstanding).......... $ 13.22
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($484,489/37,014 shares outstanding)................ $ 13.09
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($375,160/27,634 shares outstanding)................ $ 13.58
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $63,806,854
Accumulated net realized loss on investments.............. (229,052)
Net unrealized appreciation on investments................ 22,611,637
-----------
NET ASSETS.................................................. $86,189,439
===========
</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> 76
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 1,196,642
Interest.................................................. 53,462
-----------
1,250,104
-----------
EXPENSES
Management fee............................................ $674,369
Transfer agent............................................ 250,101
Administrative services fee............................... 89,916
Custodian fees............................................ 20,901
Blue Sky fees............................................. 32,836
Auditing and accounting fees.............................. 29,744
Shareholder reports....................................... 26,908
Fund accounting........................................... 98,036
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 367,636
Legal..................................................... 31,106
-----------
Total expenses........................................ 1,630,793
-----------
NET INVESTMENT LOSS......................................... (380,689)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investments.......................... 10,673,435
Net change in unrealized appreciation on investments...... (1,206,842)
-----------
Net gain on investment transactions................... 9,466,593
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 9,085,904
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 77
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment (loss) income.............................. $ (380,689) $ 76,556
Net realized gain on investments.......................... 10,673,435 3,269,440
Net change in unrealized appreciation on investments...... (1,206,842) 5,444,602
----------- -----------
Net increase resulting from operations................ 9,085,904 8,790,598
----------- -----------
Class A distributions
Dividends
From net investment income.............................. -- (44,407)
In excess of net investment income...................... (170,492) --
Distributions from capital gains.......................... (6,433,775) (1,399,111)
----------- -----------
Total distributions to Class A shareholders........... (6,604,267) (1,443,518)
----------- -----------
Class B distributions
Dividends in excess of net investment income.............. (58,202) --
Distributions from capital gains.......................... (2,210,139) (492,051)
----------- -----------
Total distributions to Class B shareholders........... (2,268,341) (492,051)
----------- -----------
Class C distributions
Dividends in excess of net investment income.............. (1,585) --
Distributions from capital gains.......................... (49,483) (31,265)
----------- -----------
Total distributions to Class C shareholders........... (51,068) (31,265)
----------- -----------
Advisor Class distributions
Dividends in excess of net investment income.............. (823) --
Distributions from capital gains.......................... (37,042) (5,709)
----------- -----------
Total distributions to Advisor Class shareholders..... (37,865) (5,709)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (6,380,015) (5,017,773)
Class B................................................... (2,128,060) 2,325,537
Class C................................................... (153,520) (3,935,114)
Advisor Class............................................. 36,051 331,216
----------- -----------
Net decrease resulting from Fund share transactions... (8,625,544) (6,296,134)
----------- -----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (8,501,181) 521,921
NET ASSETS
Beginning of period....................................... 94,690,620 94,168,699
----------- -----------
END OF PERIOD............................................. $86,189,439 $94,690,620
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 78
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
for the year ended
CLASS A December 31,
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 13.54 $ 12.59 $ 11.38 $ 10.98 $ 9.08
-----------------------------------------------------
Income from investment operations
Net investment (loss) income.............................. (.03) .04 .08 .08 .11
Net gain on securities (both realized and unrealized)..... 1.51 1.19 2.37 2.16 2.13
-----------------------------------------------------
Total from investment operations.......................... 1.48 1.23 2.45 2.24 2.24
-----------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- -- .03 .08 .08
In excess of net investment income...................... .03 -- -- .03 --
Distributions from capital gains.......................... 1.48 .28 1.21 1.73 .26
-----------------------------------------------------
Total distributions..................................... 1.51 .28 1.24 1.84 .34
-----------------------------------------------------
Net asset value, end of period.............................. $ 13.51 $ 13.54 $ 12.59 $ 11.38 $ 10.98
=====================================================
Total return (%)(a)......................................... 10.98 9.64 21.57 20.46 24.93
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $63,580 $69,733 $69,742 $63,219 $59,054
Ratio of expenses to average net assets (%)................. 1.62 1.60 1.59 1.81 1.96
Ratio of net investment (loss) income to average net assets
(%)....................................................... (.23) .28 .58 .68 1.06
Portfolio turnover rate (%)................................. 82 108 36 138 81
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
for the year ended
CLASS B December 31,
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 13.38 $ 12.54 $ 11.36 $ 10.98 $ 9.08
-----------------------------------------------------
Income from investment operations
Net investment (loss) income.............................. (.13) (.06) (.02) (.01) .03
Net gain on securities (both realized and unrealized)..... 1.48 1.18 2.37 2.15 2.13
-----------------------------------------------------
Total from investment operations.......................... 1.35 1.12 2.35 2.14 2.16
-----------------------------------------------------
Less distributions
Dividends
From net investment income.............................. -- -- .03 -- .01
In excess of net investment income...................... .03 -- -- .08 --
Distributions from capital gains.......................... 1.48 .28 1.14 1.68 .25
-----------------------------------------------------
Total distributions..................................... 1.51 .28 1.17 1.76 .26
-----------------------------------------------------
Net asset value, end of period.............................. $ 13.22 $ 13.38 $ 12.54 $ 11.36 $ 10.98
=====================================================
Total return (%)(a)......................................... 10.14 9.01 20.74 19.59 23.94
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $21,750 $23,975 $20,071 $13,473 $ 8,868
Ratio of expenses to average net assets (%)................. 2.36 2.33 2.31 2.55 2.75
Ratio of net investment (loss) income to average net assets
(%)....................................................... (.97) (.45) (.13) (.06) .27
Portfolio turnover rate (%)................................. 82 108 36 138 81
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 79
11
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
for the period
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $13.29 $12.44 $11.37 $11.73
-----------------------------------------------------
Income from investment operations
Net investment loss....................................... (.14) (.05) (.01) (.08)
Net gain on securities (both realized and unrealized)..... 1.45 1.18 2.35 1.53
-----------------------------------------------------
Total from investment operations.......................... 1.31 1.13 2.34 1.45
-----------------------------------------------------
Less distributions
Dividends in excess of net investment income.............. .03 -- -- .08
Distributions from capital gains.......................... 1.48 .28 1.27 1.73
-----------------------------------------------------
Total distributions..................................... 1.51 .28 1.27 1.81
-----------------------------------------------------
Net asset value, end of period.............................. $13.09 $13.29 $12.44 $11.37
-----------------------------------------------------
-----------------------------------------------------
Total return (%)............................................ 9.91(a) 9.16(a) 20.70(a) 12.37(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 484 $ 643 $4,356 $ 28
Ratio of expenses to average net assets (%)................. 2.50 2.27 2.23 3.02(c)
Ratio of net investment loss to average net assets (%)...... (1.11) (.39) (.05) (.53)(c)
Portfolio turnover rate (%)................................. 82 108 36 138
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
for the period
for the year April 30, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- -------------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA -----------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 13.58 $ 13.88
--------------------------------------
Income (loss) from investment operations
Net investment (loss) income.............................. (.02) .05
Net gain or loss on securities (both realized and
unrealized)............................................. 1.53 (.07)
--------------------------------------
Total from investment operations.......................... 1.51 (.02)
--------------------------------------
Less distributions
Dividends in excess of net investment income.............. .03 --
Distributions from capital gains.......................... 1.48 .28
--------------------------------------
Total distributions..................................... 1.51 .28
--------------------------------------
Net asset value, end of period.............................. $ 13.58 $ 13.58
--------------------------------------
--------------------------------------
Total return (%)............................................ 11.18(a) (.36)(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 375 $ 339
Ratio of expenses to average net assets (%)................. 1.46 1.20(c)
Ratio of net investment (loss) income to average net assets
(%)....................................................... (.07) .68(c)
Portfolio turnover rate (%)................................. 82 108
</TABLE>
<TABLE>
<S> <C> <C>
(a) Total return does not reflect (b) Total return represents (c) Annualized
a sales charge. aggregate total return and does
not reflect a sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 80
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
12
NOTES TO FINANCIAL STATEMENTS
Ivy Growth with Income Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange the
security is traded most extensively. If there is no such sale, the security is
valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked 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 December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund has a net tax basis capital loss carryover of approximately $228,000 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 Fund's capital loss carryover was
realized by Mackenzie North American Fund prior to the Fund's acquisition of all
the net assets on April 1, 1995. The carryover expires in 2002.
Pursuant to Code Section 852, the Fund designates $8,743,548 as long-term
capital gain distributions for its taxable year ended December 31, 1999.
DISTRIBUTIONS TO SHAREHOLDERS -- From January 1, 1999 to April 30, 1999,
distributions from net investment income were declared daily and paid quarterly
(or at redemption, if earlier). Beginning May 1, 1999, distributions from net
investment income and 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 and foreign
currency transactions for a reporting period may differ significantly in amount
and character from distributions during such period. Accordingly, the Fund may
make reclassifications among certain of its capital accounts without impacting
the net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .75% of the
Fund's average net assets.
Mackenzie Investment Management Inc. (MIMI), of which IMI is a wholly owned
subsidiary, provides certain administrative, accounting and pricing services for
the Fund. For those services, the Fund pays MIMI fees plus certain out-of-pocket
expenses. Such fees and expenses are reflected as Administrative services fee
and Fund accounting in the Statement of Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $6,459.
<PAGE> 81
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
Under Service and Distribution Plans, the Fund reimburses IMDI for service fee
payments made to brokers at an annual rate not to exceed .25% of its average net
assets of shares issued after December 31, 1991, excluding Advisor Class. Class
B and Class C shares are also subject to an ongoing distribution fee at an
annual rate of .75% of the average net assets attributable to Class B and Class
C. IMDI may use such distribution fee for purposes of advertising and marketing
shares of the Fund. Such fees of $132,149, $229,676, and $5,811, 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 $192,900, $53,850, $2,174, and $1,177, for Class A, Class B, Class C
and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,005,225 $ 13,615,078 1,086,458 $ 14,042,632
Issued on
reinvestment of
distributions....... 416,576 5,609,993 91,798 1,211,827
Repurchased.......... (1,864,569) (25,605,086) (1,567,998) (20,272,232)
---------- ------------ ---------- ------------
Net decrease......... (442,768) $ (6,380,015) (389,742) $ (5,017,773)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 333,834 $ 4,565,699 722,497 $ 9,215,272
Issued on
reinvestment of
distributions....... 135,392 1,784,428 29,845 389,428
Repurchased.......... (615,961) (8,478,187) (561,757) (7,279,163)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (146,735) $ (2,128,060) 190,585 $ 2,325,537
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 42,045 $ 577,646 22,867 $ 288,642
Issued on
reinvestment of
distributions....... 3,109 40,580 1,721 23,013
Repurchased.......... (56,561) (771,746) (326,251) (4,246,769)
---------- ------------ ---------- ------------
Net decrease......... (11,407) $ (153,520) (301,663) $ (3,935,114)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 4,022 $ 55,582 29,137 $ 385,406
Issued on
reinvestment of
distributions....... 2,803 37,915 417 5,466
Repurchased.......... (4,126) (57,446) (4,619) (59,656)
---------- ------------ ---------- ------------
Net increase......... 2,699 $ 36,051 24,935 $ 331,216
========== ============ ========== ============
</TABLE>
<PAGE> 82
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GROWTH WITH INCOME FUND
- --------------------------------------------------------------------------------
14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY GROWTH WITH INCOME FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 83
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ----------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ----------------------------------------------------
<S> <C> <C>
James W. Broadfoot........... 4,052,427 116,963
Keith J. Carlson............. 4,052,427 116,963
Stanley Channick............. 4,050,540 118,850
Roy J. Glauber............... 4,050,767 118,622
Edward M. Tighe.............. 4,052,427 116,963
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------
FOR: AGAINST: ABSTAIN:
- ------------------------------
<S> <C> <C>
3,974,055 19,544 175,790
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,172,765 137,178 270,281 589,165
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,148,913 160,872 270,439 589,165
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,163,871 142,858 273,495 589,165
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,162,977 148,220 269,027 589,165
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,164,813 141,219 274,192 589,165
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,161,360 145,804 273,060 589,165
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,153,675 147,735 278,814 589,165
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,166,009 143,740 270,474 589,165
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
3,149,327 158,391 272,506 589,165
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 84
02IGIF123199
<PAGE> 85
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT,INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31,1999
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
[MACKENZIE LOGO]
IVY BOND FUND
OVERVIEW
For the 12-month period ending December 31, 1999, the Ivy Bond Fund returned
- -6.17%. This compares to its benchmark, the Morningstar Corporate Bond--General
bond fund universe, which returned -0.62% over the same time period.(For the
Fund's total return with sales charge and performance commentary, please refer
to page 3.)
There are several factors that may have contributed to the Fund's
under-performance over this time period. First, while the strategy of the Ivy
Bond Fund is to focus primarily on corporate bonds based on their credit
worthiness and not on trying to predict the direction of interest rates, last
year's general rise in interest rates still negatively impacted the Fund. We
believe that another factor that negatively affected the Fund's performance was
liquidity. The liquidity of a bond refers to an investor's ability to trade it
without accepting a price concession. A bond's liquidity is determined by
several factors, including the size of the issue and, to a lesser extent, the
number of dealers that make a market in the issue, as well as the type of
investor base that holds the issue. Last year, less liquid bonds tended to
underperform, and the Ivy Bond Fund was more heavily weighted in these types of
bonds.
We believe another factor contributing to the Ivy Bond Fund's
comparatively weak performance was its focus on securities that rank in the
bottom half of a company's capital structure (i.e., senior subordinated and
unsecured debentures). Although these securities may provide investors with
higher yields, they can have a higher level of risk. These issues provide bond
investors with a low-priority claim on the company's assets. As risk in the
corporate bond market increased and bond yield spreads widened, these issues
held by the Fund underperformed significantly and accounted for almost half of
the Fund's underperformance.
Several steps were taken to reposition the Ivy Bond Fund to help reduce
its risk exposure and return volatility, while attempting to maintain its
investment strategy of finding relative value in corporate bonds. Our analysis
indicates that the cost involved in this repositioning also contributed to last
year's under-performance. The target weighting of investment-grade bonds was
increased to 80% from 70%. The target weighting for high-yield bonds was reduced
to 20% from 30%. In addition, the Fund's high-yield bond holdings now consist
almost entirely of BB-rated bonds--an improvement in the quality of bonds held
since the Fund previously invested in many B-rated bonds. The target weighting
for foreign bonds was reduced to 7% from 15%.
Additionally, going forward, the Fund's investments are expected to
focus more on bonds that rank in the top half of a company's capital structure.
This will include issues such as senior, senior secured, and first mortgage
notes, which we expect to provide an added level of security. The Ivy Bond Fund
previously focused on small issues that tended to be more difficult and
expensive to trade. Going forward, the Fund will focus on
<PAGE> 86
2
large, liquid, visible issues that we believe are easier and less expensive to
trade.
GOING FORWARD, WE BELIEVE THE OUTLOOK FOR THE CORPORATE BOND MARKET IS
POSITIVE. THE STRENGTH IN ECONOMIC GROWTH MAY PROVIDE A STRONG FUNDAMENTAL
BACKDROP FOR CORPORATE EARNINGS AND CASH FLOW.
MARKET COMMENTARY
The corporate bond market experienced another difficult and volatile year in
1999. We believe rising interest rates, inflation worries, and the widening of
bond-yield spreads all contributed to the bond market's slide, marking 1999 as
the most difficult year for bonds since 1994.
We believe that market fears that a strong economy and a tight labor
market would eventually cause inflation to rise prompted the Federal Reserve to
tighten monetary policy by raising interest rates three times during 1999.
Higher interest rates caused bond prices to move lower, sending yields higher.
The yield on the 10-year Treasury bond rose from about 4.7% in January 1999 to
almost 6.5% by the end of December 1999.
THE IMPACT OF YIELD SPREADS.
Corporate bond yield spreads were volatile over the last 12 months. The yield
spread on a bond is the difference between the yield on a corporate bond and the
yield on a Treasury bond with a similar maturity. For example, when comparing a
10-year corporate bond yielding 8% to a 10-year Treasury bond yielding 6%, the
difference, or spread, is 2%. The spread is a measurement of the risk premium
investors require to hold corporate bonds. Tighter, or narrower spreads, is
positive for corporate bonds. Conversely, increased or widening spreads
negatively impact corporate bonds. The yield spread of corporate bonds rated BBB
began 1999 at 2.2% and then subsequently tightened to 1.8% in the spring,
apparently driven by a decrease in the level of risk aversion, or the risk
premium demanded by investors. We believe investors realized that the United
States would be largely unaffected by the global financial turmoil, as the
Federal Reserve reacted quickly to provide liquidity to the credit markets.
Spreads then widened to 2.2% by the fall, most likely due to the fear
that higher interest rates, brought on by tighter monetary policy intended to
slow the strength of the United States economy, would cause a weakening of
corporate credit quality. Additionally, according to our research, there was a
very heavy flow of new issue bonds during a time when there was little demand
for bonds. When the demand for new bonds is not sufficient to absorb the
issuance, the new bonds must be priced with higher yields to attract buyers.
This, in turn, can cause already-issued bonds to trade at higher yields (i.e.,
lower prices) to remain attractive to investors. This volatility can cause
investors to seek more liquid, more secure bonds, thereby weakening the
corporate bond market.
A BRIGHTER FUTURE.
Going forward, we believe the outlook for the corporate bond market is positive.
The strength in economic growth may provide a strong fundamental backdrop for
corporate earnings and cash flow. While we believe that growth is running at
above trend levels, in our opinion, productivity gains have allowed this to
occur without a significant upturn in inflation. Our research indicates that the
labor market is tight, with unemployment at a 29-year low, and wages are rising.
We believe that this, combined with an equity bull market, has pushed consumer
confidence to an all-time high as well. It is also our belief that with Asia in
recovery and Europe showing positive growth, there may be an increase in global
demand for resources that will make it necessary for the Federal Reserve to
tighten monetary policy and slow the economy. However, in our opinion, the
Federal Reserve can do so in a controlled manner that will not cause a marked
deterioration in the credit quality of corporations, although smaller companies
and firms with a high degree of financial leverage may begin to have
difficulties obtaining financing should interest rates rise. Given our outlook
for interest rates, inflation, and the US economy, we believe that the Ivy Bond
Fund is well positioned to benefit.
<PAGE> 87
3
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (9/85) OF A $10,000 INVESTMENT
[CHART]
IVY BOND FUND
PERFORMANCE COMMENTARY
For the 12 months ended December 31, 1999, the Ivy Bond Fund returned -6.17%
versus the Morningstar Corporate Bond--General bond fund universe, its
benchmark, which returned -0.62% over the same time period. Rising interest
rates,the widening of bond yield spreads, and the Fund's investments in bonds
that were ranked low in a company's capital structure all contributed to the Ivy
Bond Fund's underperformance.
The Morningstar Corporate Bond--General bond fund benchmark is a compilation of
funds that consists primarily of corporate bonds rated BBB or higher. It is not
possible to invest in a benchmark.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4) Class 1(5)
---------------- --------------------------------- ---------------- ----------------
IVY BOND FUND w/ w/o w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
------ ------ -------------- ---------------- ------ ------ ------ ------
FOR PERIODS ENDING w/ w/o w/ w/o
DECEMBER 31,1999 CDSC CDSC CDSC CDSC
------ ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
(11.63)% (6.97)% (11.63)% (6.97)%
1 year C: C: C: C:
(10.63)% (10.63)% (7.75)% (6.81)% (7.75)% (6.81)% (6.21)% (6.21)% n/a n/a
------ ------ ------ ----- ------ ----- ----- ----- ------ ------
B: B: B: B:
4.76% 5.09% 4.76% 5.09%
5 year C: C: C: C:
4.87% 4.87% n/a n/a n/a n/a n/a n/a n/a n/a
------ ------ ------ ----- ------ ----- ----- ----- ------ ------
B: B: B: B:
n/a n/a n/a n/a
10 year C: C: C: C:
6.13% 6.09% n/a n/a n/a n/a n/a n/a n/a n/a
------ ------ ------ ----- ------ ----- ----- ----- ------ ------
B: B: B: B:
3.87% 4.01% 3.87% 4.01%
C: C: C: C:
Since Inception(6) 7.20% 1.46% 3.07% 3.07% 3.07% 3.07% (3.39)% (3.39)% n/a n/a
------ ------ ------ ----- ------ ----- ----- ----- ------ ------
</TABLE>
(1) Class A performance figures include the maximum sales charge of 4.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class I shares are not subject to an initial sales charge or a
CDSC. There were no Class I shares outstanding.
(6) Class A commenced operations September 6, 1985; Class B commenced
operations April 1, 1994; Class C commenced operations April 30, 1996;
Advisor Class commenced operations January 20, 1998.
Total returns in some periods were higher due to reimbursement of
certain Fund expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of Ivy
Bond Fund will fluctuate and at redemption shares may be worth more or
less than the amount of the original investment.
<PAGE> 88
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
U.S. CORPORATE BONDS -- 90.05% PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
Allied Waste North America Inc.,
7.625%, 01/01/06(a).............. $ 500,000 $ 453,750
American Standard Inc., 7.375%,
04/15/05(a)...................... 480,000 453,600
Amresco Inc., 9.875%, 03/15/05(a).. 337,000 200,515
BRE Properties, 7.125%, 02/15/13... 2,000,000 1,725,000
Burlington Industries, 7.25%,
08/01/27(a)...................... 1,000,000 793,750
Calpine Corporation, 7.75%,
04/15/09(a)...................... 950,000 900,125
CBS Corp., 7.15%, 05/20/05......... 925,000 907,656
CBS Corp., 7.125%, 11/01/23........ 1,000,000 893,750
CHS Electronics, 9.875%,
04/15/05(a)...................... 1,505,000 270,900
Circus Circus Enterprises, 7.625%,
07/15/13(a)...................... 1,000,000 860,000
Comcast Cable Communications,
6.20%, 11/15/08.................. 1,045,000 945,725
Conseco Inc., 9.00%, 10/15/06...... 2,400,000 2,463,000
Continental Airlines, 6.545%,
02/02/19......................... 1,499,357 1,371,912
Cyprus Amax Minerals, 8.375%,
02/01/23......................... 1,575,000 1,571,062
Darden Restaurants Inc., 7.125%,
02/01/16......................... 1,250,000 1,085,938
Dell Computer Corporation, 6.55%,
04/15/08......................... 500,000 467,500
Delphi Financial Group Inc., 8.00%,
10/01/03......................... 2,500,000 2,487,500
Delta Air Lines, 9.30%, 01/02/11... 1,000,000 1,060,000
Delta Air Lines, 9.59%, 01/12/17... 1,500,000 1,567,875
Developers Diversified Realty
Corp., 6.96%, 12/17/07........... 2,000,000 1,815,000
Developers Diversified Realty
Corp., 6.625%, 01/15/08.......... 1,000,000 872,500
Farmers Insurance Exchange, 8.625%,
05/01/24......................... 2,000,000 2,025,000
Fort James Corporation, 6.875%,
09/15/07......................... 1,356,000 1,276,335
Franchise Finance Corp America,
6.86%, 06/15/07.................. 3,750,000 3,304,688
Goldman Sachs Group, L.P., 7.20%,
03/01/07......................... 1,000,000 920,000
Goldman Sachs Group, L.P., 6.65%,
05/15/09......................... 1,000,000 930,000
Indianapolis Life Ins. Co. 144A,
8.66%, 04/01/11.................. 2,000,000 2,030,000
Indiantown Cogeneration, 9.77%,
12/15/20......................... 1,500,000 1,488,750
International Paper Company,
7.625%, 01/15/07................. 2,000,000 1,985,000
Jackson National Life Ins. Co.
144A, 8.15%, 03/15/27............ 1,000,000 967,500
Jefferies Group Inc., 7.50%,
08/15/07......................... 2,500,000 2,362,500
K-mart Corporation, 8.375%,
12/01/04(a)...................... 625,000 617,969
Leucadia National Corp., 7.75%,
08/15/13......................... 2,415,000 2,185,575
Lumbermens Mutual Casualty 144A,
9.15%, 07/01/26.................. 2,000,000 1,960,000
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
U.S. CORPORATE BONDS PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
McDermott Inc., 8.75%, 05/19/23.... $2,000,000 $ 1,832,500
Meritor Automotive, 6.80%,
02/15/09......................... 1,000,000 903,750
News America Holdings, 7.75%,
01/20/24......................... 1,000,000 940,000
News America Holdings, 7.70%,
10/30/25......................... 2,000,000 1,877,500
Northrop Grumman Corp., 9.375%,
10/15/24......................... 2,000,000 2,107,500
Pegasus Media & Communications
144A, 12.50%, 07/01/05(a)........ 1,000,000 1,072,500
Pioneer-Standard Electronics,
8.50%, 08/01/06.................. 2,000,000 1,895,000
Praxair Inc., 8.70%, 07/15/22...... 2,500,000 2,500,000
Protection One, 7.375%,
08/15/05(a)...................... 1,000,000 795,000
Pulte Corp., 7.625%, 10/15/17...... 1,500,000 1,340,625
R&B Falcon Corporation, 6.50%,
04/15/03(a)...................... 480,000 442,800
R.J. Reynolds Tobacco Holdings,
Inc., 7.375%, 05/15/03........... 2,000,000 1,885,000
Royal Caribbean Cruises, 7.50%,
10/15/27......................... 2,000,000 1,787,500
Safeway Inc., 7.00%, 09/15/07...... 1,000,000 958,750
Servicemaster Company, 7.25%,
03/01/38......................... 2,500,000 2,193,750
Sithe/Independence Funding Corp.,
9.00%, 12/30/13.................. 2,000,000 2,042,500
Spieker Properties, 7.35%,
12/01/17......................... 2,975,000 2,655,187
Storage USA Partnership L.P.,
7.00%, 12/01/07.................. 1,200,000 1,069,500
Storage USA Partnership L.P.,
8.20%, 06/01/17.................. 2,240,000 1,982,400
TCI Communications, Inc., 8.75%,
08/01/15......................... 1,000,000 1,086,250
TCI Communications Inc., 9.25%,
01/15/23......................... 2,000,000 2,077,500
TE Products Pipeline Co., 7.51%,
01/15/28......................... 1,975,000 1,715,781
Tenet Healthcare Corp., 8.00%,
01/15/05(a)...................... 480,000 462,000
Time Warner Inc., 9.125%,
01/15/13......................... 1,500,000 1,676,250
Time Warner Inc., 9.15%,
02/01/23......................... 1,500,000 1,642,500
Tommy Hilfiger USA, 6.50%,
06/01/03......................... 1,975,000 1,876,250
Torchmark Corporation, 7.875%,
05/15/23......................... 2,000,000 1,867,500
Unisys Corporation, 7.875%,
04/01/08(a)...................... 480,000 462,000
Watson Pharmaceuticals, 7.125%,
05/15/08......................... 2,955,000 2,637,337
------------
TOTAL U.S. CORPORATE BONDS
(Cost $98,182,632)............... 91,005,505
------------
U.S. DOLLAR DENOMINATED FOREIGN
CORPORATE BONDS -- 7.40%
Abitibi Consolidated Inc., 7.50%,
04/01/28......................... 1,950,000 1,662,375
Alestra 144A, 12.125%,
05/15/06(a)...................... 600,000 604,500
</TABLE>
<PAGE> 89
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
U.S. DOLLAR DENOMINATED
FOREIGN CORPORATE BONDS PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
Buenos Aires Embotelladora
Argentina S.A. (BAESA), 12.00%,
08/03/05(a)(d)................... $ 161,000 $ 161,000
Cemex S.A., 12.75%, 07/15/07(a).... 750,000 845,625
Cia Brasileira de Petroleo Ipiranga
S.A. 144A, 10.625%,
02/25/03(a)...................... 1,000,000 990,000
Equimar Shipholdings Ltd., 9.875%,
07/01/07(a)...................... 1,050,000 656,250
Grupo Industrial Durango S.A.
(GIDUSA), 12.625%, 08/1/03(a).... 1,000,000 1,001,250
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 1,396,875
------------
TOTAL U.S. DOLLAR DENOMINATED
FOREIGN CORPORATE BONDS
(Cost $9,152,091)................ 7,477,875
------------
SHARES
----------
EQUITY SECURITIES -- 0.04%
Buenos Aires Embotelladora
Argentina S.A. (BAESA)(c)(d)
(Cost $309,699).................. 1,219,559 38,165
------------
RIGHTS & WARRANTS (C) -- 0.16%
Gothic Energy Restricted
Warrants......................... 4,767 --
Gothic Energy Warrants............. 6,941 --
Gothic Energy 144A Warrants........ 14,000 14,000
McCaw International Ltd.
Warrants......................... 2,000 5,000
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
RSL Communications Ltd. 144A
Warrants......................... 1,000 60,000
Terex Corp. -- Appreciation
Rights........................... 4,000 $ 80,000
------------
TOTAL RIGHTS & WARRANTS
(Cost $0)........................ 159,000
------------
TOTAL INVESTMENTS -- 97.65%
(Cost -- $107,644,422)(e).......... 98,680,545
OTHER ASSETS, LESS LIABILITIES --
2.35%............................ 2,378,452
------------
NET ASSETS -- 100%................. $101,058,997
============
(a) Below investment grade security
(b) Issuer is in default on interest payments.
(c) Non-income producing security
(d) Securities valued in good faith by the
Valuation Committee of the Board of
Trustees. See Note 1 to the Financial
Statements.
(e) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At December 31, 1999, net unrealized depreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation.............. $ 879,105
Gross unrealized depreciation.............. (9,842,982)
------------
Net unrealized depreciation............ $ (8,963,877)
============
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $36,056,032
and $79,316,788, respectively, for the period ended December
31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 90
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $107,644,422)..... $ 98,680,545
Cash........................................................ 534,174
Receivables
Fund shares sold.......................................... 4,415
Interest.................................................. 2,370,514
Other assets................................................ 52,887
------------
Total assets.............................................. 101,642,535
------------
LIABILITIES
Payables
Fund shares repurchased................................... 398,146
Management fee............................................ 65,430
12b-1 service and distribution fees....................... 42,952
Other payables to related parties......................... 38,729
Accrued expenses............................................ 38,281
------------
Total liabilities......................................... 583,538
------------
NET ASSETS.................................................. $101,058,997
============
CLASS A
Net asset value and redemption price per share
($69,248,656/8,354,971 shares outstanding)................ $ 8.29
============
Maximum offering price per share ($8.29 x 100/95.25)*....... $ 8.70
============
CLASS B
Net asset value, offering price and redemption price** per
share ($27,549,930/3,327,248 shares outstanding).......... $ 8.28
============
CLASS C
Net asset value, offering price and redemption price*** per
share ($3,928,178/472,968 shares outstanding)............. $ 8.31
============
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($332,233/40,118 shares outstanding)................ $ 8.28
============
NET ASSETS CONSIST OF
Capital paid-in........................................... $127,765,985
Accumulated net realized loss on investments.............. (17,519,732)
Accumulated net investment loss........................... (223,379)
Net unrealized depreciation on investments................ (8,963,877)
------------
NET ASSETS.................................................. $101,058,997
============
</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> 91
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 11,721,418
------------
EXPENSES
Management fee............................................ $907,299
Transfer agent............................................ 310,628
Administrative services fee............................... 131,460
Custodian fees............................................ 91,260
Blue Sky fees............................................. 35,615
Auditing and accounting fees.............................. 43,343
Shareholder reports....................................... 29,551
Fund accounting........................................... 102,984
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 651,255
Legal..................................................... 29,012
Other..................................................... 10,589
------------
Total expenses........................................ 2,352,236
------------
NET INVESTMENT INCOME....................................... 9,369,182
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments.......................... (14,598,790)
Net change in unrealized depreciation on investments...... (3,705,523)
------------
Net loss on investments............................... (18,304,313)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (8,935,131)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 92
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 9,369,182 $ 10,579,351
Net realized loss on investments.......................... (14,598,790) (701,990)
Net change in unrealized depreciation on investments...... (3,705,523) (10,804,689)
------------ ------------
Net decrease resulting from operations................ (8,935,131) (927,328)
------------ ------------
Class A distributions
Dividends
From net investment income.............................. (6,523,088) (7,864,249)
In excess of net investment income...................... (106,066) --
------------ ------------
Total distributions to Class A shareholders........... (6,629,154) (7,864,249)
------------ ------------
Class B distributions
Dividends
From net investment income.............................. (2,391,825) (2,093,426)
In excess of net investment income...................... (38,891) (65,500)
------------ ------------
Total distributions to Class B shareholders........... (2,430,716) (2,158,926)
------------ ------------
Class C distributions
Dividends
From net investment income.............................. (433,785) (598,287)
In excess of net investment income...................... (7,053) (12,551)
------------ ------------
Total distributions to Class C shareholders........... (440,838) (610,838)
------------ ------------
Advisor Class distributions
Dividends
From net investment income.............................. (21,268) (23,389)
In excess of net investment income...................... (346) (513)
------------ ------------
Total distributions to Advisor Class shareholders..... (21,614) (23,902)
------------ ------------
Fund share transactions (Note 4)
Class A................................................... (27,828,111) 11,160,978
Class B................................................... (9,560,939) 26,333,094
Class C................................................... (6,392,927) 5,413,523
Advisor Class............................................. 25,495 374,347
------------ ------------
Net (decrease) increase resulting from Fund share
transactions......................................... (43,756,482) 43,281,942
------------ ------------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (62,213,935) 31,696,699
NET ASSETS
Beginning of period....................................... 163,272,932 131,576,233
------------ ------------
END OF PERIOD............................................. $101,058,997 $163,272,932
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 93
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
for the year ended
CLASS A December 31,
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.54 $ 10.22 $ 9.80 $ 9.78 $ 9.01
------------------------------------------------------------
Income (loss) from investment operations
Net investment income................................. .67 .69 .80 .72 .67(a)
Net gains or losses on securities (both realized and
unrealized)......................................... (1.24) (.69) .42 .03 .84
------------------------------------------------------------
Total from investment operations...................... (.57) -- 1.22 .75 1.51
------------------------------------------------------------
Less distributions
Dividends
From net investment income.......................... .67 .68 .80 .72 .63
In excess of net investment income.................. .01 -- -- .01 --
Returns of capital.................................... -- -- -- -- .11
------------------------------------------------------------
Total distributions................................. .68 .68 .80 .73 .74
------------------------------------------------------------
Net asset value, end of period.......................... $ 8.29 $ 9.54 $ 10.22 $ 9.80 $ 9.78
============================================================
Total return (%)(b)..................................... (6.17) .00 11.87 8.06 17.41
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $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 (%)..................... 1.52 1.39 1.47 1.56 1.54
Ratio of net investment income to average net assets
(%)................................................... 7.40 6.88 7.08 7.36 7.09(a)
Portfolio turnover rate (%)............................. 28 43 71 90 93
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
for the year ended
CLASS B December 31,
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.53 $ 10.22 $ 9.80 $ 9.78 $ 9.01
------------------------------------------------------------
Income (loss) from investment operations
Net investment income................................. .59 .59 .68 .64 .60(a)
Net gains or losses on securities (both realized and
unrealized)......................................... (1.24) (.67) .46 .04 .84
------------------------------------------------------------
Total from investment operations...................... (.65) (.08) 1.14 .68 1.44
------------------------------------------------------------
Less distributions
Dividends
From net investment income.......................... .59 .59 .72 .64 .56
In excess of net investment income.................. .01 .02 -- .02 --
Returns of capital.................................... -- -- -- -- .11
------------------------------------------------------------
Total distributions................................. .60 .61 .72 .66 .67
------------------------------------------------------------
Net asset value, end of period.......................... $ 8.28 $ 9.53 $ 10.22 $ 9.80 $ 9.78
============================================================
Total return (%)(b)..................................... (6.97) (.81) 11.12 7.25 16.54
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $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 (%)..................... 2.36 2.13 2.21 2.29 2.29
Ratio of net investment income to average net assets
(%)................................................... 6.55 6.13 6.35 6.62 6.34(a)
Portfolio turnover rate (%)............................. 28 43 71 90 93
</TABLE>
<PAGE> 94
10
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
for the period
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- ------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.55 $ 10.24 $ 9.82 $ 9.44
--------------------------------------------------------
Income (loss) from investment operations
Net investment income................................. .62 .60 .64 .39
Net gains or losses on securities (both realized and
unrealized)......................................... (1.25) (.68) .48 .43
--------------------------------------------------------
Total from investment operations...................... (.63) (.08) 1.12 .82
--------------------------------------------------------
Less distributions
Dividends
From net investment income.......................... .61 .60 .70 .39
In excess of net investment income.................. -- .01 -- .05
--------------------------------------------------------
Total distributions................................. .61 .61 .70 .44
--------------------------------------------------------
Net asset value, end of period.......................... $ 8.31 $ 9.55 $ 10.24 $ 9.82
========================================================
Total return (%)........................................ (6.81)(b) (.81)(b) 11.11(b) 8.81(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 3,928 $11,266 $ 6,580 $ 618
Ratio of expenses to average net assets (%)............. 2.26 2.12 2.20 2.35(d)
Ratio of net investment income to average net assets
(%)................................................... 6.65 6.15 6.35 6.56(d)
Portfolio turnover rate (%)............................. 28 43 71 90
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
for the period
for the year January 20, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- ------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
--------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.54 $ 10.28
--------------------------------------
Loss from investment operations
Net investment income................................. .67 .69
Net gains or losses on securities (both realized and
unrealized)......................................... (1.24) (.72)
--------------------------------------
Total from investment operations...................... (.57) (.03)
--------------------------------------
Less distributions
Dividends
From net investment income.......................... .67 .69
In excess of net investment income.................. .02 .02
--------------------------------------
Total distributions................................. .69 .71
--------------------------------------
Net asset value, end of period.......................... $ 8.28 $ 9.54
======================================
Total return (%)........................................ (6.21)(b) (.30)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 332 $ 347
Ratio of expenses to average net assets (%)............. 1.43 1.11(d)
Ratio of net investment income to average net assets
(%)................................................... 7.49 7.16(d)
Portfolio turnover rate (%)............................. 28 43
</TABLE>
<TABLE>
<S> <C> <C> <C>
(a) Net investment income (b) Total return does not (c) Total return (d) Annualized
is net of expenses reflect a sales charge. represents aggregate
reimbursed by Manager. total return and does not
reflect a sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
NOTES TO FINANCIAL STATEMENTS
Ivy Bond Fund (the "Fund"), is a diversified series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B, Class C, 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 December
31, 1999, securities valued by the Valuation Committee amounted to $199,165
(.20% of net assets) and have been noted as such in the Portfolio of
Investments.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
Corporate actions 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.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund has a net tax-basis capital loss 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 gains, 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 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $8,759.
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 $220,181,
$363,123, and $67,951, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
<PAGE> 96
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
12
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 $184,983, $110,587, $14,027 and $1,031, for Class A, Class B, Class
C and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 3,068,442 $ 27,762,931 4,228,736 $ 42,547,340
Issued on
reinvestment of
distributions....... 443,025 3,925,441 492,080 4,877,468
Repurchased.......... (6,632,340) (59,516,483) (3,661,831) (36,263,830)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (3,120,873) $(27,828,111) 1,058,985 $ 11,160,978
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 1,149,199 $ 10,430,940 3,607,412 $ 36,104,675
Issued on
reinvestment of
distributions....... 106,758 944,576 98,591 972,810
Repurchased.......... (2,352,740) (20,936,455) (1,092,874) (10,744,391)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (1,096,783) $ (9,560,939) 2,613,129 $ 26,333,094
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 147,492 $ 1,322,066 796,777 $ 8,013,954
Issued on
reinvestment of
distributions....... 13,078 116,032 13,159 132,586
Repurchased.......... (866,732) (7,831,025) (273,586) (2,733,017)
---------- ------------ ---------- ------------
Net (decrease)/
increase............ (706,162) $ (6,392,927) 536,350 $ 5,413,523
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 31,292 $ 277,077 59,160 $ 601,995
Issued on
reinvestment of
distributions....... 1,794 15,700 1,241 12,160
Repurchased.......... (29,292) (267,282) (24,077) (239,808)
---------- ------------ ---------- ------------
Net increase......... 3,794 $ 25,495 36,324 $ 374,347
========== ============ ========== ============
</TABLE>
<PAGE> 97
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY BOND FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 98
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY BOND FUND
- --------------------------------------------------------------------------------
14
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ----------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ----------------------------------------------------
<S> <C> <C>
James W. Broadfoot........... 7,935,746 367,059
Keith J. Carlson............. 7,935,509 367,296
Stanley Channick............. 7,918,546 384,259
Roy J. Glauber............... 7,925,197 377,608
Edward M. Tighe.............. 7,936,047 366,758
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------
FOR: AGAINST: ABSTAIN:
- ------------------------------
<S> <C> <C>
7,871,377 120,934 310,494
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,207,792 102,477 455,551 1,536,986
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,134,748 145,510 485,562 1,536,986
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,149,256 143,827 472,737 1,536,986
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,174,815 112,806 478,199 1,536,986
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,183,941 112,193 469,686 1,536,986
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,141,166 152,439 472,214 1,536,986
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,173,784 123,766 468,270 1,536,986
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,196,042 112,216 457,561 1,536,986
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
6,134,032 151,355 480,432 1,536,986
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 99
15
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 100
02IBFX123199
<PAGE> 101
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and 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 33422-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENZIE LOGO]
IVY CHINA REGION FUND
OVERVIEW
The Ivy China Region Fund invests in equity securities of companies and
countries that are expected to benefit from the economic development and growth
of the China region. The majority of the Fund's holdings are invested in Hong
Kong, Taiwan, South Korea, and mainland China.
For the 12-month period ending December 31, 1999, the Ivy China Region Fund
returned 46.72% compared to its benchmark index, the Hang Seng Index, which
returned 68.80%. (For the Fund's total return with sales charge and performance
commentary, please refer to page 3.) We believe that the Fund's underperformance
is partly due to its exposure to Chinese stocks, which returned just 16.83% over
the same period. Another factor that we believe contributed to the Fund's
lagging performance was its above-average cash position in the final quarter of
1999. The Fund's management team maintained this cash reserve as insurance
against Y2K-related liquidity constraints, and so that the Fund could take
advantage of any Y2K-related sell-off. However, the sell-off did not materialize
and the Hang Seng Index pushed to new heights only to end the year at 16962.1.
MARKET COMMENTARY
Equity markets in the China region performed well in 1999, as the region
recovered from much of the turmoil of the previous two years. We believe the
Hong Kong and Korean markets, representing 58% and 8% of the Ivy China Region
Fund assets at year-end, respectively, exceeded precrisis peaks fueled by
investors' expectations of economic recovery in the region. Chinese equities,
which represent 10% of the Fund, did not perform as well, in our view, primarily
as a result of investor concern over the potential for a devaluation of the
Chinese currency.
Recently, there has been great debate among analysts and economists over
whether China will devalue its currency, the renminbi. While many market
participants believe that a devaluation of the renminbi in 2000 is likely, we
believe that currently it seems less probable. If devaluation of the Chinese
currency occurs, its impact, in our view, will be mixed, with some sectors
benefiting and others suffering. We believe a more important issue for China and
Hong Kong is the continued effort to reform state-owned enterprises. Recently,
the Chinese government showed its strong commitment to deepening and broadening
economic reforms in the financial sector and in state-owned companies. We
believe this should be positive for investments in the region.
While exports from the region appear to have been largely responsible
<PAGE> 102
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
2
for accelerating growth in 1999, our research shows domestic consumption remains
quite weak. We believe weak consumer demand remains the major concern in
mainland China, as our analysis shows private consumption accounts for 46% of
gross domestic product. We believe that decelerating retail sales' gains,
falling from over 10% in 1997 down to 6% at the end of 1999, have raised
concerns by economists that China may be losing steam.
"We believe that the recent agreement with the United States, which
paves the way for China to join the World Trade Organization (WTO), has
significant implications for future growth in the region."
TOURISM BENEFITS HONG KONG.
In Hong Kong, our research indicates that consumer demand has recovered somewhat
from the depths of the crisis due to the "feel good factor" of rising stock
prices. However, we expect it will be sometime before local demand reaches
precrisis levels. We expect that strong growth in tourist arrivals from Japan,
Korea, and mainland China may provide a boost to Hong Kong's service-oriented
economy in 2000, further stimulating consumer demand and benefiting the economy,
as our research shows that consumer services represent 70% of Hong Kong's gross
domestic product.
The Fund's largest weighting continues to be Hong Kong, where the market,
as measured by the Hang Seng Index, gained 68.80% in 1999. In our view, the Hong
Kong market provides the best access for investors to secular growth in mainland
China. Many of the infrastructure, manufacturing, consumer goods, and financial
services companies, which we believe are direct beneficiaries of the economic
growth throughout the China region, are domiciled in Hong Kong and are
characterized by seasoned management teams with excellent ties to the mainland.
We expect this level of integration may increase going forward with the
deepening of state-owned enterprise reform in mainland China. If privatization
on the mainland takes hold, the Hong Kong stock market should play a more
important role in providing the much-needed capital resources for restructuring.
KOREAN MARKET REBOUNDS.
While the strength of the recovery in Korea has certainly been impressive, we
have adopted a somewhat cautious view of the market. In our view, the Korean
economy has roared back from the crisis and could be in danger of overheating.
We believe that an interest-rate hike is likely in 2000 and could well
jeopardize the cleanup of the banking system. Strong economic growth and a sharp
increase in earnings may also be leading to complacency among corporations in
Korea, which has the potential to endanger much-needed restructuring.
LOOKING AHEAD.
We believe that the long-term secular trend in the China region will continue to
be upward, largely sustained by growth in demand from the mainland. We believe
that the recent agreement with the United States, which paves the way for China
to join the World Trade Organization (WTO), has significant implications for
future growth in the region. We believe the agreement highlights the Chinese
government's commitment to accelerating reforms and reducing the role of the
state-owned sector in the economy. In our opinion, privatization of state-owned
assets could attract significant foreign direct investment and increase the
market's profile within the international investment community. Although there
may be short-term dislocations in the Chinese economy, particularly as an
increase in imports may threaten some of China's domestic manufacturers, the net
effect of China's membership in the WTO should be extremely positive for China
over the next decade.
<PAGE> 103
3
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (10/93) OF A $10,000 INVESTMENT
[CHART]
IVY CHINA REGION FUND
PERFORMANCE COMMENTARY
In 1999, the Ivy China Region Fund returned 46.72% compared to its benchmark,
the Hang Seng Index, which returned 68.80%. In our view, the Fund's exposure to
Chinese stocks, which returned just 16.83% over the period, and an above-average
cash position in the final quarter of 1999 contributed to the Fund's
underperformance versus its benchmark. The sell-off we expected in December was
postponed into the first week of 2000. Early in the year, we plan to take
advantage of some attractive valuations--putting the Fund's cash to work.
The Lipper Average China Region Fund represents the performance of the average
China fund as measured by Lipper Inc. It is not possible to invest in a
benchmark. The Hang Seng Index is an unmanaged index of stocks which assumes
reinvestment of dividends and, unlike Fund returns, does not reflect any fees or
expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4)
IVY CHINA REGION FUND w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
40.33% 45.33% 39.38% 44.38%
1 year C: C: C: C:
38.28% 37.38% 44.41% 45.41% 43.27% 44.27% 46.29% 45.91%
B: B: B: B:
1.02% 1.40% .56% .94%
5 year C: C: C: C:
.97% .50% n/a n/a n/a n/a n/a n/a
B: B: B: B:
(1.29)% (1.29)% (1.74)% (1.74)%
Since Inception(5) C: C: C: C:
(1.48)% (1.95)% (.71)% (.71)% (1.21)% (1.21)% 9.01% 8.59%
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC,up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class A and Class B commenced operations October 22, 1993; Class C
commenced operations April 30, 1996; Advisor Class commenced operations
February 10, 1998.
Total returns were higher due to reimbursement of certain Fund expenses. See
Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy China Region Fund will
fluctuate and at redemption shares may be worth more or less than the amount of
the original investment.
<PAGE> 104
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 86.90% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
CHINA -- 9.84%
- ------------------------------------
Anhui Expressway Co. Ltd. ........... 2,744,000 $ 257,685
First Tractor Company Limited -- H
Shares............................. 1,362,000 192,731
Guangdong Kelon Electrical Holdings
Co. Ltd. -- H Shares............... 266,000 201,890
Hainan Airlines Co., Ltd.(a)......... 350,000 108,500
Huaneng Power International, Inc. ... 200,000 47,597
Inner Mongolia Erdos Cashmere
Products Co. Ltd. 'B'.............. 681,000 153,906
Qingling Motors Company -- H
Shares............................. 1,900,000 229,754
Shanghai Dazhong Taxi Company --
Class B............................ 639,000 209,592
Shanghai Diesel Engine Co.
Ltd. -- Class B.................... 648,000 120,528
Shanghai Posts & Telecommunications
Equipment Co. Ltd. -- Class B...... 817,440 150,409
Shanghai Worldbest Co., Ltd. ........ 432,000 84,672
Shenzhen Konka Electronics Group Ltd.
Class B............................ 312,000 236,804
Zhejiang Southeast Electric Power
Co., Ltd. -- Class B............... 289,393 69,454
Zhenhai Refining and Chemical Company
Ltd. .............................. 200,000 35,505
-----------
2,099,027
-----------
HONG KONG -- 58.40%
- ------------------------------------
Asia Satellite Telecommunications
Holdings Ltd. ..................... 4,000 140,000
Asia Satellite Telecommunications
Holdings Ltd. ADR.................. 100,000 315,815
Cathay Pacific Airways............... 230,000 409,788
CDL Hotels International Ltd......... 440,000 175,467
Cheung Kong Holdings Ltd. ........... 100,000 1,270,337
Cheung Kong Infrastructure
Holdings........................... 111,000 214,188
China Hong Kong Photo Products
Holdings, Ltd. .................... 2,600,000 334,468
China Southern Airlines Company
Limited(a)......................... 1,458,000 318,851
Citic Pacific Ltd. .................. 150,000 564,415
CLP Holdings Ltd. ................... 30,000 138,161
Cosco Pacific Limited................ 326,000 270,495
Dao Heng Bank Group Ltd. ............ 66,000 340,463
Founder Hong Kong Ltd. .............. 167,600 204,823
Giordano International Ltd. ......... 404,000 415,770
Gold Peak Industries (Holdings)
Limited............................ 983,000 207,386
Guangdong Tannery Ltd. .............. 39,950 1,233
Hang Seng Bank....................... 20,900 238,614
Hong Kong & China Gas Company
Ltd. .............................. 171,072 234,374
Hong Kong Electric Holdings Ltd. .... 120,000 375,119
Hong Kong Land Holdings Ltd. ........ 289,000 427,720
Hong Kong Telecommunications Ltd. ... 124,000 358,113
HSBC Holdings plc.................... 75,600 1,060,059
i-CABLE Communications Limited(a).... 172 233
Jardine International Motor Holdings
Ltd. .............................. 524,000 262,892
Jardine Strategic Holdings Ltd. ..... 190,250 378,598
JCG Holdings Ltd. ................... 188,000 105,808
Lamex Holdings Ltd. ................. 780,000 18,563
Li & Fung Ltd. ...................... 199,600 500,699
New World Development Company Ltd. .. 196,535 442,445
New World Infrastructure Ltd. ....... 200,133 256,167
Orient Overseas International
Ltd. .............................. 1,218,000 473,974
Siu-Fung Ceramics Holdings, Ltd...... 1,110,327 17,997
Sun Hung Kai Properties Ltd. ........ 44,800 466,815
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Swire Pacific Ltd. .................. 39,500 $ 233,234
Tingyi (Cayman Island) Holding
Co.(a)............................. 1,494,000 105,705
Union Bank of Hong Kong Ltd. ........ 130,249 108,911
VTech Holdings Limited............... 108,000 351,501
Wharf Holdings Ltd. ................. 69,000 160,217
Wing Hang Bank Limited............... 131,000 448,265
Yue Yuen Industrial Holdings......... 47,200 112,937
-----------
12,460,620
-----------
MALAYSIA -- 0.09%
- ------------------------------------
Leader Universal Holdings -- Class
A.................................. 61,666 19,798
-----------
SINGAPORE -- 2.76%
- ------------------------------------
Clipsal Industries Limited........... 114,816 126,807
Elec & Eltek International Co.
Ltd. .............................. 142,500 461,700
-----------
588,507
-----------
SOUTH KOREA -- 7.93%
- ------------------------------------
Hyundai Motor Company Ltd. .......... 14,181 225,334
Pohang Iron & Steel Company Ltd. .... 2,000 233,934
Samsung Electronics Co., Ltd. ....... 3,564 836,886
Samsung Electronics Co., Ltd. 144A
Sponsored GDR...................... 640 50,880
Samsung Electronics Co., Ltd. 144A
Sponsored GDR, Registered S, N/V... 430 52,568
Shinhan Bank......................... 26,840 291,430
-----------
1,691,032
-----------
TAIWAN -- 7.88%
- ------------------------------------
Acer Incorporation(a)................ 166,390 501,558
Compal Electronics Inc. ............. 76,076 256,013
Far Eastern Department Stores
Ltd. .............................. 274,854 119,235
Hon Hai Precision Industry Co.,
Ltd.(a)............................ 49,000 365,742
Taiwan Semiconductor Manufacturing
Company(a)......................... 82,300 438,408
-----------
1,680,956
-----------
TOTAL INVESTMENTS -- 86.90%
(Cost -- $15,968,670)
(Cost on Federal income tax
basis -- $16,482,806).......... 18,539,940
OTHER ASSETS, LESS LIABILITIES -- 13.10% 2,795,673
-----------
NET ASSETS -- 100%................... $21,335,613
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
N/V -- Non voting security
(a) Non-income producing security
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............... $ 5,726,709
Gross unrealized depreciation............... (3,155,439)
-----------
Net unrealized appreciation for
financial statement purposes.................... 2,571,270
Less: tax basis adjustments................. (514,136)
-----------
Net unrealized appreciation for Federal
income tax purposes................... $ 2,057,134
===========
Purchases and sales of securities other than short-term
obligations aggregated $3,966,467 and $7,433,894,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $15,968,670)...... $18,539,940
Cash........................................................ 2,825,556
Receivables
Fund shares sold.......................................... 12,549
Dividends and interest.................................... 10,824
Manager for expense reimbursement......................... 9,694
Other assets................................................ 6,177
-----------
Total assets.............................................. 21,404,740
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 9,611
Management fee............................................ 17,926
12b-1 service and distribution fees....................... 9,675
Other payables to related parties......................... 13,114
Accrued expenses............................................ 18,801
-----------
Total liabilities......................................... 69,127
-----------
NET ASSETS.................................................. $21,335,613
===========
CLASS A
Net asset value and redemption price per share
($12,737,758/1,392,718 shares outstanding)................ $ 9.15
===========
Maximum offering price per share ($9.15 x 100/94.25)*....... $ 9.71
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($7,508,480/830,867 shares outstanding)............. $ 9.04
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($776,327/85,577 shares outstanding)................ $ 9.07
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($313,048/34,649 shares outstanding)................ $ 9.03
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $25,549,290
Accumulated net investment loss on investments and foreign
currency transactions................................... (6,784,955)
Net unrealized appreciation on investments and foreign
currency transactions................................... 2,571,278
-----------
NET ASSETS.................................................. $21,335,613
===========
</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> 106
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 541,497
Interest.................................................. 72,738
----------
614,235
----------
EXPENSES
Management fee............................................ $191,792
Transfer agent............................................ 98,352
Administrative services fee............................... 19,179
Custodian fees............................................ 54,365
Blue Sky fees............................................. 23,816
Auditing and accounting fees.............................. 22,619
Shareholder reports....................................... 16,136
Fund accounting........................................... 36,086
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 104,517
Legal..................................................... 26,936
Other..................................................... 1,545
----------
604,583
Expenses reimbursed by Manager............................ (125,910)
----------
Net expenses.......................................... 478,673
----------
NET INVESTMENT INCOME....................................... 135,562
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 924,189
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 6,328,151
----------
Net gain on investment transactions................... 7,252,340
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $7,387,902
==========
</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 YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 135,562 $ 242,809
Net realized gain (loss) on investments and foreign
currency transactions................................... 924,189 (5,197,689)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 6,328,151 1,012,350
----------- -----------
Net increase (decrease) resulting from operations..... 7,387,902 (3,942,530)
----------- -----------
Class A distributions
Dividends from net investment income...................... (116,226) (124,272)
Distributions from capital gains.......................... (9,904) --
----------- -----------
Total distributions to Class A shareholders........... (126,130) (124,272)
----------- -----------
Class B distributions
Dividends from net investment income...................... (17,335) (44,037)
Distributions from capital gains.......................... (6,000) --
----------- -----------
Total distributions to Class B shareholders........... (23,335) (44,037)
----------- -----------
Class C distributions
Dividends from net investment income...................... (944) (2,395)
Distributions from capital gains.......................... (623) --
----------- -----------
Total distributions to Class C shareholders........... (1,567) (2,395)
----------- -----------
Advisor Class distributions
Dividends from net investment income...................... (4,321) (121)
Distributions from capital gains.......................... (236) --
----------- -----------
Total distributions to Advisor Class shareholders..... (4,557) (121)
----------- -----------
Fund share transactions (Note 5)
Class A................................................... (759,913) (616,533)
Class B................................................... (1,087,549) (87,455)
Class C................................................... (217,633) (382,691)
Advisor Class............................................. 313,989 12,424
----------- -----------
Net decrease resulting from Fund share transactions... (1,751,106) (1,074,255)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 5,481,207 (5,187,610)
NET ASSETS
Beginning of period....................................... 15,854,406 21,042,016
----------- -----------
END OF PERIOD............................................. $21,335,613 $15,854,406
=========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 3,264
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 108
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
8
<TABLE>
<CAPTION>
CLASS A for the year ended December 31,
- ------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.30 $ 8.04 $ 10.30 $ 8.58 $ 8.61
----------------------------------------------------
Income (loss) from investment operations
Net investment income(a).................................. .08 .13 .02(b) .03 .14
Net gains or losses on securities (both realized and
unrealized)............................................. 2.86 (1.78) (2.28)(b) 1.74 (.01)
----------------------------------------------------
Total from investment operations.......................... 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 gains...................................... .01 -- -- -- --
In excess of capital gains.............................. -- -- -- -- .02
----------------------------------------------------
Total distributions..................................... .09 .09 -- .05 .16
----------------------------------------------------
Net asset value, end of period.............................. $ 9.15 $ 6.30 $ 8.04 $ 10.30 $ 8.58
----------------------------------------------------
----------------------------------------------------
Total return (%)(c)......................................... 46.72 (20.56) (21.94) 20.50 1.59
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $12,738 $ 9,061 $12,020 $15,290 $12,855
Ratio of expenses to average net assets(d)
With expense reimbursement (%)............................ 2.19 2.30 2.44 2.20 2.20
Without expense reimbursement (%)......................... 2.84 2.86 2.51 2.48 2.73
Ratio of net investment income to average net assets
(%)(a).................................................... 1.01 1.60 .28 .32 1.61
Portfolio turnover rate (%)................................. 23 56 20 22 25
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B for the year ended December 31,
- ------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.24 $ 7.96 $ 10.28 $ 8.58 $ 8.61
----------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .02 .05 (.04)(b) (.04) .08
Net gains or losses on securities (both realized and
unrealized)............................................. 2.81 (1.73) (2.28)(b) 1.74 (.02)
----------------------------------------------------
Total from investment operations.......................... 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 gains.......................... .01 -- -- -- --
----------------------------------------------------
Total distributions..................................... .03 .04 -- -- .09
----------------------------------------------------
Net asset value, end of period.............................. $ 9.04 $ 6.24 $ 7.96 $ 10.28 $ 8.58
----------------------------------------------------
----------------------------------------------------
Total return (%)(c)......................................... 45.33 (21.04) (22.57) 19.67 .83
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 7,508 $ 6,080 $ 7,893 $ 8,995 $ 6,905
Ratio of expenses to average net assets(d)
With expense reimbursement (%)............................ 2.97 3.08 3.17 2.95 2.95
Without expense reimbursement (%)......................... 3.62 3.64 3.24 3.23 3.48
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .24 .82 (.45) (.43) .86
Portfolio turnover rate (%)................................. 23 56 20 22 25
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 109
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9
<TABLE>
<CAPTION>
for the period
April 30, 1996
(commencement)
CLASS C for the year ended December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.25 $ 7.94 $ 10.24 $ 9.44
----------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .02 .08 (.03)(b) --
Net gains or losses on securities (both realized and
unrealized)............................................. 2.82 (1.75) (2.27)(b) .89
----------------------------------------------------
Total from investment operations.......................... 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 gains.......................... .01 -- -- --
----------------------------------------------------
Total distributions..................................... .02 .02 -- .09
----------------------------------------------------
Net asset value, end of period.............................. $ 9.07 $ 6.25 $ 7.94 $ 10.24
----------------------------------------------------
----------------------------------------------------
Total return (%)............................................ 45.41(c) (21.02)(c) (22.46)(c) 9.39(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 776 $ 704 $ 1,129 $ 449
Ratio of expenses to average net assets(d)
With expense reimbursement (%)............................ 3.03 2.98 3.05 2.71(f)
Without expense reimbursement (%)......................... 3.68 3.54 3.12 2.99(f)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .18 .92 (.33) (.19)(f)
Portfolio turnover rate (%)................................. 23 56 20 22
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year February 10, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.27 $ 7.89
----------------------------------
Income (loss) from investment operations
Net investment income(a).................................. .04 .08
Net gains or losses on securities (both realized and
unrealized)............................................. 2.86 (1.62)
----------------------------------
Total from investment operations.......................... 2.90 (1.54)
----------------------------------
Less distributions
From net investment income................................ .13 .08
Distributions from capital gains.......................... .01 --
----------------------------------
Total distributions..................................... .14 .08
----------------------------------
Net asset value, end of period.............................. $ 9.03 $ 6.27
----------------------------------
----------------------------------
Total return (%)............................................ 46.29(c) (19.56)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 313 $ 10
Ratio of expenses to average net assets(d)
With expense reimbursement (%)............................ 1.79 2.92(f)
Without expense reimbursement (%)......................... 2.44 3.48(f)
Ratio of net investment income to average net assets
(%)(a).................................................... 1.42 .98(f)
Portfolio turnover rate (%)................................. 23 56
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net investment income (loss) is (b) Based on average shares (c) Total return does not reflect a
net of expenses reimbursed by outstanding sales charge.
Manager.
(d) From 1995 to 1998, total (e) Total return represents (f) Annualized
expenses include fees paid aggregate total return and does not
indirectly, if any, through an reflect a sales charge.
expense offset arrangement.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 110
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS
Ivy China Region Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, 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
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. 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 December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends are recorded on the ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund has a net tax-basis capital loss 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 gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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
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
<PAGE> 111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
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 its 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $3,502.
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
$28,776, $68,312 and $7,429, 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 $57,560, $36,099, $4,363 and $330, 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 2,892,229 $ 19,961,432 2,287,353 $ 14,147,859
Issued on
reinvestment of
distributions....... 12,715 113,544 17,535 109,945
Repurchased.......... (2,949,520) (20,834,889) (2,363,014) (14,874,337)
---------- ------------ ---------- ------------
Net decrease......... (44,576) $ (759,913) (58,126) $ (616,533)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 147,314 $ 1,099,716 665,157 $ 4,445,368
Issued on
reinvestment of
distributions....... 1,988 17,556 5,669 35,150
Repurchased.......... (293,462) (2,204,821) (687,061) (4,567,973)
---------- ------------ ---------- ------------
Net decrease......... (144,160) $ (1,087,549) (16,235) $ (87,455)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 64,217 $ 459,612 275,555 $ 1,869,126
Issued on
reinvestment of
distributions....... 105 930 245 1,523
Repurchased.......... (91,400) (678,175) (305,285) (2,253,340)
---------- ------------ ---------- ------------
Net decrease......... (27,078) $ (217,633) (29,485) $ (382,691)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 123,402 $ 1,090,855 82,048 $ 621,435
Issued on
reinvestment of
distributions....... 478 4,224 19 121
Repurchased.......... (90,832) (781,090) (80,466) (609,132)
---------- ------------ ---------- ------------
Net increase......... 33,048 $ 313,989 1,601 $ 12,424
========== ============ ========== ============
</TABLE>
<PAGE> 112
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY CHINA REGION FUND
- --------------------------------------------------------------------------------
12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY CHINA REGION FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 113
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ----------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ----------------------------------------------------
<S> <C> <C>
James W. Broadfoot........... 1,279,406 53,249
Keith J. Carlson............. 1,275,655 57,000
Stanley Channick............. 1,277,732 54,923
Roy J. Glauber............... 1,280,397 52,258
Edward M. Tighe.............. 1,277,386 55,268
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------
FOR: AGAINST: ABSTAIN:
- ------------------------------
<S> <C> <C>
1,271,758 31,214 29,683
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,016,865 30,108 55,517 230,165
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,008,809 39,531 54,150 230,165
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,013,577 31,917 56,996 230,165
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,011,615 33,087 57,788 230,165
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,013,456 34,414 54,620 230,165
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,005,733 39,279 57,478 230,165
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,012,209 32,150 58,131 230,165
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,014,775 32,512 55,203 230,165
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
1,008,557 36,368 57,565 230,165
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 114
14
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 115
15
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 116
02ICRF123199
<PAGE> 117
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENZIE LOGO]
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
OVERVIEW
Benefiting by a gain of more than 65% in the final quarter of 1999, the Ivy
Global Science & Technology Fund ended 1999 up 122.56%. This marks the best
one-year performance for the Fund since its inception in July 1996, and the
second year in a row in which it outperformed its benchmark, the Russell 2000
Technology Index, which returned 101.32% for the same period. (For the Fund's
total return with sales charge and performance commentary, please refer to page
3.) In our opinion, the technology sector benefited more from the positive
economic environment, including subdued inflation, relatively low interest
rates, and robust growth, than probably any other sector of the economy. We
believe that this was clearly reflected in the performance of many investments
in the portfolio.
MARKET COMMENTARY
Our research shows that, overall, technology companies delivered significant
earnings growth in 1999, experiencing strong end-user demand for their products,
even in some countries with slow economic growth. We believe that consequently,
investors became enamored with technology stocks. Over the 12-month period
ending December 31, 1999, technology stocks were the market leaders,
outperforming almost all other types of equity investments. The technology-heavy
NASDAQ Composite Index posted a gain of 85.6%. Our analysis shows that this
record-setting performance resulted in high valuations for technology stocks,
both on an absolute and a relative basis. Despite their high valuations, we
believe technology stocks may outperform the broader market in the long term due
to what we view as their potential to deliver higher earnings growth than other
sectors of the market.
INTERNET STOCKS LEAD THE MARKET.
Another positive factor for technology companies was the rapid growth of the
Internet in 1999. While the performance of pure-play Internet stocks received
considerable press over the reporting period, our research indicates that
several technology sectors, such as semiconductors, telecommunications, and
software, outperformed the Internet sector on a year-to-date basis. We think
that it's fair to say that the strong performance of these sectors was driven by
the underlying growth of the Internet. Our studies indicate that over 196
million people worldwide were on the Internet by the end of 1999, up 1,300% from
1995. What's more, we anticipate almost 160% growth from now through 2003, when
we believe that over half a billion people should be connected to the Internet.
The Internet is one of the fastest-growing forms of mass communication
in history, and we believe it will probably
<PAGE> 118
be very pervasive because of its two-way communications capabilities, providing
for electronic commerce and interactive marketing. In our opinion, the Internet
is fundamentally changing the way consumers and businesses communicate and
transact business. We are projecting that business-to-business commerce may more
than double every year for the next several years, putting corporations under
pressure to "webify" their businesses. We anticipate that this may create growth
opportunities for many companies in the portfolio of the Ivy Global Science &
Technology Fund. It is our view that this growth should persist in the future
due to continued electronic commerce adoption, international Internet growth,
wireless access from mobile phones, and the electronic distribution of other
media like voice and video.
"DESPITE THEIR HIGH VALUATIONS, WE BELIEVE TECHNOLOGY STOCKS MAY OUTPERFORM THE
BROADER MARKET IN THE LONG TERM DUE TO THEIR POTENTIAL TO DELIVER HIGHER
EARNINGS GROWTH THAN OTHER SECTORS OF THE MARKET."
We believe another factor affecting technology stocks over the
reporting period was concerns about the transition to the Year 2000 (Y2K). While
our research shows that Y2K boosted technology spending over the past few years,
the redeployment of resources away from addressing these concerns to more
productive uses should be positive for technology investments over the next few
years. Another bright spot for technology companies should be a new product
cycle for the Microsoft Windows(R) operating system. Businesses and
individuals are likely to begin upgrading to Windows 2000, and we believe this
may spur demand for more powerful PCs.
INTEREST RATES AND TECHNOLOGY STOCKS.
Historically, rising interest rates have been bad news for technology stocks.
However, our research shows that technology stocks turned in one of their best
years on record, despite the fact that the Federal Reserve Board raised interest
rates three times in 1999. Although we believe continued rate hikes by the
Federal Reserve Board may cause some short-term performance problems for
technology stocks, over the long run, we believe that technology should remain a
fertile area of growth. We believe those investors willing to take a long-term
view may be rewarded.
2
<PAGE> 119
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (7/96) OF A $10,000 INVESTMENT
[CHART]
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
PERFORMANCE COMMENTARY
For the 12 months ended December 31, 1999, the Ivy Global Science & Technology
Fund returned 122.56%, outpacing its benchmark, the Russell 2000 Technology
Index, which gained 101.32% for the same period. We believe the Fund's strong
performance can be attributed to a number of factors. It is well documented that
while the US economy has performed well over the last few years, many other
parts of the world have been struggling. Our research shows that within the last
year, strong economic growth experienced in the US began to spread to other
regions of the world, in particular to Asia, which was hard-hit by an economic
crisis in 1997. Also, we think that to boost productivity and sales, businesses
in the world's recovering economies may be starting to make the same investments
in technology that US companies have made over the last few years.
The Russell 2000 Technology Index is an unmanaged index of stocks which assumes
reinvestment of dividends and, unlike Fund returns, does not reflect any fees or
expenses. It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4) Class 1(5)
IVY GLOBAL SCIENCE & TECHNOLOGY --------------------------------------------------------------------------------------------------
FUND AVERAGE ANNUAL TOTAL w/ w/o w/ w/o w/ w/o w/ w/o
RETURN FOR PERIODS ENDING Reimb. Reimb Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
DECEMBER 31, 1999 ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
B: B: B: B:
115.82% 120.82% 115.82% 120.82%
C: C: C: C:
1 year 109.76% 109.76% 119.98% 120.98% 119.98% 120.98% 122.56% 122.56% n/a n/a
- ------------------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
60.79% 60.98% 60.75% 60.79%
C: C: C: C:
Since Inception(6) 59.35% 59.27% 61.17% 61.17% 61.22% 61.22% 74.87% 74.87% n/a n/a
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class A performance figures include the maximum sales charge of
5.75%.
(2)Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3)Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4)Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5)Class I shares are not subject to an initial sales charge or CDSC.
There were no Class I shares outstanding.
(6)Class A, Class B and Class C commenced operations July 22, 1996;
Advisor Class commenced operations April 15, 1998.
Total returns in some periods were higher due to reimbursement of
certain Fund expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of Ivy
Global Science & Technology Fund will fluctuate and at redemption
shares may be worth more or less than the amount of the original
investment.
3
<PAGE> 120
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 96.82% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES -- 0.89%
Concord EFS, Inc(a)..................... 16,050 $ 413,287
NOVA Corporation(a)..................... 7,000 220,938
Profit Recovery Group
International, Inc. (The)(a).......... 8,400 223,125
-----------
857,350
-----------
COMPUTER EQUIPMENT &
STORAGE -- 6.82%
Brocade Communications Systems,
Inc.(a)............................... 2,800 495,600
EMC Corporation(a)...................... 8,600 939,550
Emulex Corporation(a)................... 2,800 315,000
Gateway Inc.(a)......................... 5,000 360,312
Network Appliance, Inc.(a).............. 21,800 1,810,762
PC-Tel, Inc.(a)......................... 12,100 635,250
Qlogic Corporation(a)................... 3,000 479,625
Sun Microsystems, Inc.(a)............... 20,000 1,548,750
-----------
6,584,849
-----------
EDUCATIONAL SERVICES -- 0.35%
CBT Group plc -- Spon ADR(a)(b)......... 10,000 335,000
-----------
ELECTRONIC COMMERCE -- 1.38%
Pegasus Systems, Inc.(a)................ 11,400 687,562
QRS Corporation(a)...................... 6,200 646,738
-----------
1,334,300
-----------
ELECTRONIC MANUFACTURING
SERVICES -- 2.19%
Flextronics International Ltd.(a)(b).... 19,400 892,400
Jabil Circuit, Inc.(a).................. 5,500 401,500
Sanmina Corporation(a).................. 6,000 599,250
Solectron Corporation(a)................ 2,300 218,787
-----------
2,111,937
-----------
HEALTHCARE INFORMATION
SYSTEMS -- 0.28%
First Consulting Group, Inc.(a)......... 17,800 275,900
-----------
INFORMATION SERVICES -- 2.40%
Dendrite International, Inc.(a)......... 23,200 785,900
FactSet Research Systems Inc. .......... 9,750 776,344
Forrester Research, Inc.(a)............. 8,800 606,100
Meta Group, Inc.(a)..................... 8,100 153,900
-----------
2,322,244
-----------
INTERNET -- 16.89%
Amazon.com, Inc.(a)..................... 5,300 403,463
America Online, Inc.(a)................. 30,400 2,293,300
BroadVision, Inc.(a).................... 4,500 765,281
Chemdex Corporation(a).................. 4,700 521,700
CMGI Inc.(a)............................ 4,600 1,273,625
CNET, Inc.(a)........................... 8,000 454,000
Digimarc Corporation(a)................. 1,800 90,000
DoubleClick Inc.(a)..................... 3,385 856,617
eBay Inc.(a)............................ 3,200 400,600
Excite @Home Corporation -- Series
A(a).................................. 7,800 334,425
Exodus Communications, Inc.(a).......... 12,400 1,101,275
F5 Networks, Inc.(a).................... 3,700 421,800
InfoSpace.com, Inc.(a).................. 3,800 813,200
Inktomi Corporation(a).................. 5,400 479,250
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
National Information Consortium,
Inc.(a)............................... 17,200 $ 550,400
Network Solutions Inc.(a)............... 4,600 1,000,787
nFront, Inc.(a)......................... 20,400 408,000
RealNetworks, Inc.(a)................... 4,300 517,344
S1 Corporation(a)....................... 6,400 500,000
SciQuest.com, Inc.(a)................... 7,600 604,200
Stamps.com Inc.(a)...................... 9,500 395,437
VeriSign, Inc.(a)....................... 4,200 801,938
Yahoo! Inc.(a).......................... 3,067 1,327,052
-----------
16,313,694
-----------
MISCELLANEOUS TECHNOLOGY -- 1.79%
Gemstar International Group Ltd.(a)..... 15,200 1,083,000
OpenTV Corporation(a)................... 8,000 642,000
-----------
1,725,000
-----------
NETWORK EQUIPMENT &
SOFTWARE -- 9.29%
American Power Conversion
Corporation(a)........................ 30,700 809,712
Cisco Systems, Inc.(a).................. 21,000 2,249,625
Clarent Corporation(a).................. 10,800 839,700
Concord Communications, Inc.(a)......... 15,200 674,500
Extreme Networks, Inc.(a)............... 10,400 868,400
Micromuse Inc.(a)....................... 8,000 1,360,000
Redback Networks Inc.(a)................ 1,600 284,000
SonicWall, Inc.(a)...................... 6,900 277,725
Sycamore Networks, Inc.(a).............. 1,400 431,200
Visual Networks, Inc.(a)................ 14,900 1,180,825
-----------
8,975,687
-----------
OPERATIONAL SUPPORT
SYSTEMS -- 0.97%
DSET Corporation(a)..................... 22,100 825,987
Metasolv Software, Inc.(a).............. 1,400 114,450
-----------
940,437
-----------
PHARMACEUTICALS &
BIOTECHNOLOGY -- 1.48%
Anesta Corp.(a)......................... 11,500 197,656
MedImmune, Inc.(a)...................... 1,725 286,134
Sepracor, Inc.(a)....................... 2,700 267,806
Shire Pharmaceuticals Group plc
ADR(a)(b)............................. 19,300 562,112
SkyePharma plc -- Sponsored ADR(a)(b)... 16,000 118,000
-----------
1,431,708
-----------
SEMICONDUCTOR EQUIPMENT -- 4.18%
Applied Materials, Inc.(a).............. 7,600 962,825
ASM Lithography Holding NV(a)(b)........ 4,500 511,875
Etec Systems, Inc.(a)................... 5,400 242,325
KLA-Tencor Corporation(a)............... 8,700 968,962
Novellus Systems, Inc.(a)............... 2,300 281,822
Photronics, Inc.(a)..................... 6,900 197,512
PRI Automation, Inc.(a)................. 4,500 302,063
Teradyne, Inc.(a)....................... 8,700 574,200
-----------
4,041,584
-----------
SEMICONDUCTORS -- 11.41%
Altera Corporation(a)................... 11,200 555,100
Applied Micro Circuits Corporation(a)... 6,400 814,400
</TABLE>
<PAGE> 121
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Broadcom Corporation(a)................. 1,900 $ 517,512
Chartered Semiconductor Manufacturing
Limited(a)(b)......................... 7,400 540,200
Conexant Systems, Inc.(a)............... 13,900 922,612
Galileo Technology Ltd.(a)(b)........... 17,600 424,600
Genesis Microchip Inc.(a)(b)............ 11,000 232,375
Integrated Device Technology, Inc.(a)... 13,500 391,500
Intel Corporation....................... 9,340 768,799
Linear Technology Corporation........... 5,900 422,219
LSI Logic Corporation(a)................ 10,100 681,750
Maxim Integrated Products, Inc.(a)...... 9,600 453,000
Micrel, Inc.(a)......................... 6,800 387,175
NETsilicon, Inc.(a)..................... 21,400 429,338
PMC-Sierra, Inc.(a)(b).................. 2,600 416,812
RF Micro Devices, Inc.(a)............... 7,900 540,656
SanDisk Corporation(a).................. 7,300 702,625
Texas Instruments Inc. ................. 11,000 1,065,625
Vitesse Semiconductor Corporation(a).... 8,800 461,450
Xilinx, Inc.(a)......................... 6,400 291,000
-----------
11,018,748
-----------
SOFTWARE -- 11.66%
Actuate Software Corporation(a)......... 12,400 531,650
Best Software, Inc.(a).................. 8,600 253,700
BMC Software Inc.(a).................... 4,500 359,719
Citrix Systems, Inc.(a)................. 12,200 1,500,600
Great Plains Software, Inc.(a).......... 3,200 239,200
Legato Systems, Inc.(a)................. 20,100 1,383,131
Mercury Interactive Corporation(a)...... 5,000 539,688
Microsoft Corporation(a)................ 15,400 1,797,950
Oracle Corporation(a)................... 6,400 717,200
Peregrine Systems, Inc.(a).............. 8,700 718,837
Project Software & Development,
Inc.(a)............................... 10,000 555,000
Quintus Corporation(a).................. 8,400 385,350
Symantec Corporation(a)................. 10,100 592,113
USinternetworking, Inc.(a).............. 8,100 565,987
Veritas Software Corp.(a)............... 5,325 762,141
Visio Corporation(a).................... 7,700 365,750
-----------
11,268,016
-----------
SYSTEM INTEGRATORS -- 3.41%
4Front Technologies, Inc.(a)(b)......... 25,000 334,375
iXL Enterprises, Inc.(a)................ 12,500 693,750
Luminant Worldwide Corporation(a)....... 13,200 600,600
Razorfish Inc.(a)....................... 3,850 366,231
Sapient Corporation(a).................. 3,200 451,000
Whittman-Hart, Inc.(a).................. 15,800 847,275
-----------
3,293,231
-----------
TELECOMMUNICATION EQUIPMENT -- 13.16%
Advanced Fibre Communications,
Inc.(a)............................... 17,000 759,687
Airnet Communications Corporation(a).... 300 10,913
ANTEC Corporation(a).................... 13,700 500,050
Aware, Inc.(a).......................... 7,200 261,900
Carrier Access Corporation(a)........... 2,800 188,475
CIENA Corporation(a).................... 5,700 327,750
Comverse Technology, Inc.(a)............ 6,600 955,350
E-Tek Dynamics, Inc.(a)................. 4,900 659,663
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
General Instrument Corporation(a)....... 6,200 $ 527,000
Gilat Satellite Networks Ltd.(a)(b)..... 5,000 593,750
Globalstar Telecommunications
Limited(a)............................ 8,800 387,200
Harmonic Inc.(a)........................ 6,000 569,625
JDS Uniphase Corporation(a)............. 6,800 1,096,925
Next Level Communications, Inc.(a)...... 8,700 651,412
Nokia Oyj Sponsored ADR(b).............. 7,600 1,444,000
Nortel Networks Corporation(b).......... 7,800 787,800
QUALCOMM Incorporated(a)................ 4,000 705,000
Scientific-Atlanta, Inc. ............... 2,700 150,188
SDL, Inc.(a)............................ 5,500 1,199,000
Tellabs, Inc.(a)........................ 14,600 937,138
-----------
12,712,826
-----------
TELECOMMUNICATION SERVICES -- 7.89%
Covad Communications Group, Inc.(a)..... 6,000 335,625
Global Crossing Ltd.(a)(b).............. 5,977 298,850
iBasis, Inc.(a)......................... 6,900 198,375
ITXC Corp.(a)........................... 7,800 262,275
MCI WorldCom, Inc.(a)................... 16,350 867,572
McLeodUSA Incorporated(a)............... 18,500 1,089,188
Metromedia Fiber Network, Inc.(a)....... 13,000 623,188
Net2Phone, Inc.(a)...................... 2,100 96,469
Nextel Communications, Inc.(a).......... 7,700 794,063
NEXTLINK Communications, Inc.(a)........ 5,800 481,763
Pac-West Telecomm, Inc.(a).............. 36,800 975,200
PSINet Inc.(a).......................... 2,868 177,099
Rhythms NetConnections Inc.(a).......... 15,000 465,000
Splitrock Services, Inc.(a)............. 15,600 310,050
TeleCorp PCS, Inc.(a)................... 600 22,800
WinStar Communications, Inc.(a)......... 8,300 621,463
-----------
7,618,980
-----------
TELESERVICES -- 0.38%
Sykes Enterprises, Inc.(a).............. 8,300 364,163
-----------
TOTAL INVESTMENTS -- 96.82%
(Cost -- $39,822,866)(c).............. 93,525,654
OTHER ASSETS, LESS LIABILITIES -- 3.18% 3,068,829
-----------
NET ASSETS -- 100%...................... $96,594,483
===========
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 December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............... $53,966,069
Gross unrealized depreciation............... (263,281)
-----------
Net unrealized appreciation............. $53,702,788
===========
Purchases and sales of securities other than short-term
obligations aggregated $39,188,703 and $28,754,339,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 122
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $39,822,866)...... $93,525,654
Cash........................................................ 3,664,055
Receivables
Investments sold.......................................... 395,894
Fund shares sold.......................................... 905,526
Deferred organization expenses.............................. 18,478
Other assets................................................ 7,214
-----------
Total assets.............................................. 98,516,821
-----------
LIABILITIES
Payables
Investments purchased..................................... 1,448,029
Fund shares repurchased................................... 302,179
Management fee............................................ 73,251
12b-1 service and distribution fees....................... 49,376
Other payables to related parties......................... 25,267
Accrued expenses............................................ 24,236
-----------
Total liabilities......................................... 1,922,338
-----------
NET ASSETS.................................................. $96,594,483
===========
CLASS A
Net asset value and redemption price per share
($41,515,714/848,967 shares outstanding).................. $ 48.90
===========
Maximum offering price per share ($48.90 x 100/94.25)*...... $ 51.88
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($35,879,013/747,881 shares outstanding)............ $ 47.97
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($18,768,723/389,502 shares outstanding)............ $ 48.19
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($431,033/8,829 shares outstanding)................. $ 48.82
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $42,042,439
Undistributed net realized gain on investments............ 849,256
Net unrealized appreciation on investments................ 53,702,788
-----------
NET ASSETS.................................................. $96,594,483
===========
</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> 123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 8,333
Interest.................................................. 76,051
-----------
84,384
-----------
EXPENSES
Management fee............................................ $466,093
Transfer agent............................................ 93,208
Administrative services fee............................... 46,609
Custodian fees............................................ 14,026
Blue Sky fees............................................. 31,646
Auditing and accounting fees.............................. 21,496
Shareholder reports....................................... 18,608
Amortization of organization expenses..................... 12,009
Fund accounting........................................... 57,838
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 318,942
Legal..................................................... 27,301
Other..................................................... 3,020
-----------
Total expenses........................................ 1,120,036
-----------
NET INVESTMENT LOSS......................................... (1,035,652)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 9,009,362
Net change in unrealized appreciation on investments...... 40,021,044
-----------
Net gain on investment transactions................... 49,030,406
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $47,994,754
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 124
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $(1,035,652) $ (640,698)
Net realized gain (loss) on
Investments............................................. 9,009,362 327,469
Written options......................................... -- (210,691)
Net change in unrealized appreciation on investments...... 40,021,044 9,515,504
----------- -----------
Net increase resulting from operations.................. 47,994,754 8,991,584
----------- -----------
Distributions to shareholders from capital gains
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................................................... 5,807,495 1,495,065
Class B................................................... 10,548,875 (964,996)
Class C................................................... 1,740,790 (87,574)
Advisor Class............................................. 364,323 12,519
----------- -----------
Net increase resulting from Fund share transactions... 18,461,483 455,014
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 60,063,734 9,446,598
NET ASSETS
Beginning of period....................................... 36,530,749 27,084,151
----------- -----------
END OF PERIOD............................................. $96,594,483 $36,530,749
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 125
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
for the period
July 22, 1996
for the year ended (commencement)
CLASS A December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA -------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 23.63 $ 17.47 $ 16.40 $ 10.00
-------------------------------------------------------
Income from investment operations
Net investment loss................................ (.43) (.36)(a) (.31)(a) (.06)(b)
Net gain on securities (both realized and
unrealized)...................................... 29.27 6.52(a) 1.38(a) 6.49
-------------------------------------------------------
Total from investment operations................... 28.84 6.16 1.07 6.43
-------------------------------------------------------
Less distributions
Distributions from capital gains................... 3.57 -- -- .03
-------------------------------------------------------
Total distributions.............................. 3.57 -- -- .03
-------------------------------------------------------
Net asset value, end of period....................... $ 48.90 $ 23.63 $ 17.47 $ 16.40
=======================================================
Total return (%)..................................... 122.56(c) 35.26(c) 6.53(c) 64.34(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $41,516 $17,888 $12,159 $ 8,324
Ratio of expenses to average net assets
With expense reimbursement (%)..................... -- -- -- 2.19(e)
Without expense reimbursement (%).................. 1.98 2.16 2.11 2.90(e)
Ratio of net investment loss to average net assets
(%)................................................ (1.80) (1.88) (1.91) (2.18)(b)(e)
Portfolio turnover rate (%).......................... 62 73 54 23
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
for the period
July 22, 1996
for the year ended (commencement)
CLASS B December 31, to December 31,
- --------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 23.31 $ 17.37 $ 16.44 $ 10.00
-------------------------------------------------------
Income from investment operations
Net investment loss................................ (.62) (.50)(a) (.32)(a) (.06)(b)
Net gain on securities (both realized and
unrealized)...................................... 28.67 6.44(a) 1.25(a) 6.52
-------------------------------------------------------
Total from investment operations................... 28.05 5.94 .93 6.46
-------------------------------------------------------
Less distributions
Distributions from capital gains................... 3.39 -- -- .02
-------------------------------------------------------
Total distributions.............................. 3.39 -- -- .02
-------------------------------------------------------
Net asset value, end of period....................... $ 47.97 $ 23.31 $ 17.37 $ 16.44
=======================================================
Total return (%)..................................... 120.82(c) 34.20(c) 5.66(c) 64.59(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $35,879 $10,197 $ 8,577 $ 3,425
Ratio of expenses to average net assets
With expense reimbursement (%)..................... -- -- -- 2.99(e)
Without expense reimbursement (%).................. 2.74 2.95 2.92 3.70(e)
Ratio of net investment loss to average net assets
(%)................................................ (2.55) (2.67) (2.72) (2.98)(b)(e)
Portfolio turnover rate (%).......................... 62 73 54 23
</TABLE>
<PAGE> 126
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
10
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
for the period
July 22, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 23.38 $ 17.40 $ 16.46 $10.00
------------------------------------------------------
Income from investment operations
Net investment loss................................ (.70) (.48)(a) (.42)(a) (.05)(b)
Net gain on securities (both realized and
unrealized)...................................... 28.87 6.46(a) 1.36(a) 6.53
------------------------------------------------------
Total from investment operations................... 28.17 5.98 .94 6.48
------------------------------------------------------
Less distributions
Distributions from capital gains................... 3.36 -- -- .02
------------------------------------------------------
Total distributions.............................. 3.36 -- -- .02
------------------------------------------------------
Net asset value, end of period....................... $ 48.19 $ 23.38 $ 17.40 $16.46
======================================================
Total return (%)..................................... 120.98(c) 34.37(c) 5.71(c) 64.84(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $18,769 $ 8,431 $ 6,348 $2,106
Ratio of expenses to average net assets
With expense reimbursement (%)..................... -- -- -- 2.95(e)
Without expense reimbursement (%).................. 2.68 2.84 2.85 3.66(e)
Ratio of net investment loss to average net assets
(%)................................................ (2.49) (2.56) (2.65) (2.94)(b)(e)
Portfolio turnover rate (%).......................... 62 73 54 23
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
for the period
for the year April 15, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- -----------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
----------------------------------
<S> <C> <C>
Net asset value, beginning of period................. $ 23.62 $ 20.19
----------------------------------
Income from investment operations
Net investment loss................................ (.24) (.20)(a)
Net gain on securities (both realized and
unrealized)...................................... 29.07 3.63(a)
----------------------------------
Total from investment operations................... 28.83 3.43
----------------------------------
Less distributions
Distributions from capital gains................... 3.63 --
----------------------------------
Total distributions.............................. 3.63 --
----------------------------------
Net asset value, end of period....................... $ 48.82 $ 23.62
==================================
Total return (%)..................................... 122.56(c) 16.99(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 431 $ 15
Ratio of expenses to average net assets(%)........... 1.89 2.18(e)
Ratio of net investment loss to average net assets
(%)................................................ (1.71) (1.91)(e)
Portfolio turnover rate (%).......................... 62 73
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) Based on average (b) Net investment (c) Total return (d) Total return (e) Annualized
shares outstanding. loss is net of does not reflect a represents aggregate
expenses reimbursed sales charge. total return and
by Manager. does not reflect a
sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 127
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
NOTES TO FINANCIAL STATEMENTS
Ivy Global Science & Technology Fund (the "Fund"), is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C, Advisor Class
and Class I are authorized. Ivy Fund was organized as a Massachusetts business
trust under a Declaration of Trust dated December 21, 1983 and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of December 31, 1999, there were no Board
valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
OPTIONS -- The Fund may invest in option contracts for the purpose of increasing
or decreasing their exposure to changing security prices, interest rates,
currency exchange rates, commodity prices, or other factors that affect the
value of the Fund's securities. An option is a right to buy or sell a particular
security at a specified price within a limited period of time. The buyer of the
option, in return for a premium paid to the seller, has the right to buy, in the
case of a call option, or sell, in the case of a put option, the underlying
security of the contract. An option on a stock index gives the purchaser the
right to receive from the seller cash equal to the difference between the
closing price of the index and the exercise price of the option.
When the Fund writes or purchases an option, an amount equal to the premium
received or paid by the Fund is recorded as a liability or an asset and is
subsequently adjusted to the current market value of the option written or
purchased. Premiums received or paid from writing or purchasing options which
expire unexercised are treated by the Fund on the expiration date as realized
gains or losses. The difference between the premium and the amount paid or
received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the cost of the purchase
or proceeds of the sale in determining whether the Fund has realized a gain or
loss on the transaction. For options on indices, cash settlement by the Fund is
required if the option is exercised. The Fund, as writer of an option, has no
control over whether the underlying securities may be sold (call) or purchased
(put) and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option. Exchange traded written
call options are valued daily at the last sale price or, in the absence of a
sale, at the calculated mean of the bid and asked prices, subject to certain
reasonability criteria on the spread between the bid and asked prices.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earns interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
Pursuant to Code Section 852, the Fund designates $3,078,662 as long-term
capital gain distributions for its taxable year ended December 31, 1999.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund prior to the
effectiveness of Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities," in connection with its organization
<PAGE> 128
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
12
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.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $14,766.
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
$48,885, $168,658, and $101,399 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 $41,973, $35,175, $15,873 and $187, for Class A, Class B, Class C
and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 505,052 $ 16,958,259 320,126 $ 6,486,249
Issued on
reinvestment of
distributions....... 55,874 2,645,066 -- --
Repurchased.......... (468,791) (13,795,830) (259,273) (4,991,184)
-------- ------------ -------- -----------
Net increase......... 92,135 $ 5,807,495 60,853 $ 1,495,065
======== ============ ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 371,473 $ 11,662,058 88,408 $ 1,667,703
Issued on
reinvestment of
distributions....... 38,614 1,793,612 -- --
Repurchased.......... (99,651) (2,906,795) (144,818) (2,632,699)
-------- ------------ -------- -----------
Net increase/
(decrease).......... 310,436 $ 10,548,875 (56,410) $ (964,996)
======== ============ ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 88,831 $ 3,130,374 56,748 $ 1,055,472
Issued on
reinvestment of
distributions....... 20,486 955,872 -- --
Repurchased.......... (80,472) (2,345,456) (60,890) (1,143,046)
-------- ------------ -------- -----------
Net increase/
(decrease).......... 28,845 $ 1,740,790 (4,142) $ (87,574)
======== ============ ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- -----------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 8,734 $ 376,835 1,642 $ 32,780
Issued on
reinvestment of
distributions....... 105 4,962
Repurchased.......... (640) (17,474) (1,012) (20,261)
-------- ------------ -------- -----------
Net increase......... 8,199 $ 364,323 630 $ 12,519
======== ============ ======== ===========
</TABLE>
<PAGE> 129
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY GLOBAL SCIENCE & TECHNOLOGY FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 130
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
14
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 771,647 15,968
Keith J. Carlson.............. 771,434 16,182
Stanley Channick.............. 769,160 18,456
Roy J. Glauber................ 769,232 18,383
Edward M. Tighe............... 771,647 15,968
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
755,342 3,304 28,969
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
684,771 11,587 34,845 56,413
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
679,416 18,938 32,849 56,413
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
682,019 14,774 34,410 56,413
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
682,705 14,100 34,398 56,413
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
683,734 12,664 34,805 56,413
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
681,938 14,460 34,805 56,413
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
681,003 15,395 34,805 56,413
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
683,900 11,407 35,896 56,413
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
679,020 16,515 35,668 56,413
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 131
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 132
02IGST123199
<PAGE> 133
[IVY FUNDS LOGO]
IVY MONEY MARKET FUND
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENZIE LOGO]
OVERVIEW
The Ivy Money Market Fund seeks 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. We believe inflation may heat up, bringing
with it higher interest rates. In response, we have kept the weighted average
maturity of the Fund shorter than normal in order to take advantage of higher
rates if they occur.
While it is impossible to predict the future direction that financial
markets will take, we will remain committed in our efforts to provide investors
in the Fund with yields that are competitive within the universe of money market
funds, as well as the current monetary and fiscal environment.
MARKET COMMENTARY
This US economy continued to grow in 1999 with virtually no inflation. Our
research indicates that the unemployment rate is at its lowest level in more
than 29 years. Wages and salaries are rising, albeit slowly. According to the
Conference Board, which studies business and finance trends, consumer confidence
reached its highest level since it began keeping such records in 1967. What's
more, the price of oil has more than doubled in the past 12 months, and other
industrial commodity prices have been rising as well. This perplexed many
managers and economists because this fundamental data, which managers normally
rely on, seemed to point to potentially higher inflation.
PRODUCTIVITY GROWTH CONTINUES.
We believe a major factor contributing to this combination of growth with low
inflation is the high growth in productivity, which is largely driven by new
technologies. These new technologies have changed the way many companies
transact their business and have helped to reduce costs. In our view, however,
these changes have not been enough to alter the traditional laws of economics.
Left unchecked, we believe the economy will eventually see a significant upturn
in inflation. It is our opinion that the Federal Reserve also understands this
and raised rates three times in the last year in preemptive moves to head off
inflation.
INFLATION-FEARS HEAT UP.
We believe that the market can see the potential for higher inflation as well.
During 1999, bond yields apparently rose in anticipation of higher interest
rates. Our research shows that the yield on a treasury note with a two-year
maturity climbed from 4.50% to almost 6.50%. The yield on a 30-year bond rose
from about 5.15% to over 6.60%. The short end of the yield curve has steepened
dramatically. The spread between the three-month treasury bill and the
<PAGE> 134
2
two-year note increased from around 10 basis points to about 95 basis points. In
our opinion, improving global economic conditions helped fuel inflationary
fears, as commodity prices started to improve, developing economies stabilized,
and Japan and Europe staged an economic comeback by the end of the year.
LOOKING AHEAD.
We believe another indication that the market may be expecting higher interest
rates in the near term is the Federal Funds futures. The futures indicate the
market's expectation for about a 75-basis point increase in rates by the end of
March 2000. We believe that the Federal Reserve has the opportunity to act
cautiously in a preemptive manner to slow the economy without causing a
significant slide.
Portfolio Holdings
December 31, 1999
[CHART]
<PAGE> 135
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 7.56%
- -----------------------------------
Associates Corp. of N.A., 5.78%,
01/27/00.......................... $1,000,000 $ 995,826
Chevron Oil Finance Co., 5.75%,
01/12/00.......................... 1,000,000 998,243
-----------
TOTAL COMMERCIAL PAPER
(Cost -- $1,994,069).............. 1,994,069
-----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 71.78%
- -----------------------------------
Federal Home Loan Bank, 5.75%,
01/19/00.......................... 4,300,000 4,287,637
Federal Home Loan Mortgage Corp.,
5.55%, 01/13/00................... 4,000,000 3,992,200
Federal Home Loan Mortgage Corp.,
5.40%, 01/14/00................... 2,700,000 2,695,005
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
PRINCIPAL VALUE
- --------------------------------------------------------------
<S> <C> <C>
Federal National Mortgage
Association, 5.50%, 01/19/00...... $3,000,000 $ 2,991,750
Federal National Mortgage
Association, 5.48%, 02/10/00...... 5,000,000 4,969,556
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost -- $18,936,148)............. 18,936,148
-----------
TOTAL INVESTMENTS -- 79.34%
(Cost -- $20,930,217)(a).......... 20,930,217
OTHER ASSETS, LESS LIABILITIES -- 20.66% 5,451,989
-----------
NET ASSETS -- 100%.................. $26,382,206
===========
(a) Cost is approximately the same for Federal
income tax purposes.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 136
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
4
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $20,930,217)...... $20,930,217
Cash........................................................ 5,233,809
Receivables
Fund shares sold.......................................... 472,504
Manager for expense reimbursement......................... 14,495
Other assets................................................ 9,136
-----------
Total assets.............................................. 26,660,161
-----------
LIABILITIES
Payables
Distributions to shareholders............................. 7,450
Fund shares repurchased................................... 240,823
Management fee............................................ 8,471
Other payables to related parties......................... 13,428
Accrued expenses............................................ 7,783
-----------
Total liabilities......................................... 277,955
-----------
NET ASSETS.................................................. $26,382,206
===========
CLASS A
Net asset value and redemption price per share
($18,523,925/18,523,925 shares outstanding)............... $ 1.00
===========
CLASS B
Net asset value, offering price and redemption price* per
share ($7,486,159/7,486,159 shares outstanding)........... $ 1.00
===========
CLASS C
Net asset value, offering price and redemption price* per
share ($372,122/372,122 shares outstanding)............... $ 1.00
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $26,382,206
-----------
NET ASSETS.................................................. $26,382,206
===========
</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> 137
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $1,328,578
----------
EXPENSES
Management fee............................................ $105,311
Transfer agent............................................ 100,169
Administrative services fee............................... 26,328
Custodian fees............................................ 6,612
Blue Sky fees............................................. 30,159
Auditing and accounting fees.............................. 9,201
Shareholder reports....................................... 11,245
Fund accounting........................................... 33,763
Trustees' fees............................................ 9,240
Legal..................................................... 26,592
Other..................................................... 1,516
----------
360,136
Expenses reimbursed by Manager.............................. (137,040)
----------
Net expenses............................................ 223,096
----------
NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................. $1,105,482
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 138
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 1,105,482 $ 1,162,955
----------- -----------
Net increase resulting from operations................ 1,105,482 1,162,955
----------- -----------
Dividends to shareholders from net investment income
Class A................................................... (778,168) (910,735)
Class B................................................... (310,429) (233,841)
Class C................................................... (16,885) (18,379)
----------- -----------
Total distributions to shareholders................... (1,105,482) (1,162,955)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (579,302) 3,718,599
Class B................................................... 850,618 2,823,837
Class C................................................... (50,878) 18,004
----------- -----------
Net increase resulting from Fund share transactions... 220,438 6,560,440
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 220,438 6,560,440
NET ASSETS
Beginning of period....................................... 26,161,768 19,601,328
----------- -----------
END OF PERIOD............................................. $26,382,206 $26,161,768
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 139
7
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- ---------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------
Income from investment operations
Net investment income(a).................................. .04 .05 .05 .04 .05
Less dividends from net investment income................. (.04) (.05) (.05) (.04) (.05)
-------------------------------------------------------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=======================================================
Total Return (%)............................................ 4.16 4.51 4.60 4.47 4.80
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $18,524 $19,103 $15,385 $21,359 $24,609
Ratio of expenses to average net assets
With expense reimbursement (%)............................ .88 .87 .88 .86 .85
Without expense reimbursement (%)......................... 1.40 1.42 1.57 1.86 1.39
Ratio of net investment income to average net assets
(%)(a).................................................... 4.17 4.50 4.60 4.47 4.91
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS B December 31,
- -----------------------------------------------------------------------------------------------------------
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
---------------------------------------------
Income from investment operations
Net investment income(a).................................. .04 .05 .05 .05
Less dividends from net investment income................. (.04) (.05) (.05) (.05)
---------------------------------------------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============================================
Total return (%)............................................ 4.30 4.59 4.77 4.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 7,486 $ 6,636 $ 3,812 $ 3,474
Ratio of expenses to average net assets
With expense reimbursement (%)............................ .77 .76 .70 .77
Without expense reimbursement (%)......................... 1.29 1.31 1.39 1.77
Ratio of net investment income to average net assets
(%)(a).................................................... 4.28 4.61 4.77 4.57
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
from
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996
-------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $1.00 $1.00 $1.00 $ 1.00
-------------------------------------------
Income from investment operations
Net investment income(a).................................. .04 .05 .05 .03
Less dividends from net investment income................. (.04) (.05) (.05) (.03)
-------------------------------------------
Net asset value, end of period.............................. $1.00 $1.00 $1.00 $ 1.00
===========================================
Total return (%)............................................ 4.14 4.55 4.78 4.78(b)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 372 $ 423 $ 405 $ 74
Ratio of expenses to average net assets
With expense reimbursement (%)............................ .87 .81 .70 .56(c)
Without expense reimbursement (%)......................... 1.39 1.36 1.39 1.56(c)
Ratio of net investment income to average net assets
(%)(a).................................................... 4.18 4.56 4.78 4.78(c)
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net investment income is net of (b) Total return represents aggregate (c) Annualized
expenses reimbursed by Manager total return
NOTE: The seven day yield as of December 31, 1999 was 4.79%. The thirty day yield as of December 31, 1999 was 4.68%.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 140
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
8
NOTES TO FINANCIAL STATEMENTS
Ivy Money Market Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B and Class C are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Short-term obligations and commercial paper are valued at
amortized cost, which approximates market.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared daily and paid monthly.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of .40% of the
Fund's average net assets. Currently, IMI limits the Fund's total operating
expenses to an annual rate of .85% of its 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 $76,850, $21,698 and $1,621, for Class A, Class B and Class C,
respectively, are reflected as Transfer agent in the Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions and equivalent dollar amounts for Class A, Class B and
Class C were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
CLASS A DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................... 52,099,224 71,915,171
Issued on reinvestment of
distributions........... 701,982 820,735
Repurchased.............. (53,380,508) (69,017,307)
----------- -----------
Net
(decrease)/increase..... (579,302) 3,718,599
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
CLASS B DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................... 10,516,744 15,159,484
Issued on reinvestment of
distributions........... 342,399 183,070
Repurchased.............. (10,008,525) (12,518,717)
----------- -----------
Net increase............. 850,618 2,823,837
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
CLASS C DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------
<S> <C> <C>
Sold..................... 2,563,747 3,746,980
Issued on reinvestment of
distributions........... 16,085 13,517
Repurchased.............. (2,630,710) (3,742,493)
----------- -----------
Net
(decrease)/increase..... (50,878) 18,004
=========== ===========
</TABLE>
<PAGE> 141
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY MONEY MARKET FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 142
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY MONEY MARKET FUND
- --------------------------------------------------------------------------------
10
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot......... 17,652,705 297,685
Keith J. Carlson........... 17,652,704 297,685
Stanley Channick........... 17,650,877 299,513
Roy J. Glauber............. 17,653,633 296,757
Edward M. Tighe............ 17,653,474 296,916
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------
FOR: AGAINST: ABSTAIN:
- -------------------------------
<S> <C> <C>
17,540,036 173,764 236,589
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,664,508 245,152 483,089 4,557,641
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,546,215 363,445 483,089 4,557,641
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,590,020 319,641 483,089 4,557,641
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,589,160 320,500 483,089 4,557,641
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,513,928 395,732 483,089 4,557,641
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,474,111 435,549 483,089 4,557,641
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,514,516 395,144 483,089 4,557,641
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,602,804 306,856 483,089 4,557,641
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
12,586,961 322,699 483,089 4,557,641
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 143
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
11
<PAGE> 144
02IMMF123199
<PAGE> 145
[IVY FUNDS LOGO]
IVY DEVELOPING NATIONS FUND
OVERVIEW
We believe the Ivy Developing Nations Fund provides well-diversified exposure to
emerging markets around the world. Close to 31% of the Fund's assets is
currently concentrated in Asia, nearly 38% in Latin America, and almost 16% in
the Emerging Europe, Middle East and African (EMEA) markets.
The Ivy Developing Nations Fund returned 46.70% in 1999 versus the
Morgan Stanley Capital International Emerging Markets Free Index, which returned
66.41% for the same period. (For the Fund's total return with sales charge and
performance commentary, please refer to page 3.) During the first nine months of
the year, the Fund performed in line with the Index (48.18% versus the Index
return of 48.00%). However, in the final quarter of the year, the Fund lost
substantial relative performance. In our view, this can be attributed to a
higher-than-average cash position, which we believe was prudent in light of
liquidity concerns associated with Y2K and in anticipation of related volatility
that could have created buying opportunities. The volatility we anticipated did
not materialize until after the beginning of 2000 and the higher cash balance
impacted the Fund's 1999 performance. Another factor we believe impacted the
Fund's fourth-quarter performance was its underweighting in technology stocks.
According to our research, in the final quarter of the year, Asian technology
stocks were swept up in the global "Internet mania," pushing already record-
high valuations even higher. Given our view that prices for these stocks have
already significantly overshot even the most optimistic growth prospects, we
continue to approach the sector with great caution.
MARKET COMMENTARY
Prospects for emerging markets improved significantly over the course of 1999,
as our research showed that stronger growth in the developed world provided a
steady source of demand for exports from developing countries. Since primary
materials tend to make up a large portion of output for many emerging markets,
we believe higher commodity prices also contributed to a better outlook for
emerging economies. In 2000, we expect domestic demand to start to recover in
many of the economies hit hardest by the emerging market crisis that roiled
world financial markets in 1998. We believe these factors, combined with what we
view as compelling valuations, should be supportive of continued strong
performance from emerging equity markets in 2000.
To date, we believe recovery in non-Japan Asia has been driven by lower
interest rates, competitive exchange rates, and strong external demand. We
expect a pickup in domestic demand and a resumption of investment may fuel the
next stage of recovery. If the recovery in the region broadens as anticipated,
we believe the upward revisions in GDP and earnings growth estimates should
continue into 2000. In addition to accelerating economic growth, we expect
corporate restructuring to become a more prevalent theme in the
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
December 31, 1999
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
[MACKENZIE LOGO]
<PAGE> 146
2
region as the Asian economic crisis appears to have highlighted the need for an
increased focus on generating shareholder value and more effective management of
resources.
A SHIFT IN ASIAN FOCUS.
Earlier this year, the Ivy Developing Nations Fund reduced its exposure to Asian
markets. While we remain optimistic that the lessons learned from the 1998
economic crisis may benefit many Asian economies and corporations, and given the
rebound in many of these markets, we believed that valuations were no longer as
compelling as they had been.
In our view, selectivity is becoming increasingly important within the
region. The Fund's Asian holdings are currently concentrated in companies we
expect may benefit from an anticipated pickup in domestic demand. The Fund
continues to hold a number of stocks that may benefit from corporate
restructuring--which we believe will be a powerful theme for the region.
"In 2000, we expect domestic demand to start to recover in many of the economies
hit hardest by the emerging market crisis that roiled world financial markets in
1998."
LATIN AMERICA RECOVERS.
Within the Latin American region, the Fund invests in what we believe are
high-quality companies selected for both their potential defensive strengths and
long-term prospects. Our research indicates a relatively healthy cyclical
recovery in 2000, with regional economic growth possibly averaging over 3%,
after a slight decline in 1999. In our opinion, economic recovery could
translate into a rebound in earnings growth in the region. In addition to
improving growth prospects, we believe declining interest rates should support
equity markets. According to our research, interest rates for the major Latin
American economies are currently at their lowest level since the devaluation of
the Thai baht in the summer of 1997, which marked the beginning of the economic
crisis in many developing economies. However, we believe there is room for
interest rates to come down further. The combination of improved growth and
lower rates with attractive valuations is attracting global money into the
region after a two-year hiatus. While stock prices have recovered from the
distressed early 1999 levels, we think valuations still remain attractive.
CENTRAL AND EASTERN EUROPE.
Our research indicated that EMEA markets lagged over the course of 1999 due to
macro-economic concerns. The Ivy Developing Nations Fund continues to be
underweight in these markets. However, we took advantage of lower prices during
the first half of the year to add to existing positions in Central and Eastern
Europe (C&EE). According to our research, the Hungarian market, long considered
at the forefront of market liberalization and economic reform relative to its
C&EE neighbors, came under particular pressure in the first half of the year, on
the back of deteriorating current account and fiscal deficits. While we
recognize these concerns, we believe the market has been overpenalized and that
long-term growth prospects remain intact. Our analysis indicates that economic
recovery in developed Europe has increased demand for exports from the Eastern
European countries, including Hungary. What's more, macrofundamentals are
improving. Despite short-term pressure, we believe economic convergence with the
Economic and Monetary Union (EMU) remains on track. Going forward, our research
suggests that the prospect of EMU membership is likely to spur reform and
development.
Overall, we believe the outlook for emerging markets is currently much
more constructive than it has been for some time. After a hiatus of two or three
years, which we believe was caused by a risk aversion among international
investors, our research indicates that interest is returning to the asset class.
We think that global growth and liquidity provide a supportive back-drop. And,
perhaps most important, we believe that emerging-market valuations have
significant upside potential, particularly when compared to those found in
developed markets. Although emerging markets may remain volatile, we believe
that, over time, emerging-market exposure should continue to provide valuable
diversification benefits to investors.
<PAGE> 147
3
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (11/94) OF A $10,000 INVESTMENT
[CHART]
IVY DEVELOPING NATIONS FUND
PERFORMANCE COMMENTARY
The Ivy Developing Nations Fund returned 46.70% in 1999 versus the Morgan
Stanley Capital International (MSCI) Emerging Markets Free Index return of
66.41%. The Fund performed in line with the Index (48.18% versus the Index
return of 48.00%) for the first three quarters then lost substantial relative
performance during the fourth quarter of 1999. We believe this underperformance
can be attributed to a higher-than-average cash position adopted because of
liquidity concerns related to Y2K and an underweighting in Asian technology
stocks, which experienced unprecedented gains.
The Morgan Stanley Capital International (MSCI) Emerging Markets Free Index is
an unmanaged index of stocks which assumes reinvestment of dividends and, unlike
Fund returns, does not reflect any fees or expenses. It is not possible to
invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of all other share classes will vary relative to that of Class A
shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
IVY DEVELOPING NATIONS FUND Class A(1) Class B(2) & C(3) Advisor Class(4)
AVERAGE ANNUAL TOTAL RETURN -----------------------------------------------------------------------------------------------
FOR PERIODS ENDING w/ w/o w/ w/o w/ w/o
DECEMBER 31, 1999 Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---- ---- ---- ----
B: B: B: B:
40.82% 45.82% 39.39% 44.39%
C: C: C: C:
1 year 38.27% 36.74% 44.84% 45.84% 43.42% 44.42% 47.38% 46.57%
- ------------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
1.16% 1.54% (.16)% .22%
C: C: C: C:
1.07% (.29)% n/a n/a n/a n/a n/a n/a
5 year
- ------------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
(1.53)% (1.34)% (3.13)% (2.95)%
C: C: C: C:
Since inception(5) (1.76)% (3.41)% (1.72)% (1.72)% (2.33)% (2.33)% 11.13% 10.27%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2)Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5.00%.
(3)Class C performance figures are calculated with and without the applicable
CDSC, up to a maximum of 1.00%.
(4)Advisor Class shares are not subject to an initial sales charge or a CDSC.
(5)Class A and Class B commenced operations November 1, 1994; Class C commenced
operations April 30, 1996; Advisor Class commenced operations April 30, 1998.
Total returns in some periods were higher due to reimbursement of certain Fund
expenses.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy Developing Nations Fund will
fluctuate and at redemption shares may be worth more or less than the amount of
the original investment.
<PAGE> 148
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 91.22% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 7.52%
- -------------------------------
SOUTH AFRICA -- 7.52%
Anglo American plc.............. 3,700 $ 238,553
Liberty International plc....... 4,895 36,767
Liberty Life Association of
Africa Limited................ 13,700 157,969
Nampak Limited.................. 87,600 263,190
Nedcor Limited.................. 8,400 186,893
South African Breweries plc..... 21,800 218,716
Standard Bank Investment
Corporation Limited........... 45,067 187,000
------------
1,289,088
------------
ASIA/PACIFIC -- 30.43%
- -------------------------------
CHINA -- 0.74%
Anhui Expressway Co. Ltd........ 252,000 23,665
Huaneng Power International,
Inc. ADR...................... 1,200 12,675
Inner Mongolia Erdos Cashmere
Products Co. Ltd. Class B..... 64,000 14,464
Qingling Motors Company -- H
Shares........................ 67,000 8,102
Shanghai Diesel Engine Co.
Ltd. -- Class B............... 81,200 15,103
Shanghai Posts &
Telecommunications Equipment
Co. Ltd. -- Class B........... 89,440 16,457
Zhenhai Refining and Chemical
Company Ltd................... 210,000 37,280
------------
127,746
------------
HONG KONG -- 6.29%
Asia Satellite
Telecommunications Holdings
Ltd. ADR...................... 16,000 50,531
Cheung Kong Holdings Ltd........ 17,000 215,957
Citic Pacific Ltd............... 31,000 116,646
Guangdong Kelon Electrical
Holdings Co. Ltd. -- H.
Shares........................ 45,000 34,154
Hong Kong Telecommunications
Ltd........................... 34,400 99,347
HSBC Holdings plc............... 10,023 140,542
i-CABLE Communications
Limited(a).................... 130 176
New World Development
Company Ltd................... 41,000 92,300
Ng Fung Hong Limited............ 48,000 24,699
Shanghai Industrial Holdings
Limited....................... 35,000 73,165
Wharf Holdings Ltd.............. 52,111 121,001
Wing Hang Bank Limited.......... 32,000 109,500
------------
1,078,018
------------
ISRAEL -- 1.04%
Koor Industries Limited --
Sponsored ADR................. 8,900 178,000
------------
MALAYSIA -- 5.54%
Berjaya Sports Toto Berhad...... 65,000 140,262
Genting Berhad.................. 41,000 145,657
London & Pacific Insurance
Company Berhad................ 90,400 96,585
Malayan Banking Berhad.......... 46,000 163,420
Perusahaan Otomobil Nasional
Berhad........................ 68,000 132,420
Sime Darby Berhad............... 80,000 101,473
Sime UEP Properties Berhad...... 120,000 168,946
------------
948,763
------------
PHILIPPINES -- 2.58%
Alaska Milk Corporation(a)...... 1,706,000 122,764
Asian Terminals, Inc.(a)........ 1,177,500 35,062
Belle Corporation (with 61,400
warrants(a)).................. 607,000 29,197
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Benpres Holdings Corporation
Sponsored GDR(a).............. 15,000 $ 45,938
Manila Electric Company -- B
Shares........................ 10,000 28,536
Metropolitan Bank & Trust
Company....................... 12,901 92,834
Music Corporation(a)............ 127,000 16,702
Southeast Asia Cement
Holdings, Inc.(a)............. 1,051,519 12,263
Universal Robina Corporation.... 329,000 58,779
------------
442,075
------------
SINGAPORE -- 4.61%
Asia Pulp & Paper Company
Ltd. -- Sponsored ADR(a) (with
800 warrants(a)).............. 4,000 32,250
DBS Land Ltd.................... 92,000 181,128
Elec & Eltek International Co.
Ltd........................... 12,700 41,148
Fraser & Neave Ltd. Ordinary.... 35,000 129,201
Overseas Union Bank Ltd......... 42,254 247,284
Singapore Airlines Limited...... 14,000 158,823
------------
789,834
------------
SOUTH KOREA -- 7.25%
Hyundai Motor Company Ltd....... 10,474 166,430
Hyundai Motor Company GDR
144A(a)....................... 226 1,017
Korea Electric Power Corp.
Sponsored ADR................. 12,400 207,700
Pohang Iron & Steel Company
Ltd........................... 4,000 467,867
Samsung Fire & Marine Insurance
(with 1,568 rights(a))........ 7,670 257,700
Shinhan Bank.................... 13,016 141,328
------------
1,242,042
------------
THAILAND -- 2.38%
Advanced Info Service Public
Company Limited -- Foreign.... 5,000 84,098
Bangkok Bank Public Company
Ltd -- Foreign Registered..... 20,800 52,588
Krung Thai Thanakit
PCL -- Foreign Registered..... 24,000 7,345
Robinson Department Store Public
Company Limited............... 637,200 64,441
Siam Cement Public Company
Limited -- Foreign
Registered.................... 4,700 156,604
Thai Farmers Bank Public Company
Limited -- Foreign
Registered.................... 25,800 43,258
------------
408,334
------------
EUROPE -- 15.98%
- -------------------------------
CZECH REPUBLIC -- 3.09%
Ceske Energeticke
Zavody a.s. (CEZ)............. 109,000 268,615
Inzenyrske a Prumyslove
Stavby (IPS).................. 27,800 117,201
Restitucni Invest Fund Ceske.... 1,200 45,879
Skoda Plzen a.s................. 2,000 6,460
Zivnobanka -- Investicni Fond... 5,300 91,649
------------
529,804
------------
ESTONIA -- 1.34%
Hansabank Ltd................... 36,500 229,016
------------
GREECE -- 2.01%
Hellenic Telecommunications
Organization SA ADR........... 28,900 344,994
------------
HUNGARY -- 7.11%
BorsodChem Rt................... 5,600 224,864
Magyar Tavkozlesi Rt............ 44,200 307,984
MOL Magyar Olaj-es Gazipari
Rt............................ 8,800 181,875
</TABLE>
- --------------------------------------------------------------
- --------------------------------------------------------------
<PAGE> 149
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
5
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Pannonplast Rt.................. 9,500 $ 233,367
Pick Szeged Rt.................. 5,800 270,569
------------
1,218,659
------------
POLAND -- 1.77%
Bank Rozwoju Eksportu S.A....... 1,550 49,046
Telekomunikacja Polska S.A...... 40,000 255,000
------------
304,046
------------
PORTUGAL -- 0.56%
Portugal Telecom S.A. --
Sponsored ADR................. 5,500 59,813
Sonae Industria E
Investimentos................. 700 36,765
------------
96,578
------------
RUSSIA -- 0.10%
Gorkovsky Auto Plant (GAZ)(a)... 500 17,500
------------
LATIN AMERICA -- 37.29%
- -------------------------------
ARGENTINA -- 5.60%
Banco de Galicia y Buenos Aires
S.A. de C.V................... 19,275 95,809
Banco Frances S.A............... 17,787 140,535
Bansud S.A.(a).................. 36,701 85,524
Inversiones y Representaciones
S.A. (IRSA)................... 65,895 213,527
Quilmes Industrial S.A.......... 20,000 238,750
Telefonica de Argentina S.A. --
Sponsored ADR................. 6,000 185,250
------------
959,395
------------
BRAZIL -- 18.24%
Banco Bradesco S.A. Preferred(a)
(with 1,948,022 rights(a)).... 30,000,000 244,809
Centrais Electricas Brasileiras
S.A.(Electrobras)............. 10,200,000 224,700
Tam -- Cia de Invetimentos em
Transportes Preferred(a)...... 9,200,000 256,480
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar........................ 8,148,100 272,586
Companhia Energetica de Minas
Gerais (CEMIG)................ 3,879,016 87,594
Companhia Vale do Rio Doce --
Preferred A(a) (with 5,000
non-tradeable
debentures(a))................ 14,000 390,296
Embratel Participacoes S.A...... 8,500 231,625
Petroleo Brasileiro S.A.
(Petrobras)................... 1,354,300 347,351
Tele Centro Oeste Celular Part.
S.A........................... 79,200,000 167,805
Tele Norte Leste Participacoes
S.A........................... 11,000 280,500
Telecomunicacoes Brasileiras
S.A. (Telebras) -- Sponsored
ADR Preferred Block........... 1,700 218,450
Telecomunicacoes de Sao Paulo
ADR........................... 6,400 156,400
Uniao de Bancos Brasileiras S.A.
(Unibanco) Sponsored GDR...... 3,900 117,488
Uniao de Bancos Brasileiros S.A.
(Unibanco) -- Units........... 1,950,000 130,470
------------
3,126,554
------------
CHILE -- 4.38%
A.F.P. Provida S.A. -- Sponsored
ADR........................... 6,700 144,050
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Antofagasta Holdings plc........ 37,963 $ 265,237
Cristalerias de Chile Sponsored
ADR........................... 14,800 212,750
Gener S.A. Sponsored ADR........ 3,590 55,645
Laboratorio Chile S.A. ADR...... 4,000 72,750
------------
750,432
------------
COLOMBIA -- 0.61%
Bancolombia S.A. Sponsored
ADR........................... 22,700 104,988
------------
MEXICO -- 6.33%
Fomento Economico Mexicano S.A.
Sponsored ADR................. 3,600 160,200
Grupo Financiero Banamex Accival
S.A. de C.V. (Banacci)........ 39,200 157,130
Grupo Financiero Bancomer S.A.
de C.V........................ 166,600 69,592
Grupo Posadas S.A. -- Series
A(a).......................... 83,785 50,377
Panamerican Beverages Inc....... 15,100 310,494
Telefonos de Mexico S.A. ADR
Class L....................... 3,000 337,500
------------
1,085,293
------------
PERU -- 1.07%
Banco Wiese ADR................. 38,000 45,125
Telefonica del Peru S.A. --
Class B....................... 105,900 137,803
------------
182,928
------------
VENEZUELA -- 1.06%
Cia Anonima Nacional Telefonos
de Venezuela ADR (CANTV)...... 7,400 182,225
------------
TOTAL INVESTMENTS -- 91.22%
(Cost -- $14,484,370) (Cost on
Federal income tax basis --
$14,664,553)................ 15,636,312
OTHER ASSETS, LESS
LIABILITIES -- 8.78%.......... 1,504,456
------------
NET ASSETS -- 100%.............. $ 17,140,768
============
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing
security
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation.............. $ 3,770,237
Gross unrealized depreciation.............. (2,618,295)
------------
Net unrealized appreciation for
financial
statement purposes................... 1,151,942
Less: tax basis adjustments................ (180,183)
------------
Net unrealized appreciation for Federal
income tax purposes.................. $ 971,759
============
Purchases and sales of securities other than short-term
obligations aggregated $5,112,181 and $8,575,848,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 150
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $14,484,370)...... $15,636,312
Cash........................................................ 1,494,627
Receivables
Fund shares sold.......................................... 10,530
Dividends and interest.................................... 41,476
Manager for expense reimbursement......................... 17,003
Other assets................................................ 5,745
-----------
Total assets.............................................. 17,205,693
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 9,000
Management fee............................................ 14,039
12b-1 service and distribution fees....................... 10,330
Other payables to related parties......................... 10,384
Accrued expenses............................................ 21,172
-----------
Total liabilities......................................... 64,925
-----------
NET ASSETS.................................................. $17,140,768
===========
CLASS A
Net asset value and redemption price per share
($5,652,490/644,371 shares outstanding)................... $ 8.77
===========
Maximum offering price per share ($8.77 x 100/94.25)*....... $ 9.31
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($7,676,451/889,530 shares outstanding)............. $ 8.63
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($3,474,412/400,771 shares outstanding)............. $ 8.67
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($337,415/38,331 shares outstanding)................ $ 8.80
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $23,771,926
Accumulated net realized loss on investments and foreign
currency transactions................................... (7,643,290)
Accumulated net investment loss........................... (140,220)
Net unrealized appreciation on investments and foreign
currency transactions................................... 1,152,352
-----------
NET ASSETS.................................................. $17,140,768
===========
</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> 151
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $39,434 foreign taxes withheld.......... $ 326,802
Interest.................................................. 44,422
----------
371,224
----------
EXPENSES
Management fee............................................ $152,772
Transfer agent............................................ 68,986
Administrative services fee............................... 15,277
Custodian fees............................................ 60,777
Blue Sky fees............................................. 30,795
Auditing and accounting fees.............................. 23,452
Shareholder reports....................................... 13,411
Amortization of organization expenses..................... 8,183
Fund accounting........................................... 35,656
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 111,791
Legal..................................................... 26,690
Other..................................................... 2,032
----------
559,062
Expenses reimbursed by Manager............................ (149,367)
----------
Net expenses.......................................... 409,695
----------
NET INVESTMENT LOSS......................................... (38,471)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (904,233)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 6,508,089
----------
Net gain on investment transactions................... 5,603,856
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $5,565,385
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 152
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment (loss) income.............................. $ (38,471) $ 64,818
Net realized loss on investments and foreign currency
transactions............................................ (904,233) (6,212,483)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 6,508,089 3,893,124
----------- -----------
Net increase (decrease) resulting from operations..... 5,565,385 (2,254,541)
----------- -----------
Class A distributions
Dividends from net investment income...................... (4,492) (3,738)
Distributions from capital gains.......................... (33,645) --
----------- -----------
Total distributions to Class A shareholders........... (38,137) (3,738)
----------- -----------
Class B distributions
Dividends from net investment income...................... -- (4,282)
Distributions from capital gains.......................... (15,012) --
----------- -----------
Total distributions to Class B shareholders........... (15,012) (4,282)
----------- -----------
Class C distributions
Dividends from net investment income...................... -- (1,761)
Distributions from capital gains.......................... (8,682) --
----------- -----------
Total distributions to Class C shareholders........... (8,682) (1,761)
----------- -----------
Advisor Class distributions
Dividends from net investment income...................... (2,222) (54)
Distributions from capital gains.......................... (1,949) --
----------- -----------
Total distributions to Advisor Class shareholders..... (4,171) (54)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (1,654,359) (2,149,545)
Class B................................................... (983,723) (1,249,929)
Class C................................................... (271,069) 436,012
Advisor Class............................................. 195,560 90,457
----------- -----------
Net decrease resulting from Fund share transactions... (2,713,591) (2,873,005)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 2,785,792 (5,137,381)
NET ASSETS
Beginning of period....................................... 14,354,976 19,492,357
----------- -----------
END OF PERIOD............................................. $17,140,768 $14,354,976
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 153
9
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 6.02 $ 6.82 $ 10.12 $ 9.05 $ 8.64
-------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)....................... .01 .06(b) .01 (.02)(b) .01
Net gains or losses on securities (both realized and
unrealized)......................................... 2.80 (.86)(b) (2.80) 1.09(b) .54
-------------------------------------------------------------
Total from investment operations...................... 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 gains.................................. .05 -- .30 -- .10
In excess of capital gains.......................... -- -- .20 -- .03
-------------------------------------------------------------
Total distributions................................. .06 -- .51 -- .14
-------------------------------------------------------------
Net asset value, end of period.......................... $ 8.77 $ 6.02 $ 6.82 $ 10.12 $ 9.05
=============================================================
Total return (%)(c)..................................... 46.70 (11.67) (27.42) 11.83 6.40
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 5,652 $ 5,487 $ 8,584 $ 9,925 $ 3,435
Ratio of expenses to average net assets(d)
With expense reimbursement (%)........................ 2.30 2.18 2.31 2.45 2.55
Without expense reimbursement (%)..................... 3.28 3.47 2.39 2.82 7.18
Ratio of net investment income (loss) to
average net assets (%)(a)............................. .13 .88 .09 (.23) .24
Portfolio turnover rate (%)............................. 37 47 42 27 14
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
for the year ended
CLASS B December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 5.93 $ 6.77 $ 10.04 $ 9.05 $ 8.64
-------------------------------------------------------------
Income (loss) from investment operations
Net investment (loss) income (a)...................... (.04)(b) .01(b) (.06) (.06)(b) (.02)
Net gains or losses on securities (both realized and
unrealized)......................................... 2.76 (.85)(b) (2.76) 1.05(b) .51
-------------------------------------------------------------
Total from investment operations...................... 2.72 (.84) (2.82) .99 .49
-------------------------------------------------------------
Less distributions
Dividends in excess of net investment income.......... -- -- .01 -- --
Distributions
From capital gains.................................. .02 -- .28 -- .08
In excess of capital gains.......................... -- -- .16 -- --
-------------------------------------------------------------
Total distributions................................. .02 -- .45 -- .08
-------------------------------------------------------------
Net asset value, end of period.......................... $ 8.63 $ 5.93 $ 6.77 $ 10.04 $ 9.05
=============================================================
Total return (%)(c)..................................... 45.82 (12.35) (27.93) 10.95 5.62
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................ $ 7,676 $ 6,145 $ 8,488 $ 6,269 $ 945
Ratio of expenses to average net assets(d)
With expense reimbursement (%)........................ 2.92 2.96 3.09 3.20 3.30
Without expense reimbursement (%)..................... 3.90 4.25 3.17 3.57 7.93
Ratio of net investment (loss) income to
average net assets (%)(a)............................. (.49) .10 (.69) (.98) (.51)
Portfolio turnover rate (%)............................. 37 47 42 27 14
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 154
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
10
<TABLE>
<CAPTION>
for the period
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- -------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 5.96 $ 6.79 $ 10.06 $ 9.89
------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a).................... (.03) .01(b) (.07) (.02)(b)
Net gains or losses on securities (both realized
and unrealized).................................. 2.76 (.84)(b) (2.76) .19 (b)
------------------------------------------------------------
Total from investment operations................... 2.73 (.83) (2.83) .17
------------------------------------------------------------
Less distributions
Dividends in excess of net investment income....... -- -- .01 --
Distributions
From capital gains............................... .02 -- .27 --
In excess of capital gains....................... -- -- .16 --
------------------------------------------------------------
Total distributions.............................. .02 -- .44 --
------------------------------------------------------------
Net asset value, end of period....................... $ 8.67 $ 5.96 $ 6.79 $ 10.06
============================================================
Total return (%)..................................... 45.84(c) (12.16)(c) (28.01)(c) 1.73 (e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 3,474 $ 2,641 $ 2,420 $ 1,854
Ratio of expenses to average net assets(d)
With expense reimbursement (%)..................... 2.85 2.96 3.12 3.16 (f)
Without expense reimbursement (%).................. 3.83 4.25 3.20 3.53 (f)
Ratio of net investment income (loss) to
average net assets (%)(a).......................... (.43) .10 (.72) (.94)(f)
Portfolio turnover rate (%).......................... 37 47 42 27
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year April 30, 1996
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- -------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998
------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period................. $ 6.05 $ 7.48
-----------------------------------
Income (loss) from investment operations
Net investment income(a)........................... .03 .04 (b
Net gains or losses on securities (both realized
and unrealized).................................. 2.83 (1.47)(b)
-----------------------------------
Total from investment operations................... 2.86 (1.43)
-----------------------------------
Less distributions
Dividends from net investment income............... .06 --
Distributions from capital gains................... .05 --
-----------------------------------
Total distributions................................ .11 --
-----------------------------------
Net asset value, end of period....................... $ 8.80 $ 6.05
-----------------------------------
-----------------------------------
Total return (%)..................................... 47.38(c) (19.06)(e)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $ 337 $ 82
Ratio of expenses to average net assets(d)
With expense reimbursement (%)..................... 1.74 1.68 (f)
Without expense reimbursement (%).................. 2.72 2.97 (f)
Ratio of net investment income to
average net assets (%)(a).......................... .69 1.38 (f)
Portfolio turnover rate (%).......................... 37 47
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net investment income (loss) (b) Based on average shares (c) Total return does not reflect
is net of expenses reimbursed by outstanding a sales charge.
Manager.
(d) From 1995 to 1997, total (e) Total return represents (f) Annualized
expenses include fees paid aggregate total return and does
indirectly through an expense not reflect a sales charge.
offset arrangement.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 155
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
NOTES TO FINANCIAL STATEMENTS
Ivy Developing Nations Fund (the "Fund"), is a diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C, and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of December 31, 1999, there were no Board
valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund earned foreign source dividends of $366,236. These dividends were
subject to foreign withholding tax in the amount of $39,434. The Fund intends to
elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may report their share of foreign taxes paid as either a tax
credit or itemized deduction.
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 gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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
Statement of Position
<PAGE> 156
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
12
98-5, "Reporting on the Cost 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 foreign denominated securities, passive
foreign investment companies and certain securities sold at a loss. As a result,
Net investment loss and Net realized loss on investments and foreign currency
transactions for a reporting period may differ significantly in amount and
character from distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% 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 its 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $2,506.
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 $13,128,
$67,796 and $30,867, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $28,914, $28,640, $11,050 and $382, for Class A, Class B, Class C
and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.................. 403,801 $ 3,110,881 339,762 $ 1,889,391
Issued on reinvestment
of distributions..... 2,958 25,081 449 2,705
Repurchased........... (673,581) (4,790,321) (688,352) (4,041,641)
-------- ----------- -------- -----------
Net decrease.......... (266,822) $(1,654,359) (348,141) $(2,149,545)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.................. 156,336 $ 1,112,285 249,973 $ 1,513,934
Issued on reinvestment
of distributions..... 928 7,752 414 2,490
Repurchased........... (303,685) (2,103,760) (469,091) (2,766,353)
-------- ----------- -------- -----------
Net decrease.......... (146,421) $ (983,723) (218,704) $(1,249,929)
======== =========== ======== ===========
</TABLE>
<PAGE> 157
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.................. 169,606 $ 1,253,679 240,773 $ 1,338,143
Issued on reinvestment
of distributions..... 736 6,171 106 548
Repurchased........... (213,019) (1,530,919) (153,701) (902,679)
-------- ----------- -------- -----------
Net
(decrease)/increase.. (42,677) $ (271,069) 87,178 $ 436,012
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- -----------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.................. 55,850 $ 426,326 14,503 $ 95,403
Issued on reinvestment
of distributions..... 490 4,171 9 54
Repurchased........... (31,508) (234,937) (1,013) (5,000)
-------- ----------- -------- -----------
Net increase.......... 24,832 $ 195,560 13,499 $ 90,457
======== =========== ======== ===========
</TABLE>
<PAGE> 158
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY DEVELOPING NATIONS FUND
- --------------------------------------------------------------------------------
14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY DEVELOPING NATIONS FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ----------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ----------------------------------------------------
<S> <C> <C>
James W. Broadfoot........... 1,175,093 42,232
Keith J. Carlson............. 1,175,092 42,232
Stanley Channick............. 1,171,045 46,279
Roy J. Glauber............... 1,169,469 47,855
Edward M. Tighe.............. 1,172,548 44,776
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------
FOR: AGAINST: ABSTAIN:
- ------------------------------
<S> <C> <C>
1,158,647 18,200 40,478
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
956,069 25,862 51,835 183,558
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
942,711 35,912 55,143 183,558
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
948,053 33,160 52,553 183,558
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
951,056 29,503 53,208 183,558
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
951,138 27,489 55,139 183,558
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
947,381 28,174 58,212 183,558
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
944,185 32,659 56,923 183,558
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
952,676 28,237 52,553 183,558
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- --------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- --------------------------------------------
<S> <C> <C> <C>
949,191 32,022 52,553 183,558
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 160
02IDNF123199
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 161
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENZIE LOGO]
IVY GLOBAL FUND
OVERVIEW
The long-term strategy of the Ivy Global Fund is to provide shareholders with an
all-inclusive worldwide investment portfolio that includes exposure to developed
as well as developing areas of the world. While there are no guarantees, history
has shown that over the long run, including both foreign and domestic stocks in
a single portfolio can reduce overall portfolio risk.
The management team uses a disciplined value approach. Rather than base
country allocation decisions on predetermined benchmarks, country weightings are
determined based on the risk-adjusted relative value of markets around the
world. It is not uncommon for the Fund to be substantially underweight major
markets when we believe valuations are unjustified, thereby increasing the level
of risk. In addition to our top-down analysis, which includes an evaluation of
factors such as each country's political and social stability, foreign trade
relationships, and currency valuation, we conduct a rigorous bottom-up stock
selection process to uncover stocks that we believe are undervalued by the
market.
The Fund's US holdings (approximately 29% of assets) are concentrated
in blue chip companies with proven track records of quality earnings growth that
are trading at what we believe to be a reasonable price relative to the
company's underlying level of profitability. The Fund's underweighting in the
US, as compared to many other global funds, is a reflection of the Fund's value
management style and our belief that greater opportunities exist elsewhere in
the world. For the 12 months ended December 31, 1999, the Ivy Global Fund
returned 26.51%. This compares favorably to the Morgan Stanley Capital
International World Index, which was up 24.94% for the same period. (For the
Fund's total return with sales charge and performance commentary, please refer
to page 4.)
MARKET COMMENTARY
The world's stock markets made a significant turnaround in 1999, surprising, we
believe, even the most optimistic global investors. In our view, over the last
few months, there were a number of encouraging signs of growth coming from the
eurozone (the 11 nations that make up the Economic and Monetary
Union--EMU), particularly from the two largest economies, Germany and France.
According to our research, on average, gross domestic product (GDP) in Europe
grew more than 4% in the third quarter on a seasonally adjusted basis, and
unemployment dipped below 10% for the first time in years. We anticipate that
upgrades in earnings and GDP estimates across continental Europe will
<PAGE> 162
2
continue to support the markets through 2000. We believe that Europe remains the
most attractive investment area at this time.
Within this environment, we expect interest rates and inflation to
remain relatively low. We believe the European Central Bank's half-point rise in
short-term rates in early November was precautionary leaving real short-term
rates at over 1%. In our view, investors' concerns about rising interest rates
throughout 1999 put severe pressure on rate-sensitive sectors, particularly
financial stocks. Beginning in the fourth quarter of the year, banks and
insurance companies appeared frequently on our research screens as representing
good long-term value. We began increasing the size of existing holdings in this
sector and added a few new securities, including two Swiss financial firms.
"WE BELIEVE THAT THE EURO WILL GAIN STRENGTH IF ECONOMIC GROWTH ACCELERATES ON
THE CONTINENT, WHICH SHOULD PROVIDE INCREMENTAL RETURNS FOR US DOLLAR-BASED
INVESTORS IN THE COMING YEAR."
Weakness in the euro, which according to our research lost about 16% of its
value relative to the dollar and even more relative to the yen, should result in
a sizable pickup in export growth in 2000. Recent economic data supports this
belief, with third-quarter exports from France showing the strongest increase in
10 years. Purchasing-power analysis, which compares the cost to buy a basket of
goods in one currency versus another, indicates that exchange rates for deutsche
mark-linked currencies, including the euro (since its introduction in January
1999) are at their cheapest levels in 25 years relative to the dollar and the
yen. We expect the euro to gain strength if economic growth accelerates on the
Continent, which should provide incremental returns for US dollar-based
investors in the coming year.
We believe that we are just starting to see the impact of EMU on
European corporate profitability. Consolidation activity is taking place in many
industries throughout continental Europe and the UK, including
telecoms, pharmaceuticals, autos, energy, utilities, banks, and insurance
companies. And we believe there is more to come. Recently proposed tax changes
in Germany--effectively eliminating capital gains tax on asset sales for
corporations--should clear the way for long-overdue corporate restructuring in
that market. We expect these trends to continue across the Continent over the
next three to five years. In the short run, equity prices will continue to
respond favorably to takeover announcements, while we anticipate that longer
term, equity prices will benefit from strong earnings growth if costs decline,
productivity rises, and economies of scale are realized.
ASIA'S RECOVERY.
The economies in Asia staged a strong recovery in 1999. Our research indicates
that in less than two years industrial production in the crisis economies in
Asia are back to their precrisis levels. We believe that a combination of looser
monetary conditions and a strong recovery in exports aided in the first stage of
economic growth throughout Asia. We expect that the second phase of the recovery
may be driven by domestic demand. Recent economic statistics appear to indicate
that domestic conditions are improving across the region. Initial reports from
Hong Kong point to 10% to 30% year-on-year increases in department store sales
since mid-November. We believe a rebound in consumer confidence is critical to
driving the regional recovery further. We anticipate that domestic demand
will, in turn, fuel an increase in intraregional trade and be an important step
in returning Asia's economies to the virtuous circle of growth experienced in
the late 1980s and early 1990s.
RISING PRICES FOR LATIN
AMERICAN COMMODITIES.
Historically, stronger growth in the developed world has led to higher demand
for exports from emerging markets and higher commodity prices. We believe that
Latin America, which represents about 7% of the Fund's assets, should benefit
from higher commodity prices, as primary materials
<PAGE> 163
3
make up a large portion of the region's economic output. Our research shows that
this year's increases in oil prices have already benefited oil exporters in
Argentina, Venezuela, and Peru. And, improving iron ore and copper prices should
provide an economic boost in Brazil and Chile.
THE IMPACT OF TECHNOLOGY.
As we approached the end of 1999, the technology mania that was pervasive in US
equity markets spread to the rest of the world. It seemed as though any company
with hopes of becoming an Internet player was suddenly awarded very lofty
valuations based on projections of cash flows to be generated 25 years
hence. Because Ivy Global Fund is managed with a disciplined, value approach, we
looked at the high valuations of these companies with great skepticism. The
Internet is undeniably changing the way business is conducted around the
globe. However, with the absence of profits and the presence of a high level of
speculation, we believe these companies are more suitable for funds managed with
a more growth-oriented investment style or that specialize in the technology
sector, such as the Ivy Global Science & Technology Fund.
We believe that valuations in international markets highlight the
attractiveness of overseas opportunities, particularly when compared to the
domestic market. Despite recent strong performance, our research indicates that
equities of emerging markets are still trading at a substantial discount to US
equities. In the developed world, we believe that Europe and Asia offer
compelling value, with earnings growth estimates substantially higher than those
expected in the US. While some investors might argue that foreign markets should
trade at a discount to the US, this has not always been the case. Our research
confirms that, on average, European markets have traded in line with US equity
valuations while trading at a premium between 1976 and 1979, 1982 and 1989, and
1994 and 1996. In the early 1990s, high-growth economies in Asia, such as
Singapore and Hong Kong, traded at significant premiums.
In our view, strong performance in foreign markets this year provides a
reminder to domestic investors that the US market is not the only game in
town. While US equities may continue to perform well, history tells us that
nothing lasts forever. We believe that a normalization of US stock prices may
provide a catalyst for a change in market leadership in favor of international
markets. While there are no guarantees, we believe the Ivy Global Fund is well
positioned to benefit from an anticipated continued improvement in worldwide
economic growth, and that our value style should benefit shareholders over the
long term.
<PAGE> 164
4
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (4/91) OF A $10,000 INVESTMENT
[CHART]
IVY GLOBAL FUND
PERFORMANCE COMMENTARY
For the 12 months ended December 31, 1999, the Ivy Global Fund returned 26.51%
versus its benchmark, the Morgan Stanley Capital International (MSCI) World
Index, which gained 24.94% over the same period. The Fund's outperformance can
be attributed to two primary factors: its overweighting in Asian equities and
underweighting in US equities. Asian equities posted a strong recovery in 1999
following one and a half years of economic crisis. With over 31% of the Fund
invested in Asian stocks at the start of the year, the Fund was well positioned
to benefit as economies and stock markets in the region rebounded. In addition,
following five years of solid outperformance of US equities (as measured by the
S&P 500 Index), 1999 marks the first year since 1993 that non-US markets
outperformed the US market. The Fund's underweight position in US equities (29%
versus 50% for the MSCI World Index) contributed to the Fund's outperformance in
1999.
The Morgan Stanley Capital International (MSCI) World Index and the S&P 500
Index are unmanaged indices of stocks which assume reinvestment of dividends
and, unlike Fund returns, do not reflect any fees or expenses. It is not
possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of all other share classes will vary relative to that of Class A
shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4)
---------------- ------------------------------------ ----------------
IVY GLOBAL FUND w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING ------ ------ ---------------- ---------------- ------ ------
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
20.31% 25.31% 19.54% 24.54%
C: C: C: C:
1 year 19.23% 18.39% 24.24% 25.24% 23.21% 24.21% 26.77% 24.41%
----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
9.15% 9.43% 8.88% 9.16%
C: C: C: C:
5 year 9.01% 8.71% n/a n/a n/a n/a n/a n/a
----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
7.70% 7.82% 7.46% 7.58%
C: C: C: C:
Since Inception(5) 8.88% 8.18% 6.28% 6.28% 5.89% 5.89% 8.07% 6.71%
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
(1) Class A performance figures include the maximum sales charge of
5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum
of 5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class A commenced operations April 18, 1991; Class B commenced
operations April 1, 1994; Class C commenced operations
April 30, 1996; Advisor Class commenced operations April 30, 1998.
Total returns in some periods were higher due to reimbursement of
certain Fund expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of
Ivy Global Fund will fluctuate and at redemption shares may be worth
more or less than the amount of the original investment.
<PAGE> 165
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 99.97% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AFRICA -- 3.10%
- --------------------------------
SOUTH AFRICA -- 3.10%
Anglo American plc............... 4,090 $ 263,698
Nampak Limited................... 33,000 99,147
South African Breweries plc...... 24,144 245,458
-----------
608,303
-----------
ASIA/PACIFIC -- 14.30%
- --------------------------------
AUSTRALIA -- 1.57%
National Australia Bank Ltd...... 10,248 156,242
Pacific Dunlop Limited........... 107,000 150,951
-----------
307,193
-----------
HONG KONG -- 2.79%
Cheung Kong Holdings Ltd. ....... 17,000 215,957
Citic Pacific Ltd. .............. 30,000 112,883
Jardine Matheson Holdings
Ltd. .......................... 15,600 61,464
Jardine Strategic Holdings
Ltd. .......................... 38,187 75,992
New World Development
Company Ltd. .................. 35,401 79,696
-----------
545,992
-----------
MALAYSIA -- 1.03%
Perusahaan Otomobil Nasional
Berhad......................... 30,000 58,421
RHB Sakura Merchant Bankers
Berhad......................... 3,000 2,368
Sime Darby Berhad................ 43,000 54,542
Sime UEP Properties Berhad....... 62,000 87,289
-----------
202,620
-----------
NEW ZEALAND -- 3.72%
Fletcher Challenge Building...... 41,500 61,031
Fletcher Challenge Forestry(a)... 2,580 1,036
Fletcher Challenge Paper......... 83,000 58,001
Lion Nathan Limited.............. 27,000 62,658
Tourism Holdings Limited......... 292,242 545,608
-----------
728,334
-----------
PHILIPPINES -- 1.40%
Bacnotan Cement Corporation(a)... 94,000 7,697
Belle Corporation Warrants(a).... 46,200 436
Benpres Holdings Corporation
Sponsored GDR(a)............... 24,100 73,806
Philippine Long Distance
Telephone Co. ................. 3,800 96,650
Universal Robina Corporation..... 535,000 95,583
-----------
274,172
-----------
SINGAPORE -- 3.27%
Clipsal Industries Limited....... 118,000 130,324
Elec & Eltek International Co.
Ltd. .......................... 34,100 110,484
Fraser & Neave Ltd. ORD.......... 27,200 100,408
Overseas Union Bank Ltd. ........ 27,408 160,400
Singapore Airlines
Ltd. -- Foreign Registered..... 4,000 45,378
United Overseas Bank
Ltd. -- Foreign Registered..... 10,560 93,176
-----------
640,170
-----------
THAILAND -- 0.52%
Bangkok Bank Public Company
Ltd. -- Foreign Registered..... 40,000 101,131
-----------
EUROPE -- 47.10%
- --------------------------------
AUSTRIA -- 0.99%
Bank Austria AG.................. 3,466 194,543
-----------
DENMARK -- 1.53%
Den Danske Bank Group............ 1,786 194,854
Unidanmark A/S................... 1,500 105,060
-----------
299,914
-----------
FINLAND -- 0.34%
Stora Enso Oyj -- R Shares....... 3,847 66,745
-----------
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
FRANCE -- 7.99%
Alcatel S.A. .................... 7,000 $ 315,000
Banque Nationale de Paris........ 3,364 308,851
Compagnie Generale des
Etablissements Michelin Class
B.............................. 3,000 117,269
Groupe Danone.................... 600 140,723
Scor S.A......................... 4,800 210,724
Societe Generale................. 1,315 304,464
Suez Lyonnaise des Eaux.......... 1,054 168,077
-----------
1,565,108
-----------
GERMANY -- 3.80%
Adidas-Salomon AG................ 2,400 179,211
DaimlerChrysler AG............... 2,715 211,985
Hornbach Holding AG Preferred.... 2,921 140,531
Volkswagen AG.................... 3,800 213,290
-----------
745,017
-----------
IRELAND -- 0.61%
Bank of Ireland.................. 15,000 118,773
-----------
ITALY -- 1.09%
Banca Popolare di Milano......... 27,500 213,064
-----------
NETHERLANDS -- 5.26%
Akzo Nobel NV.................... 4,863 242,735
Fortis NL NV..................... 3,100 111,080
Hunter Douglas NV................ 3,800 102,836
ING Groep NV..................... 4,022 241,633
Koninklijke (Royal) Philips
Electronics NV................. 2,013 272,380
Royal Dutch Petroleum Company --
NY Shares...................... 1,000 60,437
-----------
1,031,101
-----------
NORWAY -- 1.13%
Storebrand ASA(a)................ 29,200 221,620
-----------
PORTUGAL -- 2.05%
Lusomundo -- SGPS S.A. Preferred
Shares......................... 5,900 52,631
Portugal Telecom S.A. --
Sponsored ADR.................. 14,885 161,874
Sonae Industria E
Investimentos.................. 3,550 186,448
-----------
400,953
-----------
SWEDEN -- 3.85%
AssiDoman AB..................... 4,680 75,872
Electrolux AB.................... 12,000 300,596
Investor AB...................... 24,000 337,117
Trelleborg AB -- B Shares........ 4,645 41,594
-----------
755,179
-----------
SWITZERLAND -- 6.90%
Holderbank Financiere Glaris
AG............................. 103 140,273
Nestle AG Registered............. 64 116,627
Novartis AG Registered........... 183 267,286
SGS Societe Generale de
Surveillance Holding S.A. ..... 251 318,311
Swatch Group, (The) AG........... 350 401,004
UBS AG -- Registered............. 400 107,451
-----------
1,350,952
-----------
UNITED KINGDOM -- 11.56%
Allied Zurich plc................ 6,000 70,979
Barclay's Bank ORD............... 2,500 71,962
Billiton plc..................... 32,742 191,028
Boots Company plc................ 12,000 116,816
British Airways plc.............. 56,000 363,728
Cadbury Schweppes plc............ 24,000 140,605
Corporate Services Group plc..... 125,000 206,499
Gallaher Group plc............... 41,048 174,324
Imperial Chemical Industries
plc............................ 21,539 227,727
National Westminster Bank plc
ADR............................ 900 116,325
</TABLE>
<PAGE> 166
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
6
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Pilkington plc................... 207,890 $ 279,772
PowerGen plc..................... 18,831 133,919
Rio Tinto plc Sponsored ADR...... 89 8,433
Tate & Lyle plc.................. 25,000 163,588
-----------
2,265,705
-----------
LATIN AMERICA -- 6.62%
- --------------------------------
BRAZIL -- 4.34%
Petroleo Brasileiro S.A.
(Petrobras) Preferred.......... 1,340,000 343,684
Telecomunicacoes Brasileiras S.A.
(Telebras) -- Sponsored ADR
Preferred Block................ 3,000 385,500
Uniao de Bancos Brasileiros S.A.
(Unibanco) -- Preferred........ 4,400,000 120,162
-----------
849,346
-----------
CHILE -- 1.65%
A.F.P. Provida S.A. -- Sponsored
ADR............................ 7,100 152,650
Cristalerias de
Chile -- Sponsored ADR......... 11,900 171,062
-----------
323,712
-----------
MEXICO -- 0.63%
Panamerican Beverages Inc. ...... 6,000 123,375
-----------
NORTH AMERICA -- 28.85%
- --------------------------------
CANADA -- 0.06%
Boliden Limited -- Swedish
Depository Receipt(a).......... 3,790 11,579
-----------
UNITED STATES -- 28.79%
Abbott Laboratories.............. 500 18,156
ALLTEL Corporation............... 1,600 132,300
Altera Corporation(a)............ 1,200 59,475
American International Group,
Inc. .......................... 600 64,875
Anheuser-Busch Companies,
Inc. .......................... 1,750 124,031
Applied Materials, Inc.(a)....... 1,000 126,688
AT&T Corporation................. 2,600 131,950
Atlantic Richfield Company
(ARCO)......................... 250 21,625
Bank of America Corporation...... 1,000 50,187
Bank of New York Company,
Inc., (The).................... 1,800 72,000
Bell Atlantic Corporation........ 1,500 92,344
BellSouth Corporation............ 2,000 93,625
Briggs & Stratton Corporation.... 400 21,450
Bristol-Myers Squibb Company..... 1,750 112,328
Chase Manhattan Corporation,
(The).......................... 1,200 93,225
Chevron Corporation.............. 1,200 103,950
Cisco Systems, Inc.(a)........... 1,000 107,125
Colgate-Palmolive Company........ 2,000 130,000
Dell Computer Corporation(a)..... 1,500 76,500
Eli Lilly and Company............ 1,500 99,750
Emerson Electric Co.............. 500 28,687
Exxon Mobil Corporation.......... 1,320 106,343
Fannie Mae....................... 1,000 62,438
Gap, Inc.(The)................... 2,500 115,000
General Electric Company......... 1,000 154,750
General Mills, Inc............... 2,000 71,500
General Motors Corporation....... 1,300 94,494
Georgia-Pacific Group............ 1,250 63,438
H.J. Heinz Company............... 2,000 79,625
Hewlett-Packard Company.......... 300 34,181
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Home Depot, Inc.................. 600 $ 41,138
Honeywell International Inc...... 1,687 97,319
Intel Corporation................ 2,500 205,781
International Business Machines
Corp. ......................... 1,700 183,600
Johnson & Johnson................ 1,250 116,406
Kimberly-Clark Corporation....... 1,100 71,775
Lowe's Companies, Inc. .......... 1,800 107,550
Lucent Technologies Inc.......... 400 29,925
May Department Stores
Company, (The)................. 2,000 64,500
MCI WorldCom, Inc.(a)............ 450 23,878
MediaOne Group, Inc.(a).......... 350 26,884
Mellon Financial Corporation..... 3,000 102,188
Merck & Co, Inc. ................ 1,250 83,828
Merrill Lynch & Co., Inc. ....... 1,300 108,550
Microsoft Corporation(a)......... 1,200 140,100
Morgan Stanley Dean Witter &
Co. ........................... 1,800 256,950
Novellus Systems, Inc.(a)........ 1,000 122,531
PepsiCo, Inc..................... 2,000 70,500
Pfizer Inc. ..................... 600 19,463
PPG Industries, Inc. ............ 1,350 84,459
Praxair, Inc. ................... 1,850 93,078
Sara Lee Corporation............. 700 15,444
SBC Communications Inc. ......... 2,000 97,500
Schering-Plough Corporation...... 2,200 92,813
State Street Corporation......... 1,250 91,328
Sun Microsystems, Inc.(a)........ 3,200 247,800
Texaco Inc. ..................... 1,500 81,469
Texas Instruments Inc. .......... 600 58,125
Tommy Hilfiger Corporation(a).... 2,600 60,613
United Technologies
Corporation.................... 1,400 91,000
Wal-Mart Stores, Inc. ........... 500 34,563
Wells Fargo Corporation.......... 1,900 76,831
Wm. Wrigley Jr. Company.......... 1,200 99,525
-----------
5,639,454
-----------
TOTAL INVESTMENTS -- 99.97%
(Cost -- $16,142,610)
(Cost on Federal income tax
basis -- $16,230,959)........ 19,584,055
OTHER ASSETS, LESS LIABILITIES -- 0.03% 5,562
-----------
NET ASSETS -- 100%............... $19,589,617
===========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
NY Shares -- New York Shares
ORD -- Ordinary
(a) Non-income producing security
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............... $ 5,209,129
Gross unrealized depreciation............... (1,767,684)
-----------
Net unrealized appreciation for
financial statement purposes.......... 3,441,445
Less: tax basis adjustments................. (88,349)
-----------
Net unrealized appreciation for Federal
income tax purposes................... $ 3,353,096
===========
Purchases and sales of securities other than short-term
obligations aggregated $9,945,252 and $17,998,559,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 167
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $16,142,610)...... $19,584,055
Cash........................................................ 30,886
Receivables
Fund shares sold.......................................... 1,896
Dividends and interest.................................... 42,195
Manager for expense reimbursement......................... 16,197
Other assets................................................ 7,678
-----------
Total assets.............................................. 19,682,907
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 31,622
Management fee............................................ 16,113
12b-1 service and distribution fees....................... 8,704
Other payables to related parties......................... 10,275
Accrued expenses............................................ 26,576
-----------
Total liabilities......................................... 93,290
-----------
NET ASSETS.................................................. $19,589,617
===========
CLASS A
Net asset value and redemption price per share
($11,828,413/881,437 shares outstanding).................. $ 13.42
===========
Maximum offering price per share ($13.42 x 100/94.25)*...... $ 14.24
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($7,315,790/556,677 shares outstanding)............. $ 13.14
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($266,586/20,912 shares outstanding)................ $ 12.75
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($178,828/13,244 shares outstanding)................ $ 13.50
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $16,202,917
Accumulated net investment loss........................... (51,217)
Net unrealized appreciation on investments and foreign
currency transactions................................... 3,437,917
-----------
NET ASSETS.................................................. $19,589,617
===========
</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> 168
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $45,056 foreign taxes withheld.......... $ 451,742
Interest.................................................. 7,797
----------
459,539
----------
EXPENSES
Management fee............................................ $202,715
Transfer agent............................................ 64,932
Administrative services fee............................... 20,271
Custodian fees............................................ 79,966
Blue Sky fees............................................. 30,150
Auditing and accounting fees.............................. 24,139
Shareholder reports....................................... 14,346
Fund accounting........................................... 36,499
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 105,217
Legal..................................................... 26,691
Other..................................................... 7,096
----------
621,262
Expenses reimbursed by Manager............................ (120,751)
----------
Net expenses.......................................... 500,511
----------
NET INVESTMENT LOSS......................................... (40,972)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 2,479,642
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 2,250,842
----------
Net gain on investment transactions................... 4,730,484
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $4,689,512
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 169
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
DECREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (40,972) $ (32,877)
Net realized gain (loss) on investments and foreign
currency transactions................................... 2,479,642 (1,235,420)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 2,250,842 3,370,566
----------- -----------
Net increase resulting from operations................ 4,689,512 2,102,269
----------- -----------
Class A distributions
Dividends in excess of net investment income.............. -- (622)
Distributions from capital gains.......................... (738,164) (677,923)
----------- -----------
Total distributions to Class A shareholders........... (738,164) (678,545)
----------- -----------
Class B distributions
Dividends in excess of net investment income.............. -- (328)
Distributions from capital gains.......................... (468,259) (356,809)
----------- -----------
Total distributions to Class B shareholders........... (468,259) (357,137)
----------- -----------
Class C distributions
Dividends in excess of net investment income.............. -- (19)
Distributions from capital gains.......................... (17,380) (20,452)
----------- -----------
Total distributions to Class C shareholders........... (17,380) (20,471)
----------- -----------
Advisor Class distributions
Dividends in excess of net investment income.............. -- (13)
Distributions from capital gains.......................... (11,002) (14,685)
----------- -----------
Total distributions to Advisor Class shareholders..... (11,002) (14,698)
----------- -----------
Fund share transactions (Note 4)
Class A................................................... (5,072,125) (5,705,136)
Class B................................................... (1,283,220) (2,919,278)
Class C................................................... (216,719) (351,723)
Advisor Class............................................. (197,021) 373,565
----------- -----------
Net decrease resulting from Fund share transactions... (6,769,085) (8,602,572)
----------- -----------
TOTAL DECREASE IN NET ASSETS................................ (3,314,378) (7,571,154)
NET ASSETS
Beginning of period....................................... 22,903,995 30,475,149
----------- -----------
END OF PERIOD............................................. $19,589,617 $22,903,995
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 170
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
10
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 11.32 $ 10.93 $ 13.17 $ 11.97 $ 11.23
------------------------------------------------------
Income (loss) from investment operations
Net investment income.................................... .01(a) .02(a) .08 .08 .09(a)
Net gains or losses on securities (both realized and
unrealized)............................................ 2.98 .91 (1.23) 1.86 1.25
------------------------------------------------------
Total from investment operations......................... 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 gains..................................... .89 .54 .99 .48 .49
In excess of capital gains............................. -- -- -- -- .07
------------------------------------------------------
Total distributions.................................... .89 .54 1.09 .74 .60
------------------------------------------------------
Net asset value, end of period............................. $ 13.42 $ 11.32 $ 10.93 $ 13.17 $ 11.97
======================================================
Total return (%)(b)........................................ 26.51 8.59 (8.72) 16.21 12.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $11,828 $14,660 $19,692 $24,152 $21,264
Ratio of expenses to average net assets
With expense reimbursement (%)........................... 2.17 2.18 -- -- 2.20
Without expense reimbursement (%)........................ 2.77 2.54 2.07 2.18 2.46
Ratio of net investment income to average net assets (%)... .09(a) .16(a) .58 .58 .71(a)
Portfolio turnover rate (%)................................ 50 17 45 43 53
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
for the year ended
CLASS B December 31,
- -------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 11.99 $ 10.90 $ 13.12 $ 11.97 $ 11.23
------------------------------------------------------
Income (loss) from investment operations
Net investment loss...................................... (.10)(a) (.09)(a) (.02) (.02) --(a)
Net gains or losses on securities (both realized and
unrealized)............................................ 2.14 .92 (1.20) 1.85 1.25
------------------------------------------------------
Total from investment operations......................... 2.04 .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 gains..................................... .89 .54 .90 .48 .45
In excess of capital gains............................. -- -- -- -- .06
------------------------------------------------------
Total distributions.................................... .89 .54 1.00 .68 .51
------------------------------------------------------
Net asset value, end of period............................. $ 13.14 $ 11.19 $ 10.90 $ 13.12 $ 11.97
======================================================
Total return (%)(b)........................................ 25.31 7.69 (9.33) 15.30 11.25
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 7,316 $ 7,495 $10,056 $ 8,968 $ 4,811
Ratio of expenses to average net assets
With expense reimbursement (%)........................... 2.99 2.97 -- -- 2.95
Without expense reimbursement (%)........................ 3.59 3.33 2.82 2.94 3.21
Ratio of net investment loss to average net assets (%)..... (.72)(a) (.63)(a) (.18) (.17) (.04)(a)
Portfolio turnover rate (%)................................ 50 17 45 43 53
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 171
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
11
<TABLE>
<CAPTION>
for the period
April 30, 1996
for the year ended (commencement)
CLASS C December 31, to December 31,
- ---------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $10.90 $10.67 $12.94 $13.31
--------------------------------------------------
Income (loss) from investment operations
Net investment loss...................................... (.16)(a) (.16)(a) (.02) (.01)
Net gains or losses on securities (both realized and
unrealized)............................................ 2.90 .93 (1.24) .42
--------------------------------------------------
Total from investment operations......................... 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 gains......................... .89 .54 .91 .48
--------------------------------------------------
Total distributions.................................... .89 .54 1.01 .78
--------------------------------------------------
Net asset value, end of period............................. $12.75 $10.90 $10.67 $12.94
==================================================
Total return (%)........................................... 25.24(b) 7.30(b) (9.72)(b) 3.07(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 267 $ 428 $ 727 $ 71
Ratio of expenses to average net assets
With expense reimbursement (%)........................... 3.23 3.30 -- --
Without expense reimbursement (%)........................ 3.83 3.66 2.82 3.77(d)
Ratio of net investment loss to average net assets (%)..... (.96)(a) (.96)(a) (.18) (1.01)(d)
Portfolio turnover rate (%)................................ 50 17 45 43
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
for the period
for the year April 30, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- -----------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA ----------------------------------
<S> <C> <C>
Net asset value, beginning of period....................... $11.36 $13.26
-------------------------------
Income (loss) from investment operations
Net investment income(a)................................. .08 .05
Net gains or losses on securities (both realized and
unrealized)............................................ 2.95 (1.41)
-------------------------------
Total from investment operations......................... 3.03 (1.36)
-------------------------------
Less distributions
Distributions from capital gains......................... .89 .54
-------------------------------
Total distributions.................................... .89 .54
-------------------------------
Net asset value, end of period............................. $13.50 $11.36
===============================
Total return (%)........................................... 26.77(b) (10.19)(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................... $ 179 $ 321
Ratio of expenses to average net assets
With expense reimbursement (%)........................... 1.96 1.75(d)
Without expense reimbursement (%)........................ 2.56 2.11(d)
Ratio of net investment income to average net assets
(%)(a)................................................... .31 .59(d)
Portfolio turnover rate (%)................................ 50 17
</TABLE>
<TABLE>
<S> <C> <C> <C>
(a) Net investment income (b) Total return does not (c) Total return represents (d) Annualized
(loss) is net of expenses reflect a sales charge. aggregate total return and
reimbursed by Manager. does not reflect a sales
charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 172
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
12
NOTES TO FINANCIAL STATEMENTS
Ivy Global Fund (the "Fund"), is a diversified series of shares of Ivy Fund. The
shares of beneficial interest are assigned no par value and an unlimited number
of shares of Class A, Class B, Class C and Advisor Class are authorized. Ivy
Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of December 31, 1999, there were no Board
valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund earned foreign source dividends of $441,945. These dividends were
subject to foreign withholding tax in the amount of $45,056. The Fund intends to
elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may report their share of foreign taxes paid as either a tax
credit or itemized deduction.
Pursuant to Code Section 852, the Fund designates $1,211,125 as long-term
capital gain distributions for its taxable year ended December 31, 1999.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction. Exchange gains or losses from currency translation of other assets
and liabilities, if significant, are reported as a separate component of Net
realized and unrealized gain (loss) on investment transactions.
For 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> 173
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
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 its 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $1,782.
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 $31,419,
$70,526 and $3,272, 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 $37,017, $24,881, $1,964 and $1,070, for Class A, Class B, Class C
and Advisor Class, respectively, are reflected as Transfer agent in the
Statement of Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 241,445 $ 3,162,247 146,315 $ 1,787,073
Issued on
reinvestment of
distributions....... 50,936 671,840 55,920 628,542
Repurchased.......... (706,165) (8,906,212) (708,378) (8,120,751)
-------- ------------- ----------- -------------
Net decrease......... (413,784) $ (5,072,125) (506,143) $ (5,705,136)
======== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 62,902 $ 775,522 81,549 $ 964,574
Issued on
reinvestment of
distributions....... 29,290 378,431 26,955 299,738
Repurchased.......... (205,333) (2,437,173) (361,380) (4,183,590)
-------- ------------- ----------- -------------
Net decrease......... (113,141) $ (1,283,220) (252,876) $ (2,919,278)
======== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 3,127 $ 39,261 15,683 $ 182,504
Issued on
reinvestment of
distributions....... 1,153 14,448 1,448 15,682
Repurchased.......... (22,661) (270,428) (45,990) (549,909)
-------- ------------- ----------- -------------
Net decrease......... (18,381) $ (216,719) (28,859) $ (351,723)
======== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- -----------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 3,716 $ 44,937 30,998 $ 403,896
Issued on
reinvestment of
distributions....... 829 11,002 1,303 14,699
Repurchased.......... (19,538) (252,960) (4,064) (45,030)
-------- ------------- ----------- -------------
Net (decrease)/
increase............ (14,993) $ (197,021) 28,237 $ 373,565
======== ============= =========== =============
</TABLE>
<PAGE> 174
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL FUND
- --------------------------------------------------------------------------------
14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY GLOBAL FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 175
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot......... 865,642 51,650
Keith J. Carlson........... 866,594 50,698
Stanley Channick........... 865,004 52,288
Roy J. Glauber............. 865,004 52,288
Edward M. Tighe............ 866,594 50,698
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------
FOR: AGAINST: ABSTAIN:
- -------------------------------
<S> <C> <C>
859,722 1,572 55,998
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
692,018 9,239 77,728 138,307
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
688,507 12,575 77,903 138,307
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
688,564 11,614 78,807 138,307
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
691,336 8,406 79,243 138,307
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
688,126 10,420 80,439 138,307
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
689,522 10,837 78,625 138,307
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
686,034 11,608 81,343 138,307
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
689,828 9,239 79,917 138,307
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ---------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ---------------------------------------------
<S> <C> <C> <C>
688,564 9,600 80,821 138,307
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 176
02IGLF123199
<PAGE> 177
[IVY FUNDS LOGO]
IVY GLOBAL NATURAL RESOURCES FUND
OVERVIEW
The long-term strategy of the Ivy Global Natural Resources Fund is to provide
investors with long-term capital growth through investments in equity securities
of companies throughout the world that explore, develop, produce, and/or
distribute natural resources and other basic commodities, or that supply goods
and services to such companies. For the 12 months ended December 31, 1999, the
Ivy Global Natural Resources Fund was up 40.98%. This compares favorably to the
Morgan Stanley Capital International Commodity-Related Index, which was up
21.45% for the same period. (For the Fund's total return with sales charge and
performance commentary, please refer to page 3.)
The Fund manager uses a return-seeking stock selection process. The
portfolio is anchored with world-class, low-cost, and low-debt-producing
companies that usually have "trophy" assets. The manager looks for companies he
believes have strong management, a strong financial position, and the ability to
use technology effectively to grow, even in times of depressed commodity prices.
Another important aspect of the Fund's investment strategy is minimizing risk
through diversification of commodity, country, capitalization, and individual
security.
MARKET COMMENTARY
The world's stock markets made a significant turnaround in 1999, surprising, we
believe, even the most optimistic global investors. Our research indicates that
after almost a decade of struggle, stronger world economic growth sponsored a
much-improved year for resource producers. In our view, healthy global growth
aided resource stocks, as they are vital to the infrastructure of both developed
and developing economies. As world demand for infrastructure improvements grows,
so does the need for resources. Commodity prices have rebounded from multi-
decade lows and, in our view, should stay firm or may even trend higher. Our
research indicates that the share prices of base metal producers and select
forest product companies have enjoyed a recovery, and several have doubled from
the lows of late 1998. In contrast, shares of many energy companies have barely
advanced, even though oil prices more than doubled. We believe gold and precious
metal producers have just begun to advance.
We believe the Ivy Global Natural Resources Fund's gains over the past
year can be attributed to the recovery of economies in Europe and Asia as well
as continued limits on the production
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
[MACKENIZE LOGO]
<PAGE> 178
2
growth of such resources as oil, copper, and other commodities. In our opinion,
oil prices are the most visible example of these limits, with production cuts by
OPEC. In our view, the Fund benefited from large increases in the share prices
of energy service companies. Oil prices have exceeded our targets, and OPEC
seems committed to production discipline. Nickel, zinc, aluminum, and copper
have all rebounded. Our research indicates that platinum has been strong, and
palladium has advanced to record highs. Pulp and containerboard prices are
healthy and, according to our research, newsprint and paper prices are also
beginning to rise.
From our analysis, upward revisions in expected growth highlight that
economic activity is broadening. We believe production and profitability should
continue to rise, provided the growth of world population and productivity of
workers continue. In our view, this cycle should lead to record global
production and solid demand for commodities.
". . . we believe continued strong economic growth in North America and
stabilization in Asia are setting the stage for what could be a period of
outperformance relative to other investment alternatives."
TECHNOLOGY SECTOR BENEFITS.
We believe that last year's enthusiasm for day-trading on the part of investors
seeking growth, value, quality, and "on-sale" prices caused an unprecedented
focus on large, easy-to-trade, high-growth companies. Our research indicates
that the technology sector and large US and European companies were the main
beneficiaries. Many of the Fund's larger holdings benefited; however, despite
strong corporate results, the market has ignored several smaller companies in
which the Fund is invested. We believe resource stocks are also on the rise and
are in a good position to attract more "growth" investor interest, especially if
the technology sector should lose momentum.
PROSPECTS FOR FUTURE GROWTH.
In our view, the environment should remain favorable for the Ivy Global Natural
Resources Fund, as we expect to see synchronized economic growth in North
America, Europe, and Asia. We believe the steady improvement in the resource
sector has been somewhat masked by the flow of investment into enhancing
technology and that the broader markets remain at risk due to high valuations.
Going forward, we believe the natural resource investor should continue to
remain optimistic.
In addition, we believe that continued strong economic growth in North
America and stabilization in Asia are setting the stage for what could be a
period of outperformance relative to other investment alternatives. With ongoing
rationalization and cost reduction, in our view, many companies could see
tremendous profit improvement if commodity prices rebound from continuous
extreme lows to more normal levels. We don't expect oil prices to increase from
current levels; however, we believe valuations are still attractive. The Fund
will continue to emphasize the energy sector, while maintaining established
sector diversification disciplines.
<PAGE> 179
3
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (1/97) OF A $10,000 INVESTMENT
[GRAPH]
IVY GLOBAL NATURAL RESOURCES FUND
PERFORMANCE COMMENTARY
For the 12 months ended December 31, 1999, the Fund returned 40.98% versus its
benchmark, the Morgan Stanley Capital International (MSCI) Commodity-Related
Index, which returned 21.45% over the same period. The Fund's outperformance
versus the Index can be attributed to differences in the composition of the
Fund's portfolio and the Index. The Fund is required to invest in at least three
countries worldwide, while the Index is made up of US-based companies. Also, the
Fund tends to invest in smaller-capitalization global companies, while the Index
focuses on larger US companies.
The Morgan Stanley Capital International (MSCI) Commodity-Related Index is an
unmanaged index of stocks which assumes reinvestment of dividends and, unlike
Fund returns, does not reflect any fees or expenses. It is not possible to
invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
IVY GLOBAL NATURAL Class A(1) Class B(2) & C(3) Advisor Class(4)
RESOURCES FUND ------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN w/ w/o w/ w/o w/ w/o
FOR PERIODS ENDING Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
DECEMBER 31, 1999 ------------------------------------------------------------------------
- --------------------------- w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---- ---- ---- ----
B: B: B: B:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
34.87% 39.87% 31.62% 36.62%
1 year C: C: C: C:
32.87% 29.80% 37.97% 38.97% 34.69% 35.69% n/a n/a
- -----------------------------------------------------------------------------------------------------------
B: B: B: B:
.44% 1.42% (1.89)% (.93)%
Since Inception(5) C: C: C: C:
.13% (2.24)% .82% .82% (2.34)% (2.34)% 27.14% 25.13%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5.00%.
(3) Class C performance figures are calculated with and without the applicable
CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a CDSC.
(5) Class A, Class B and Class C commenced operations January 1, 1997; Advisor
Class commenced operations April 18, 1999.
Total returns in some periods were higher due to reimbursement of certain Fund
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy Global Natural Resources Fund
will fluctuate and at redemption shares may be worth more or less than the
amount of the original investment.
<PAGE> 180
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 99.08% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
DIAMONDS -- 3.51%
- --------------------------------------
Aber Resources, Ltd.(a)................ 50,000 $ 310,061
-----------
ENERGY SERVICES -- 17.15%
- --------------------------------------
Badger Daylighting Inc.(a)............. 50,000 136,083
CenAlta Energy Services Inc.(a)........ 137,000 486,142
Ensign Resource Service Group, Inc. ... 8,000 184,659
Fred. Olsen Energy ASA(a).............. 10,000 72,787
NQL Drilling Tools Inc. -- Class
A(a)................................. 32,500 156,753
R&B Falcon Corporation(a).............. 20,000 265,000
Shaw Industries Ltd. -- Class A........ 10,000 90,262
Smedvig ASA-A Shares................... 10,000 124,422
-----------
1,516,108
-----------
FOOD/AGRICULTURE -- 2.18%
- --------------------------------------
IMC Global Inc. ....................... 4,500 73,687
Potash Corporation of Saskatchewan
Inc. ................................ 2,500 118,857
-----------
192,544
-----------
GAS PRODUCERS -- 10.67%
- --------------------------------------
Beau Canada Exploration Ltd.(a)........ 125,000 146,418
Elk Point Resources, Inc.(a)........... 50,000 134,360
Merit Energy Ltd.(a)................... 150,000 77,515
Newport Petroleum Corporation(a)....... 40,000 90,951
Niko Resources Ltd.(a)................. 45,000 201,540
Penn West Petroleum Ltd.(a)............ 15,000 291,975
-----------
942,759
-----------
GOLD MINING -- 5.49%
- --------------------------------------
Battle Mountain Gold Company........... 100,000 206,250
Gold Fields Limited.................... 20,000 96,630
Kinnross Gold Corporation(a)........... 23,000 42,472
Newmont Mining Corporation............. 5,700 139,650
-----------
485,002
-----------
INDUSTRIAL -- 4.13%
- --------------------------------------
AK Steel Holding Corporation........... 10,000 188,750
IPSCO, Inc. ........................... 9,000 176,735
-----------
365,485
-----------
JUNIOR PRECIOUS METALS -- 7.13%
- --------------------------------------
Durban Roodepoort Deep Limited(a)...... 135,000 226,917
Meridian Gold, Inc.(a)................. 30,000 202,574
Orvana Minerals Corporation(a)......... 600,000 101,287
Randgold & Exploration Company Ltd. ... 4,000 15,625
Repadre Capital Corporation(a)......... 62,500 83,975
-----------
630,378
-----------
METALS & MINERALS -- 6.31%
- --------------------------------------
Anaconda Nickel Limited(a)............. 40,000 69,098
Cia Vale do Rio Doce -- Sponsored
ADR.................................. 5,000 139,400
Freeport-McMoRan Copper & Gold Class
B.................................... 8,500 179,562
Ivernia West plc(a).................... 85,000 76,032
Teck Corporation Class B............... 10,000 93,707
-----------
557,799
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
OIL PRODUCERS -- 12.82%
- --------------------------------------
Cabre Exploration Ltd.(a).............. 18,000 $ 148,830
Canadian Natural Resources Ltd.(a)..... 10,000 242,881
Hurricane Hydrocarbons Ltd. -- Class
A(a)................................. 100,000 227,378
Ranger Oil Limited(a).................. 70,000 217,043
Talisman Energy Inc.(a)................ 11,700 297,473
-----------
1,133,605
-----------
PAPER & FOREST PRODUCTS -- 15.20%
- --------------------------------------
Alliance Forest Products, Inc.(a)...... 15,000 176,218
Asia Pulp & Paper Company Ltd. --
Sponsored ADR(a) (with 2,500
warrants(a))......................... 17,500 120,469
Canfor Corporation..................... 25,000 291,113
Cascades Inc. ......................... 30,000 181,903
Sino-Forest Corp. Class A(a)........... 404,800 454,636
St. Laurent Paperboard Inc.(a)......... 9,000 119,374
-----------
1,343,713
-----------
PLATINUM GROUP METALS -- 12.49%
- --------------------------------------
Anglo American Platinum Corporation.... 10,000 303,693
Freeport-McMoRan Copper & Gold
Preferred Depository Shares.......... 3,500 43,969
Gencor Limited......................... 75,000 325,820
Industrias Penoles S.A................. 50,000 143,987
Stillwater Mining Company(a)........... 9,000 286,875
-----------
1,104,344
-----------
SENIOR PRECIOUS METALS -- 2.00%
- --------------------------------------
Normandy Mining Limited................ 250,000 176,671
-----------
TOTAL INVESTMENTS -- 99.08%
- --------------------------------------
(Cost -- $8,660,045) (Cost on Federal
income tax basis -- $8,792,395).... 8,758,469
OTHER ASSETS, LESS
LIABILITIES -- 0.92%................. 81,478
-----------
NET ASSETS -- 100%..................... $ 8,839,947
===========
ADR -- American Depository Receipt
(a) Non-income producing security
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and net unrealized depreciation
based on cost for Federal income tax purposes is as follows:
Gross unrealized appreciation............... $ 1,734,276
Gross unrealized depreciation............... (1,635,852)
-----------
Net unrealized appreciation for
financial statement purposes.......... 98,424
Less: tax basis adjustments................. (132,350)
-----------
Net unrealized depreciation for Federal
income tax purposes..................... $ (33,926)
===========
</TABLE>
Purchases and sales of securities other than short-term
obligations aggregated $17,152,054 and $10,915,471,
respectively, for the period ended December 31, 1999.
The accompanying notes are an integral
part of the financial statements.
<PAGE> 181
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $8,660,045)....... $ 8,758,469
Receivables
Investments sold.......................................... 143,558
Fund shares sold.......................................... 53,647
Dividends and interest.................................... 1,611
Manager for expense reimbursement......................... 15,949
Deferred organization expenses.............................. 19,006
Other assets................................................ 5,080
-----------
Total assets.............................................. 8,997,320
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 19,414
Management fee............................................ 7,188
12b-1 service and distribution fees....................... 3,602
Other payables to related parties......................... 6,981
Due to custodian............................................ 103,836
Accrued expenses............................................ 16,352
-----------
Total liabilities......................................... 157,373
-----------
NET ASSETS.................................................. $ 8,839,947
===========
CLASS A
Net asset value and redemption price per share
($5,822,590/653,245 shares outstanding)................... $ 8.91
===========
Maximum offering price per share ($8.91 x 100/94.25)*....... $ 9.45
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($2,519,596/287,314 shares outstanding)............. $ 8.77
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($471,808/54,652 shares outstanding)................ $ 8.63
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($25,953/2,916 shares outstanding)................ $ 8.90
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $18,748,800
Accumulated net realized loss on investments and foreign
currency transactions................................... (9,989,424)
Accumulated net investment loss........................... (17,882)
Net unrealized appreciation on investments and foreign
currency transactions................................... 98,453
-----------
NET ASSETS.................................................. $ 8,839,947
===========
</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> 182
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 80,197
Interest.................................................. 76,736
-----------
156,933
-----------
EXPENSES
Management fee............................................ $71,968
Transfer agent............................................ 38,990
Administrative services fee............................... 7,197
Custodian fees............................................ 52,244
Blue Sky fees............................................. 28,180
Auditing and accounting fees.............................. 25,330
Shareholder reports....................................... 9,747
Amortization of organization expenses..................... 9,826
Fund accounting........................................... 23,905
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 36,826
Legal..................................................... 24,999
Other..................................................... 1,356
-----------
339,808
Expenses reimbursed by Manager............................ (170,530)
-----------
Net expenses.......................................... 169,278
-----------
NET INVESTMENT LOSS......................................... (12,345)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (1,827,773)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 4,156,527
-----------
Net gain on investment transactions................... 2,328,754
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 2,316,409
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss....................................... $ (12,345) $ (2,358)
Net realized loss on investments and foreign currency
transactions............................................ (1,827,773) (1,287,009)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 4,156,527 (122,583)
----------- -----------
Net increase (decrease) resulting from operations..... 2,316,409 (1,411,950)
----------- -----------
Dividends to shareholders in excess of net investment income
Class A................................................... -- (9,832)
Class B................................................... -- (9,330)
Class C................................................... -- (292)
----------- -----------
Total dividends to shareholders....................... -- (19,454)
----------- -----------
Fund share transactions (Note 5)
Class A................................................... 2,942,391 (1,812,081)
Class B................................................... 481,343 (740,027)
Class C................................................... 371,378 (47,826)
Advisor Class............................................. 21,786 --
----------- -----------
Net increase (decrease) resulting from Fund share
transactions......................................... 3,816,898 (2,599,934)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 6,133,307 (4,031,338)
NET ASSETS
Beginning of period....................................... 2,706,640 6,737,978
----------- -----------
END OF PERIOD............................................. $ 8,839,947 $ 2,706,640
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 184
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CLASS A for the year ended December 31,
- --------------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.32 $ 9.01 $10.00
----------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... --(b) .03 (.11)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.59(b) (2.68) .70
----------------------------------
Total from investment operations.......................... 2.59 (2.65) .59
----------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .04 .22
Distributions
From capital gains...................................... -- -- 1.08
In excess of capital gains.............................. -- -- .28
----------------------------------
Total distributions..................................... -- .04 1.58
----------------------------------
Net asset value, end of period.............................. $ 8.91 $ 6.32 $ 9.01
----------------------------------
----------------------------------
Total return (%)(c)......................................... 40.98 (29.35) 6.95
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $5,823 $ 1,345 $3,907
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.16 2.22 2.10
Without expense reimbursement (%)......................... 4.53 5.75 2.88
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .02 .29 (1.10)
Portfolio turnover rate (%)................................. 157 98 199
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CLASS B for the year ended December 31,
- --------------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.27 $ 9.00 $10.00
----------------------------------
Income (loss) from investment operations
Net investment loss(a).................................... (.04)(b) (.04) (.15)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.54(b) (2.65) .68
----------------------------------
Total from investment operations.......................... 2.50 (2.69) .53
----------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .04 .17
Distributions
From capital gains...................................... -- -- 1.08
In excess of capital gains.............................. -- -- .28
----------------------------------
Total distributions..................................... -- .04 1.53
----------------------------------
Net asset value, end of period.............................. $ 8.77 $ 6.27 $ 9.00
----------------------------------
----------------------------------
Total return (%)(c)......................................... 39.87 (29.82) 6.28
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $2,520 $ 1,320 $2,706
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.71 2.90 2.86
Without expense reimbursement (%)......................... 5.08 6.43 3.64
Ratio of net investment loss to average net assets (%)(a)... (.53) (.39) (1.86)
Portfolio turnover rate (%)................................. 157 98 199
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 185
9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CLASS C for the year ended December 31,
- --------------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA ------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 6.21 $ 9.00 $10.00
----------------------------------
Income (loss) from investment operations
Net investment loss(a).................................... (.04)(b) (.14) (.17)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.46(b) (2.61) .68
----------------------------------
Total from investment operations.......................... 2.42 (2.75) .51
----------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .04 .15
Distributions
From capital gains...................................... 1.08
In excess of capital gains.............................. -- -- .28
----------------------------------
Total distributions..................................... -- .04 1.51
----------------------------------
Net asset value, end of period.............................. $ 8.63 $ 6.21 $ 9.00
----------------------------------
----------------------------------
Total return (%)(c)......................................... 38.97 (30.49) 6.08
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 472 $ 41 $ 124
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.73 3.57 3.08
Without expense reimbursement (%)......................... 5.10 7.10 3.86
Ratio of net investment loss to average net assets (%)(a)... (.55) (1.06) (2.08)
Portfolio turnover rate (%)................................. 157 98 199
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
for the period
April 18, 1999
(commencement)
ADVISOR CLASS to December 31,
- ---------------------------------------------------------------------------------
1999
SELECTED PER SHARE DATA -------------------
<S> <C>
Net asset value, beginning of period........................ $ 7.00
------------------
Loss from investment operations
Net investment income(a)(b)............................... .02
Net gains on securities (both realized and
unrealized)(b).......................................... 1.88
------------------
Total from investment operations.......................... 1.90
------------------
Net asset value, end of period.............................. $ 8.90
------------------
------------------
Total return (%)(d)......................................... 27.14
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 26
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............................ 1.87
Without expense reimbursement (%)......................... 4.24
Ratio of net investment income to average net assets
(%)(a)(e)................................................. .31
Portfolio turnover rate (%)................................. 157
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) Net investment (b) Based on average (c) Total return does (d) Total return (e) Annualized
income (loss) is net shares outstanding not reflect a sales represents aggregate
of expenses charge. total return and does
reimbursed by not reflect a sales
Manager. charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 186
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS
Ivy Global Natural Resources Fund (the "Fund"), is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C and Advisor Class
are authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there is no such sale, the security
is valued at the calculated mean between the last bid and asked price on the
exchange. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board; as of December 31, 1999, there were no Board
valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
At 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 gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes 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 which may differ from generally accepted accounting principles.
These differences primarily relate to foreign denominated securities, passive
foreign investment companies, certain securities sold at a loss and non-
deductible organization expenses. As a result, Net investment loss and Net
realized loss on investments and
<PAGE> 187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
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 1.00% of the Fund's
average net assets. Mackenzie Financial Corporation (MFC) in Toronto, Ontario,
Canada 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 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $586.
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 $11,667,
$22,713 and $2,446, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $28,508, $9,332, $1,070 and $80 for Class A, Class B, Class C and
Advisor Class, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. TRANSFER OF NET ASSETS
At a meeting held on April 7, 1999, the shareholders of the Fund approved an
Agreement and Plan of Reorganization (the "Reorganization") providing for the
transfer into the Fund of all or substantially all of the assets of Ivy Canada
Fund. On April 7, 1999, the date of the consummation of the Reorganization, the
Fund acquired all or substantially all of the assets of Ivy Canada Fund. The
transaction was structured for tax purposes to qualify as a tax-free
reorganization under the Code.
Ivy Canada Fund shareholders contributed net assets having an aggregate value of
$4,845,256 (including $2,735,535 of unrealized depreciation). Upon completion of
the merger the combined net assets were $7,841,856.
5. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.................. 202,795 $ 1,722,555 145,809 $ 1,262,673
Issued on reinvestment
of distributions..... -- -- 1,494 9,069
Repurchased........... (316,732) (2,665,348) (368,169) (3,083,823)
Issued on acquisition
of Ivy Canada Fund... 554,442 3,885,184 -- --
-------- ----------- -------- -----------
Net
increase/(decrease).. 440,505 $ 2,942,391 (220,866) $(1,812,081)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.................. 51,156 $ 399,377 17,035 $ 138,303
Issued on reinvestment
of distributions..... -- -- 327 1,810
Repurchased........... (80,968) (654,849) (107,494) (880,140)
Issued on acquisition
of Ivy Canada Fund... 106,477 736,815 -- --
-------- ----------- -------- -----------
Net
increase/(decrease).. 76,665 $ 481,343 (90,132) $ (740,027)
======== =========== ======== ===========
</TABLE>
<PAGE> 188
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
12
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold.................. 26,590 $ 229,609 3,817 $ 31,278
Issued on reinvestment
of distributions..... -- -- 38 232
Repurchased........... (9,236) (67,346) (11,016) (79,336)
Issued on acquisition
of Ivy Canada Fund... 30,640 209,115 -- --
-------- ----------- -------- -----------
Net
increase/(decrease).. 47,994 $ 371,378 (7,161) $ (47,826)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 8, 1999
(COMMENCEMENT)
TO DECEMBER 31, 1999
- -----------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- -----------------------------------------------
<S> <C> <C>
Sold................... 964 $ 8,253
Repurchased............ (69) (609)
Issued on acquisition
of Ivy Canada Fund.... 2,021 14,142
-------- -----------
Net increase........... 2,916 $ 21,786
======== ===========
</TABLE>
<PAGE> 189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY GLOBAL NATURAL RESOURCES FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 190
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY GLOBAL NATURAL RESOURCES FUND
- --------------------------------------------------------------------------------
14
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 599,372 18,481
Keith J. Carlson.............. 599,372 18,481
Stanley Channick.............. 597,724 20,129
Roy J. Glauber................ 597,724 20,129
Edward M. Tighe............... 599,375 18,478
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
600,924 1,864 15,065
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
467,300 24,170 18,157 108,226
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
437,608 25,344 46,675 108,226
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
467,310 24,159 18,157 108,226
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
467,746 24,200 17,681 108,226
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
462,755 23,844 23,028 108,226
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
479,707 11,763 18,157 108,226
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
467,498 23,972 18,157 108,226
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
480,214 11,255 18,157 108,226
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
437,031 54,208 18,388 108,226
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 191
15
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 192
02IGNR123199
<PAGE> 193
[IVY FUNDS LOGO]
IVY US BLUE CHIP FUND
OVERVIEW
We believe the Ivy US Blue Chip Fund benefited from rising equity prices during
1999. The Fund is invested primarily in high-quality, large-cap companies that
hold leading positions in their industry or that we expect to be leaders in the
future. The Ivy US Blue Chip Fund continues to be managed in accordance with a
disciplined investment philosophy, the key to which is stock selection.
The manager of the Ivy US Blue Chip Fund makes no attempt to time the
market. A key component of the investment strategy is to be fully invested at
all times--ignoring short-term market volatility. Excess cash positions within
the Fund are held to a minimum, typically less than 2%. There are no sector bets
made by the Fund. The manager divides the stock market into nine broad economic
sectors, and the weightings within the Fund approximate the weighting of each
sector within the market as measured by the S&P 500 Index.
The manager utilizes an equity style that is a blend of growth and
value stocks. The Fund is invested in companies that history shows have a proven
and consistent record of earnings profitability, but whose prices do not appear
to the Fund manager to adequately reflect the underlying profitability of the
companies. The profitability of each company is compared to the patterns of its
industry to account for normal cyclicality. In addition, the manager prefers
companies that have a dominant market position with high-quality management.
By following this investment philosophy and equity style, we believe
the Ivy US Blue Chip Fund is well positioned for, and should benefit from, the
long-term positive trends of the stock market.
MARKET COMMENTARY
The US stock market continued to perform well in 1999, extending its
multi-year bull-market trend. After undergoing a brief correction in the
fall, stocks surged in the final months of the year, propelled higher by
technology companies. The NASDAQ Composite Index, the Dow Jones Industrial
Average, and the Standard & Poor's 500 Index all closed the year at all-time
highs. The performance of the NASDAQ Composite was so strong that it
generated the highest return of any US index in the 20th century, ending the
year up an impressive 85.6%. During the year, the Dow Jones Industrial
Average moved well past 10,000, ending the year up 25.22% at 11,497.12. Within
this environment, the Ivy US Blue Chip Fund was up 15.35%. (For the Fund's
total return with sales charge and performance commentary, please refer to
page 3.)
The Ivy US Blue Chip Fund benefited from this market strength. The Fund
invested in a number of high-quality, large-capitalization stocks, such as
General Electric, that performed well and are members of one or more of the
popular averages. In addition, technology stocks were particularly strong in
1999. Given the Fund manager's belief in diversification across all major
sectors, the Fund held positions in technology companies like Intel and Sun
Microsystems, which performed well in 1999.
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
December 31, 1999
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
[MACKENZIE LOGO]
<PAGE> 194
2
INVESTORS SHED MARKET CONCERNS.
It appears that many of the concerns expressed by investors early in 1999
dissipated as the year progressed. Our research confirms that earnings growth
did not slow, narrow market participation broadened, and weakness in foreign
economies did not cause the US economy to slow. In fact, we believe the strength
in the US economy and US stock market served to bolster overseas economies and
markets. Our analysis indicates that the fear of deflation disappeared, the fear
of a financial market collapse was replaced by the fear of a possible financial
market bubble, and the fear of Y2K proved to be overblown. And, once again, fear
that the market was overvalued, which we believe has existed since the Dow
passed 6,000, was proven to be unfounded.
WE BELIEVE EXPERIENCED INVESTORS KNOW THAT IT IS BEST TO KEEP FOCUSED ON THE
LONG-TERM TREND OF THE MARKET AND TO VIEW CORRECTIONS AS MAJOR BUYING
OPPORTUNITIES THAT MAY ENHANCE LONG-TERM RETURNS.
During the year, long-term interest rates rose as the Federal Reserve
increased short-term interest rates three times. Although these increases did
not derail the market averages, interest-rate-sensitive stocks performed poorly,
including many banks and insurance companies. The Fund was exposed to the
finance sector through investments in companies like Chase Manhattan and Mellon
Financial. Although we believe these to be high-quality finance companies, they
performed poorly, which according to our research was in line with the rest of
the sector. We believe that the sector will recover when interest rates begin to
decline.
In 1999, the investment community began to focus on the upcoming
presidential election and its possible impact on the market. According to our
research, one sector that was particularly hurt by the political situation was
healthcare. We believe that investors became concerned that political candidates
would urge medical cost-controls. The Fund was exposed to the healthcare sector
through investments in Merck and Bristol-Myers Squibb. Although we believe these
to be high-quality healthcare companies, they performed poorly along with the
rest of the sector. We believe that the long-term prospects for healthcare
companies are particularly strong given the demographics in the US and the aging
of the baby boomers.
Oil prices rose sharply in 1999, causing many energy-related companies
to do well. The Fund was exposed to this area through investments in
high-quality companies such as Exxon Mobil Corp.
There is an old market adage that states "the market likes to climb a
wall of worry." Looking back, that appears to be what the market did in 1999
and it seems the investment community has given birth to new fears. We now
witness the fear of an overheated economy, the fear of inflation, and the fear
of higher interest rates. We believe that any one of these concerns can easily
cause the market to correct 10% or more, and that the investment landscape is
filled with unsuccessful investors who tried to time the short-term movements of
the market. We believe it is best to keep focused on the long-term trend of the
market and to view corrections as major buying opportunities that may enhance
long-term returns.
LOOKING AHEAD.
In our view, long-term investors have many reasons to remain optimistic. We
believe the threat of a significant rise in inflation is fairly remote.
Inflation is a monetary phenomenon caused by too much money chasing too few
goods. In our view, the productive capacity of the United States should not have
a problem producing sufficient goods to meet expanding demand and that world
economies are awash in excess capacity. Moreover, according to our research,
monetary growth in the US, as measured by high-powered bank reserves, indicates
that inflation is likely to remain under control. We believe the recent rise in
interest rates may easily reverse once the markets accept and reflect a low
inflation environment.
We expect that the economy will continue to grow and will soon mark the
longest uninterrupted period of expansion in US history. This may result in
further growth of corporate profits. Over the long term, we believe that higher
earnings should be reflected in higher stock prices. Finally, the demographics
in the US can be a powerful force that, in our view, could lead to higher stock
prices. We continue to believe that the increasing need for baby boomers to plan
and invest for retirement should provide a significant positive influence on the
financial markets, particularly on stock prices.
<PAGE> 195
3
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (11/98) OF A $10,000 INVESTMENT
[CHART]
IVY US BLUE CHIP FUND
PERFORMANCE COMMENTARY
For the 12 months ended December 31, 1999, the Ivy US Blue Chip Fund returned
15.35%. Relative to the S&P 500 Index, an unmanaged index of stocks, the Ivy US
Blue Chip Fund underperformed the Index, which returned 21.10% for the same time
period. We believe this underperformance was primarily due to the Fund's first
quarter 1999 underexposure to certain technology issues that fueled the S&P
500's strong performance throughout the year. Although the Ivy US Blue Chip Fund
increased its exposure to these companies during the year, the early
underexposure hurt its overall performance relative to the S&P 500. The Fund's
exposure to the financial sector, which we believe was hurt by rising interest
rates, and the out-of-favor healthcare sector, particularly pharmaceuticals,
also may have contributed to its underperformance relative to the S&P 500.
The S&P 500 Index is an unmanaged index of stocks which assumes reinvestment of
dividends and, unlike Fund returns, does not reflect any fees or expenses. It is
not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of all other share classes will vary relative to that of Class A
shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4) Class I(5)
IVY US BLUE CHIP FUND ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN w/ w/o w/ w/o w/ w/o w/ w/o
FOR PERIODS ENDING Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
--------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
9.74% 14.74% 8.05% 13.05%
C: C: C: C:
1 year 8.71% 7.11% 13.84% 14.84% 12.05% 13.05% 15.89% 13.80% n/a n/a
- -----------------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
13.28% 16.68% 10.99% 14.33%
C: C: C: C:
Since Inception(6) 14.29% 12.00% 16.76% 16.76% 14.37% 14.37% 20.95% 18.20% n/a n/a
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class A performance figures include the maximum sales charge of 5.75%.
(2)Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5.00%.
(3)Class C performance figures are calculated with and without the applicable
CDSC, up to a maximum of 1.00%.
(4)Advisor Class shares are not subject to an initial sales charge or a CDSC.
(5)Class I shares are not subject to an initial sales charge or a CDSC. There
were no Class I shares outstanding.
(6)Class A and Advisor Class commenced operations November 2, 1998; Class B and
Class C commenced operations November 6, 1998.
Total returns were higher due to reimbursement of certain Fund expenses. See
Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy US Blue Chip Fund will
fluctuate and at redemption shares may be worth more or less than the amount of
the original investment.
<PAGE> 196
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 98.72% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES -- 3.96%
Georgia-Pacific Group................... 4,000 $ 203,000
PPG Industries, Inc..................... 3,200 200,200
Praxair, Inc............................ 4,200 211,312
-----------
614,512
-----------
CAPITAL GOODS -- 9.40%
Briggs & Stratton Corporation........... 3,000 160,875
Emerson Electric Co..................... 3,250 186,469
General Electric Company................ 4,100 634,475
Honeywell International Inc............. 4,312 248,749
United Technologies Corporation......... 3,500 227,500
-----------
1,458,068
-----------
CONSUMER CYCLICALS -- 9.01%
Gap, Inc. (The)......................... 3,000 138,000
General Motors Corporation.............. 3,200 232,600
Home Depot, Inc......................... 3,300 226,256
Lowe's Companies, Inc................... 3,800 227,050
May Department Stores Company, (The).... 3,000 96,750
Tommy Hilfiger Corporation(a)........... 6,800 158,525
Wal-Mart Stores, Inc.................... 4,600 317,975
-----------
1,397,156
-----------
CAPITAL STAPLES -- 9.66%
Anheuser-Busch Companies, Inc........... 3,350 237,431
Colgate-Palmolive Company............... 3,850 250,250
General Mills, Inc...................... 4,500 160,875
H.J. Heinz Company...................... 3,800 151,287
Kimberly-Clark Corporation.............. 3,700 241,425
PepsiCo, Inc............................ 4,000 141,000
Sara Lee Corporation.................... 6,800 150,025
Wm. Wrigley Jr. Company................. 2,000 165,875
-----------
1,498,168
-----------
ENERGY -- 6.23%
Atlantic Richfield Company (ARCO)....... 600 51,900
Chevron Corporation..................... 2,200 190,575
Exxon Mobil Corporation................. 4,660 375,421
Royal Dutch Petroleum -- NY Shares...... 2,800 169,225
Texaco Inc.............................. 3,300 179,231
-----------
966,352
-----------
FINANCIAL SERVICES -- 13.55%
American International Group, Inc....... 1,400 151,375
Bank of America Corporation............. 3,950 198,241
Bank of New York Company, Inc., (The)... 4,900 196,000
Chase Manhattan Corporation, (The)...... 2,500 194,219
Fannie Mae.............................. 2,800 174,825
Mellon Financial Corporation............ 6,000 204,375
Merrill Lynch & Co., Inc................ 2,750 229,625
Morgan Stanley Dean Witter & Co......... 2,250 321,187
State Street Corporation................ 3,100 226,494
Wells Fargo Corporation................. 5,100 206,231
-----------
2,102,572
-----------
HEALTHCARE -- 9.90%
Abbott Laboratories..................... 2,800 101,675
Bristol-Myers Squibb Company............ 4,500 288,844
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
Eli Lilly and Company................... 4,250 $ 282,625
Johnson & Johnson....................... 2,500 232,812
Merck & Co., Inc........................ 4,250 285,016
Pfizer Inc.............................. 2,500 81,094
Schering-Plough Corporation............. 6,250 263,672
-----------
1,535,738
-----------
TECHNOLOGY -- 27.14%
Adobe Systems Incorporated.............. 1,100 73,975
Altera Corporation(a)................... 2,500 123,906
Applied Materials, Inc.(a).............. 1,750 221,703
Cisco Systems, Inc.(a).................. 3,700 396,363
Dell Computer Corporation(a)............ 3,600 183,600
EMC Corporation(a)...................... 1,600 174,800
Hewlett-Packard Company................. 1,400 159,512
Intel Corporation....................... 5,600 460,950
International Business Machines Corp.... 3,000 324,000
Lucent Technologies Inc................. 3,850 288,028
Microsoft Corporation(a)................ 5,350 624,612
Nasdaq-100 Shares(a).................... 1,750 319,813
Nortel Networks Corporation(b).......... 1,600 161,600
Novellus Systems, Inc.(a)............... 500 61,266
Sun Microsystems, Inc.(a)............... 3,700 286,519
Texas Instruments Inc................... 2,100 203,438
Xilinx, Inc.(a)......................... 3,200 145,500
-----------
4,209,585
-----------
UTILITIES -- 9.87%
ALLTEL Corporation...................... 2,600 214,987
AT&T Corporation........................ 5,600 284,200
Bell Atlantic Corporation............... 3,800 233,937
BellSouth Corporation................... 4,900 229,381
MCI WorldCom, Inc.(a)................... 3,000 159,188
MediaOne Group, Inc.(a)................. 2,000 153,625
SBC Communications Inc.................. 5,250 255,938
-----------
1,531,256
-----------
TOTAL INVESTMENTS -- 98.72%
(Cost -- $13,485,629)(c).............. 15,313,407
OTHER ASSETS, LESS LIABILITIES -- 1.28% 198,601
-----------
NET ASSETS -- 100%...................... $15,512,008
===========
NY Shares -- New York Shares
(a) Non-income producing security
(b) Foreign security
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............... $ 2,203,546
Gross unrealized depreciation............... (375,768)
-----------
Net unrealized appreciation............. $ 1,827,778
===========
Purchases and sales of securities other than short-term
obligations aggregated $19,467,938 and $8,095,654,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 197
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $13,485,629)...... $15,313,407
Cash........................................................ 480,628
Receivables
Fund shares sold.......................................... 6,515
Dividends and interest.................................... 10,218
Manager for expense reimbursement......................... 18,353
Other assets................................................ 5,841
-----------
Total assets.............................................. 15,834,962
-----------
LIABILITIES
Payables
Investments purchased..................................... 284,128
Fund shares repurchased................................... 2,929
Management fee............................................ 9,504
12b-1 service and distribution fees....................... 9,865
Other payables to related parties......................... 6,413
Accrued expenses............................................ 10,115
-----------
Total liabilities......................................... 322,954
-----------
NET ASSETS.................................................. $15,512,008
===========
CLASS A
Net asset value and redemption price per share
($3,352,786/272,114 shares outstanding)................... $ 12.32
===========
Maximum offering price per share ($12.32 x 100/94.25)*...... $ 13.07
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($8,742,297/711,563 shares outstanding)............. $ 12.29
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($2,497,324/203,086 shares outstanding)............. $ 12.30
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($919,601/74,461 shares outstanding)................ $ 12.35
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $13,863,713
Accumulated net realized loss on investments.............. (179,483)
Net unrealized appreciation on investments................ 1,827,778
-----------
NET ASSETS.................................................. $15,512,008
===========
</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> 198
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 136,175
Interest.................................................. 5,123
----------
141,298
----------
EXPENSES
Management fee............................................ $78,946
Transfer agent............................................ 17,901
Administrative services fee............................... 10,526
Custodian fees............................................ 23,748
Blue Sky fees............................................. 28,050
Auditing and accounting fees.............................. 15,331
Shareholder reports....................................... 6,031
Amortization of deferred offering costs................... 88,584
Fund accounting........................................... 29,915
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 80,833
Legal..................................................... 25,639
Other..................................................... 704
----------
415,448
Expenses reimbursed by Manager.............................. (213,586)
----------
Net expenses.......................................... 201,862
----------
NET INVESTMENT LOSS......................................... (60,564)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments.......................... (169,569)
Net change in unrealized appreciation on investments...... 1,730,573
----------
Net gain on investment transactions................... 1,561,004
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $1,500,440
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 199
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE NOVEMBER 2, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, TO DECEMBER 31,
--------------------------------
1999 1998
--------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (60,564) $ (195)
Net realized loss on investments.......................... (169,569) (9,914)
Net change in unrealized appreciation on investments...... 1,730,573 97,205
----------- ----------
Net increase resulting from operations................ 1,500,440 87,096
----------- ----------
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 4)
Class A................................................... 2,307,988 702,150
Class B................................................... 6,883,607 1,021,585
Class C................................................... 2,161,639 108,021
Advisor Class............................................. 273,966 500,010
----------- ----------
Net increase resulting from Fund share transactions... 11,627,200 2,331,766
----------- ----------
TOTAL INCREASE IN NET ASSETS................................ 13,093,146 2,418,862
NET ASSETS
Beginning of period....................................... 2,418,862 --
----------- ----------
END OF PERIOD............................................. $15,512,008 $2,418,862
=========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 3,885
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 200
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year November 2, 1998
ended (commencement)
CLASS A December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.74 $ 10.00
------------------------------------
Income from investment operations
Net investment (loss) income(a)........................... (.01) --(b)
Net gains on securities (both realized and unrealized).... 1.66 .74(b)
------------------------------------
Total from investment operations.......................... 1.65 .74
------------------------------------
Less distributions
Dividends from net investment income...................... .07 --
------------------------------------
Total distributions..................................... .07 --
------------------------------------
Net asset value, end of period.............................. $ 12.32 $ 10.74
------------------------------------
------------------------------------
Total return (%)............................................ 15.35(c) 7.40(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 3,353 $ 726
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.46 1.43(e)
Without expense reimbursement (%)......................... 3.49 6.34(e)
Ratio of net investment (loss) income to average net assets
(%)(a).................................................... (.12) .02(e)
Portfolio turnover rate (%)................................. 80 3
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year November 6, 1998
ended (commencement)
CLASS B December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.72 $ 10.30
------------------------------------
Income from investment operations
Net investment loss(a).................................... (.07) (.01)(b)
Net gains on securities (both realized and unrealized).... 1.65 .43(b)
------------------------------------
Total from investment operations.......................... 1.58 .42
------------------------------------
Less distributions
Dividends from net investment income...................... .01 --
------------------------------------
Total distributions..................................... .01 --
------------------------------------
Net asset value, end of period.............................. $ 12.29 $ 10.72
------------------------------------
------------------------------------
Total return (%)............................................ 14.74(c) 4.08(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 8,742 $ 1,047
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.15 2.13(e)
Without expense reimbursement (%)......................... 4.18 7.04(e)
Ratio of net investment loss to average net assets (%)(a)... (.81) (.68)(e)
Portfolio turnover rate (%)................................. 80 3
</TABLE>
<PAGE> 201
9
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year November 6, 1998
ended (commencement)
CLASS C December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.72 $ 10.30
------------------------------------
Income from investment operations
Net investment loss(a).................................... (.07) (.01)(b)
Net gains on securities (both realized and unrealized).... 1.66 .43(b)
------------------------------------
Total from investment operations.......................... 1.59 .42
------------------------------------
Less distributions
Dividends from net investment income...................... .01 --
------------------------------------
Total distributions..................................... .01 --
------------------------------------
Net asset value, end of period.............................. $ 12.30 $ 10.72
------------------------------------
------------------------------------
Total return (%)............................................ 14.84(c) 4.08(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 2,497 $ 110
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 2.08 2.22(e)
Without expense reimbursement (%)......................... 4.11 7.13(e)
Ratio of net investment loss to average net assets (%)(a)... (.74) (.77)(e)
Portfolio turnover rate (%)................................. 80 3
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
for the year November 2, 1998
ended (commencement)
ADVISOR CLASS December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.74 $ 10.00
------------------------------------
Income from investment operations
Net investment income(a).................................. .02 .01(b)
Net gains on securities (both realized and unrealized).... 1.69 .73(b)
------------------------------------
Total from investment operations.......................... 1.71 .74
------------------------------------
Less distributions
Dividends from net investment income...................... .10 --
------------------------------------
Total distributions..................................... .10 --
------------------------------------
Net asset value, end of period.............................. $ 12.35 $ 10.74
------------------------------------
------------------------------------
Total return (%)............................................ 15.89(c) 7.40(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 920 $ 537
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.10 1.08(e)
Without expense reimbursement (%)......................... 3.13 5.99(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .24 .37(e)
Portfolio turnover rate (%)................................. 80 3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) Net investment (b) Based on average (c) Total return does (d) Total return (e) Annualized
income (loss) is net shares outstanding. not reflect a sales represents aggregate
of expenses charge. total return and does
reimbursed by not reflect a sales
Manager. charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 202
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS
Ivy US Blue Chip Fund (the "Fund"), is a diversified series of shares of Ivy
Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C, Advisor Class and Class
I are authorized. Ivy Fund was organized as a Massachusetts business trust under
a Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there were no sales on the exchange
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. 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 December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Realized gains and losses
from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund has a net tax-basis capital loss 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 gains, if any, are declared in December.
DEFERRED OFFERING COSTS -- Offering costs were amortized over the one year
period which began November 6, 1998, 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 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
1.15% of its 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 December 31, 1999, MIMI owned 4.0% of the Fund's
shares outstanding.
<PAGE> 203
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly owned subsidiary of MIMI, is
the underwriter and distributor of the Fund's shares, and as such, purchases
shares from the Fund at net asset value to settle orders from investment
dealers. For the year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $8,970.
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
$5,576, $57,173 and $18,084, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $5,146, $9,956, $1,845 and $954, for Class A, Class B, Class C and
Advisor Class, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 2, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 281,189 $ 3,172,160 67,905 $ 705,555
Issued on
reinvestment
of distributions.... 1,246 15,288 -- --
Repurchased.......... (77,902) (879,460) (324) (3,405)
--------- ----------- --------- -----------
Net increase......... 204,533 $ 2,307,988 67,581 $ 702,150
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 6, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 678,732 $ 7,639,044 97,672 $ 1,021,966
Issued on
reinvestment
of distributions.... 483 5,908 -- --
Repurchased.......... (65,287) (761,345) (37) (381)
--------- ----------- --------- -----------
Net increase......... 613,928 $ 6,883,607 97,635 $ 1,021,585
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 6, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ------------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 225,883 $ 2,547,834 10,223 $ 108,031
Issued on
reinvestment
of distributions.... 163 1,994 -- --
Repurchased.......... (33,182) (388,189) (1) (10)
--------- ----------- --------- -----------
Net increase......... 192,864 $ 2,161,639 10,222 $ 108,021
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 2, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ------------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 29,163 $ 329,193 50,001 $ 500,010
Issued on
reinvestment
of distributions.... 577 7,101 -- --
Repurchased.......... (5,280) (62,328) -- --
--------- ----------- --------- -----------
Net increase......... 24,460 $ 273,966 50,001 $ 500,010
========= =========== ========= ===========
</TABLE>
<PAGE> 204
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY US BLUE CHIP FUND
- --------------------------------------------------------------------------------
12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY US BLUE CHIP FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for the year then ended and for the period November 2, 1998 (commencement of
operations) through December 31, 1998, and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 205
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 602,735 26,261
Keith J. Carlson.............. 602,735 26,261
Stanley Channick.............. 602,735 26,261
Roy J. Glauber................ 602,735 26,261
Edward M. Tighe............... 602,735 26,261
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- -----------------------------
FOR: AGAINST: ABSTAIN:
- -----------------------------
<S> <C> <C>
594,072 6,681 28,243
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
491,431 13,881 38,206 85,477
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
488,818 16,409 38,292 85,477
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
493,896 11,330 38,292 85,477
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
493,896 11,330 38,292 85,477
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
494,415 11,330 37,773 85,477
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
493,896 11,330 38,292 85,477
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
494,415 11,330 37,773 85,477
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
493,606 12,139 37,773 85,477
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
490,293 15,020 38,205 85,477
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 206
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
14
<PAGE> 207
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 208
02IBCF123199
<PAGE> 209
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
December 31, 1999
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
[MACKENZIE LOGO]
IVY ASIA PACIFIC FUND
Overview
The Ivy Asia Pacific Fund returned 45.10% for the 12-month period ending
December 31, 1999,versus the Morgan Stanley Capital International Far East Free
(Excluding-Japan) Index, which returned 59.40% for the same time period. (For
the Fund's total return with sales charge and performance commentary, please
refer to page 3.) After relatively strong performance in the first nine months
of the year, the Fund lost substantial ground relative to the Index in the final
quarter of the year. We believe this underperformance can largely be attributed
to two factors. The first is an above-average cash position, which we maintained
as insurance against Y2K-related liquidity constraints and so that we could take
advantage of any Y2K-related sell-off. Unfortunately, markets moved sharply in
the opposite direction from what we expected, with the anticipated December
sell-off postponed into the first week of the new year. The other factor that we
believe impacted the Fund's fourth-quarter 1999 performance was underweighting
in telecommunications and technology stocks. According to our research, in the
final quarter of the year, Asian technology stocks, which are heavily
represented in the Taiwan market, were swept up in a global "Internet mania."
Telecommunications stocks also moved in tandem with the global technology stock
rally. Performance from Asian telecommunications stocks in the fourth quarter
was concentrated primarily in three companies, which do not meet the Ivy Asia
Pacific Fund's value criteria. The fourth quarter rally in these stocks pushed
already record-high valuations even further. Given our view that prices for
these stocks have already dramatically overshot even optimistic growth
prospects, we continue to approach these sectors with great caution.
As we move into 2000, and the recovery from the recent economic crisis
broadens, we believe the Ivy Asia Pacific Fund should be positioned to benefit
from two main themes: an anticipated recovery in consumer demand growth and a
resumption in investment and loan growth, as capacity utilization improves. We
expect the upward revisions in growth estimates to continue if the recovery
gains momentum. We believe that as volumes and pricing power pickup,
accelerating economic growth could fuel top-line growth for companies in the
region.
Market Commentary
Our research indicates that equity markets in Asia, excluding Japan, performed
well in 1999, underpinned by better-than-expected economic recovery from the
1998 financial crisis. We believe that looser monetary conditions and strong
demand for exports from developed
<PAGE> 210
2
markets were largely responsible for the snap-back from 1998's depressed levels
of economic activity, while domestic demand remained subdued. However,
according to our research, we are starting to see signs of a nascent recovery in
domestic demand in many economies in the region. Initial reports from Hong
Kong, which has lagged in the regional recovery so far, point to significant
year-on-year increases in department store sales since mid-November. We believe
that a rebound in consumer confidence is critical to further driving the
regional recovery.
In addition to economic recovery, we expect that corporate
restructuring should become a powerful theme in the region. We believe much of
the turmoil of the last two years resulted from a sharp cyclical adjustment,
which, in turn, revealed some of the excesses of over a decade of considerable
growth. Looking forward, we expect higher-quality growth in Asia due to the
recent crisis, as we anticipate that structural weaknesses will be corrected and
corporations will streamline their operations. The potential for earnings growth
driven by restructuring-related gains in Asia could be significant. Longer term,
we believe investors in the Asia Pacific (non-Japan) region should benefit from
the positive changes taking place.
"Our research indicates that equity markets in Asia, excluding
Japan, performed well in 1999, underpinned by
better-than-expected economic recovery from the 1998
financial crisis."
Outlook for Hong Kong.
The Fund's largest weighting (37% of assets) continues to be Hong Kong, which
gained 68% in 1999. We expect the economic recovery, which was somewhat subdued
in 1999, will gain strength in 2000. Analysts' estimates for economic growth in
2000, currently around 5%, are undergoing rapid upgrades. We believe consumer
demand has recovered somewhat due to the "feel good factor" that resulted from
rising stock prices. However, we expect it may be some time before local demand
reaches precrisis levels. The strong growth in tourism from Japan, Korea, and
mainland China is expected to provide a boost to Hong Kong's service-oriented
economy. (Services represent 70% of Hong Kong's gross domestic product.)
In Singapore, our research shows that strong electronics exports
continue to support economic recovery. However, we think that positive
fundamentals have largely been reflected in stock prices.
Malaysia making strides.
We continue to be optimistic for the Malaysian market, which should be
reintroduced to regional indexes since its exclusion in September 1998. In our
view, the equity market, which remains 27% below its precrisis peak, has already
started to benefit from the return of foreign investors, although it continues
to be underowned. We believe this market offers strong macroeconomic
fundamentals, with a competitive exchange rate driving continued growth in
exports. Our research also indicates that domestic demand is picking up, ahead
of some of its neighbors in Southeast Asia. In our opinion, political risks
remain the major concern, although we believe this is largely reflected in share
prices.
Cautious about Korea.
A strong recovery in Korea is responsible for our somewhat cautious view of that
market. The Korean economy has roared back from the crisis and we believe it
could be in danger of overheating. We believe the likelihood of an
interest-rate hike this year could well jeopardize the cleanup of the banking
system. We think that strong economic growth and a sharp increase in earnings
may also lead to complacency among corporations in Korea, endangering their
much-needed restructuring.
<PAGE> 211
3
Performance Comparison of the Fund Since
Inception (1/97) of a $10,000 Investment
[CHART]
Ivy Asia Pacific Fund
Performance Commentary
For the 12-month period ending December 31, 1999, the Ivy Asia Pacific Fund
returned 45.10% versus 59.40% for its benchmark index, the Morgan Stanley
Capital International (MSCI) Far East Free (Excluding-Japan) Index. The Fund
performed well relative to its benchmark for the first nine months of the year
but underperformed the Index during the fourth quarter. We believe this
underperformance was primarily because of the Fund's larger-than-normal cash
position as insurance against Y2K-related liquidity issues and an underweighting
in telecommunications and technology stocks.
The Morgan Stanley Capital International (MSCI) Far East Free (Excluding-Japan)
Index is an unmanaged index of stocks which assumes reinvestment of dividends
and, unlike Fund returns, does not reflect any fees or expenses. It is not
possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4)
----------------- ----------------------------------- ----------------
IVY ASIA PACIFIC FUND w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING ------ ------ ------ ------ ------ ------
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
B: B: B: B:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
38.64% 43.64% 36.54% 41.54%
C: C: C: C:
1 year 36.76% 34.38% 42.92% 43.92% 40.61% 41.61% n/a n/a
----- ----- ----- ----- ----- ----- --- ---
B: B: B: B:
(8.21)% (7.26)% (10.29)% (9.37)%
C: C: C: C:
Since Inception(5) (8.38)% (11.11)% (8.45)% (8.45)% (10.75)% (10.75)% 4.14% 3.59%
----- ----- ---- ---- ----- ----- ---- ----
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class A, Class B and Class C commenced operations January 1, 1997;
Advisor Class commenced operations July 1, 1999.
Total returns were higher due to reimbursement of certain Fund expenses. See
Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy Asia Pacific Fund will
fluctuate and at redemption shares may be worth more or less than the amount of
the original investment.
<PAGE> 212
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 85.08% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 1.39%
- -------------------------------------
National Australia Bank Ltd........... 4,099 $ 62,494
Westpac Banking Corp. Ltd............. 9,000 61,876
----------
124,370
----------
CHINA -- 0.67%
- -------------------------------------
Anhui Expressway Co. Ltd.............. 110,000 10,330
Qingling Motors Company -- H Shares... 288,000 34,826
Zhenhai Refining and Chemical Company
Ltd................................. 84,000 14,912
----------
60,068
----------
HONG KONG -- 36.62%
- -------------------------------------
Asia Satellite Telecommunications
Holdings Ltd. ADR................... 30,000 94,745
CDL Hotels International Ltd.......... 360,000 143,564
Cheung Kong Holdings Ltd.............. 26,000 330,287
China Hong Kong Photo Products
Holdings, Ltd....................... 926,000 119,122
China Resources Enterprise Limited.... 26,000 41,641
Citic Pacific Ltd..................... 48,000 180,613
CLP Holdings Ltd...................... 23,000 105,924
Dao Heng Bank Group Ltd............... 31,000 159,914
Giordano International Ltd............ 274,000 281,983
Gold Peak Industries (Holdings)
Limited............................. 200,000 42,194
Guangdong Kelon Electrical Holdings
Co. Ltd. -- H. Shares............... 39,000 29,600
Hong Kong Electric Holdings Ltd....... 43,000 134,418
Hong Kong Land Holdings Ltd........... 52,000 76,960
Hong Kong Telecommunications Ltd...... 46,800 135,159
HSBC Holdings plc..................... 25,600 358,962
i-CABLE Communications Limited(a)..... 84 114
Jardine International Motor Holdings
Ltd................................. 160,000 80,272
Jardine Matheson Holdings Ltd......... 16,200 63,828
Jardine Strategic Holdings Ltd........ 30,500 60,695
JCG Holdings Ltd...................... 78,000 43,899
Moulin International Holding Ltd...... 230,000 22,191
New World Development Company Ltd..... 65,000 146,330
Orient Overseas International Ltd..... 272,000 105,846
Sun Hung Kai Properties Ltd........... 8,000 83,360
Swire Pacific Ltd..................... 17,000 100,379
Union Bank of Hong Kong Ltd........... 12,399 10,368
VTech Holdings Limited................ 29,000 94,384
Wharf Holdings Ltd.................... 33,810 78,506
Wing Hang Bank Limited................ 35,000 119,765
Yue Yuen Industrial Holdings.......... 13,000 31,106
----------
3,276,129
----------
INDONESIA -- 1.58%
- -------------------------------------
PT Bank Dagang Nasional Indonesia Tbk
Warrants(a)(b)...................... 500 --
PT Hanjaya Mandala Sampoerna Tbk...... 56,000 141,191
----------
141,191
----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
MALAYSIA -- 12.32%
- -------------------------------------
Berjaya Sports Toto Berhad............ 61,000 $ 131,631
Genting Berhad........................ 17,000 60,394
Johor Port Berhad..................... 204,000 89,652
Malakoff Berhad....................... 32,000 84,210
Malayan Banking Berhad................ 34,400 122,210
Perusahaan Otomobil Nasional Berhad... 52,000 101,262
Petronas Gas Berhad................... 28,000 65,579
Public Bank Berhad.................... 40,000 34,947
Public Bank Berhad -- Foreign
Registered.......................... 50,000 51,842
Sime Darby Berhad..................... 102,000 129,378
Sime UEP Properties Berhad............ 68,000 95,736
Telekom Malaysia Berhad............... 35,000 135,394
----------
1,102,235
----------
NEW ZEALAND -- 3.35%
- -------------------------------------
Fletcher Challenge Paper.............. 34,000 23,760
Telecom Corporation of New Zealand
Limited............................. 19,200 90,115
Tourism Holdings Limited.............. 99,237 185,273
----------
299,148
----------
PHILIPPINES -- 3.73%
- -------------------------------------
Alaska Milk Corporation(a)............ 382,000 27,489
Benpres Holdings Corporation Sponsored
GDR(a).............................. 9,600 29,400
Manila Electric Company -- B Shares... 16,000 45,658
Metropolitan Bank & Trust Company..... 7,920 56,992
Music Corporation(a).................. 242,000 31,826
Philippine Long Distance Telephone
Co.................................. 1,972 50,156
Southeast Asia Cement Holdings,
Inc.(a)............................. 2,267,000 26,439
Universal Robina Corporation.......... 369,500 66,015
----------
333,975
----------
SINGAPORE -- 15.18%
- -------------------------------------
Asia Pulp & Paper Company Ltd. --
Sponsored ADR(a) (with 2,560
warrants(a))........................ 12,800 103,200
DBS Group Holdings Limited............ 9,943 162,931
DBS Land Ltd.......................... 73,000 143,721
Elec & Eltek International Co. Ltd.... 41,050 133,002
Fraser & Neave Ltd. Ordinary.......... 17,000 62,755
Overseas Union Bank Ltd............... 52,148 305,187
Singapore Airlines Limited............ 17,000 192,857
Singapore Press Holdings Ltd.......... 10,000 216,686
United Overseas Bank Ltd.............. 4,224 37,270
----------
1,357,609
----------
SOUTH KOREA -- 7.64%
- -------------------------------------
Hyundai Motor Company Ltd............. 5,983 95,069
Korea Electric Power Corp............. 2,000 62,147
Pohang Iron & Steel Company Ltd....... 1,000 116,967
Samsung Electronics Co. Sponsored
GDR................................. 2,970 363,083
Samsung Fire & Marine Insurance (with
280 rights(a))...................... 1,370 46,029
----------
683,295
----------
</TABLE>
<PAGE> 213
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
5
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
THAILAND -- 2.60%
- -------------------------------------
Advanced Info Service Public Company
Limited -- Foreign Registered....... 4,600 $ 77,370
Bangkok Bank Public Company Ltd --
Foreign Registered.................. 23,800 60,173
Siam Cement Public Company Limited --
Foreign Registered.................. 1,200 39,984
Thai Farmers Bank Public Company
Limited -- Foreign Registered....... 33,000 55,329
----------
232,856
----------
TOTAL INVESTMENTS -- 85.08%
(Cost -- $4,872,103)(c)............. 7,610,876
OTHER ASSETS, LESS LIABILITIES --
14.92%.............................. 1,334,239
----------
NET ASSETS -- 100%.................... $8,945,115
==========
<CAPTION>
- --------------------------------------------------------------
- --------------------------------------------------------------
<S> <C> <C>
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Securities valued in good faith by the
Valuation Committee of the Board of Trustees.
See Note 1 to the Financial Statements.
(c) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation................ $2,969,394
Gross unrealized depreciation................ (230,621)
----------
Net unrealized appreciation.............. $2,738,773
==========
Purchases and sales of securities other than short-term
obligations aggregated $1,512,352 and $1,650,225,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 214
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $4,872,103)....... $ 7,610,876
Cash........................................................ 1,343,045
Receivables
Fund shares sold.......................................... 7,319
Dividends and interest.................................... 11,712
Manager for expense reimbursement......................... 15,237
Deferred organization expenses.............................. 19,005
Other assets................................................ 5,599
-----------
Total assets.............................................. 9,012,793
-----------
LIABILITIES
Payables
Fund shares repurchased................................... 32,509
Management fee............................................ 7,401
12b-1 service and distribution fees....................... 6,037
Other payables to related parties......................... 4,581
Accrued expenses............................................ 17,150
-----------
Total liabilities......................................... 67,678
-----------
NET ASSETS.................................................. $ 8,945,115
===========
CLASS A
Net asset value and redemption price per share
($2,014,928/252,048 shares outstanding)................... $ 7.99
===========
Maximum offering price per share ($7.99 x 100/94.25)*....... $ 8.48
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($3,763,103/475,660 shares outstanding)............. $ 7.91
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($3,031,135/381,540 shares outstanding)............. $ 7.94
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($135,949/17,060 shares outstanding)................ $ 7.97
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $ 8,049,737
Accumulated net realized loss on investments and foreign
currency transactions................................... (1,822,714)
Accumulated net investment loss........................... (20,722)
Net unrealized appreciation on investments and foreign
currency transactions................................... 2,738,814
-----------
NET ASSETS.................................................. $ 8,945,115
===========
</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> 215
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 159,880
Interest.................................................. 23,455
----------
183,335
----------
EXPENSES
Management fee............................................ $72,724
Transfer agent............................................ 22,560
Administrative services fee............................... 7,272
Custodian fees............................................ 44,117
Blue Sky fees............................................. 31,072
Auditing and accounting fees.............................. 20,233
Shareholder reports....................................... 9,055
Amortization of organization expenses..................... 9,826
Fund accounting........................................... 20,305
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 58,969
Legal..................................................... 26,577
Other..................................................... 1,362
----------
333,312
Expenses reimbursed by Manager............................ (119,280)
Fees paid indirectly...................................... (13,251)
----------
Net expenses.......................................... 200,781
----------
NET INVESTMENT LOSS......................................... (17,446)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments.......................... 311,404
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 2,429,520
----------
Net gain on investment transactions................... 2,740,924
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $2,723,478
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 216
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (17,446) $ (115)
Net realized gain (loss) on investments and foreign
currency transactions................................... 311,404 (2,099,161)
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 2,429,520 1,157,220
---------- -----------
Net increase (decrease) resulting from operations..... 2,723,478 (942,056)
---------- -----------
Class A distributions
Dividends
From net investment income.............................. (4,345) --
In excess of net investment income...................... -- (8,845)
Distributions from capital gains.......................... (14,864) (1,561)
---------- -----------
Total distributions to Class A shareholders........... (19,209) (10,406)
---------- -----------
Class B distributions
Dividends in excess of net investment income.............. -- (3,991)
Distributions from capital gains.......................... (15,357) (704)
---------- -----------
Total distributions to Class B shareholders........... (15,357) (4,695)
---------- -----------
Class C distributions
Dividends in excess of net investment income.............. -- (2,487)
Distributions from capital gains.......................... (12,237) (439)
---------- -----------
Total distributions to Class C shareholders........... (12,237) (2,926)
---------- -----------
Advisor Class distributions
Dividends from net investment income...................... (791) --
Distributions from capital gains.......................... (934) --
---------- -----------
Total distributions to Advisor Class shareholders..... (1,725) --
---------- -----------
Fund share transactions (Note 5)
Class A................................................... (107,980) 1,414,019
Class B................................................... 529,602 1,367,392
Class C................................................... 281,207 1,239,743
Advisor Class............................................. 122,006 --
---------- -----------
Net increase resulting from Fund share transactions... 824,835 4,021,154
---------- -----------
TOTAL INCREASE IN NET ASSETS................................ 3,499,785 3,061,071
NET ASSETS
Beginning of period....................................... 5,445,330 2,384,259
---------- -----------
END OF PERIOD............................................. $8,945,115 $ 5,445,330
========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 9,686
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 217
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- ---------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.56 $ 6.01 $ 10.00
--------------------------------
Income (loss) from investment operations
Net investment income(a).................................. .02 .03 .02
Net gains or loss on securities (both realized and
unrealized)............................................. 2.49 (.44) (3.98)
--------------------------------
Total from investment operations.......................... 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 gains.......................... .06 .01 --
--------------------------------
Total distributions..................................... .08 .04 .03
--------------------------------
Net asset value, end of period.............................. $ 7.99 $ 5.56 $ 6.01
================================
Total return (%)(b)......................................... 45.10 (6.86) (39.58)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 2,015 $ 1,393 $ 692
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 2.39 2.77 2.11
Without expense reimbursement (%)......................... 4.03 6.15 10.17
Ratio of net investment income to average net assets
(%)(a).................................................... .31 .53 .63
Portfolio turnover rate (%)................................. 24 86 1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS B December 31,
- ---------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.53 $ 5.99 $ 10.00
--------------------------------
Income (loss) from investment operations
Net investment loss(a).................................... (.03) (.01) --
Net gains or loss on securities (both realized and
unrealized)............................................. 2.44 (.44) (4.00)
--------------------------------
Total from investment operations.......................... 2.41 (.45) (4.00)
--------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .01 .01
Distributions from capital gains.......................... .03 -- --
--------------------------------
Total distributions..................................... .03 .01 .01
--------------------------------
Net asset value, end of period.............................. $ 7.91 $ 5.53 $ 5.99
================================
Total return (%)(b)......................................... 43.64 (7.48) (39.96)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 3,763 $ 2,197 $ 929
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 3.17 3.65 2.86
Without expense reimbursement (%)......................... 4.81 7.03 10.92
Ratio of net investment loss to average net assets (%)(a)... (.46) (.35) (.12)
Portfolio turnover rate (%)................................. 24 86 1
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 218
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[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
10
<TABLE>
<CAPTION>
for the year ended
CLASS C December 31,
- ---------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
-------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.54 $ 5.99 $ 10.00
--------------------------------
Income (loss) from investment operations
Net investment loss(a).................................... (.03) (.01) --
Net gains or loss on securities (both realized and
unrealized)............................................. 2.46 (.43) (3.99)
--------------------------------
Total from investment operations.......................... 2.43 (.44) (3.99)
--------------------------------
Less distributions
Dividends in excess of net investment income.............. -- .01 .02
Distributions from capital gains.......................... .03 -- --
--------------------------------
Total distributions..................................... .03 .01 .02
--------------------------------
Net asset value, end of period.............................. $ 7.94 $ 5.54 $ 5.99
================================
Total return (%)(b)......................................... 43.92 (7.37) (39.94)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 3,031 $ 1,855 $ 764
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 3.09 3.54 2.74
Without expense reimbursement (%)......................... 4.73 6.92 10.80
Ratio of net investment loss to average net assets (%)(a)... (.38) (.24) --
Portfolio turnover rate (%)................................. 24 86 1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
July 1, 1999
(commencement)
ADVISOR CLASS to December 31,
- -------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999
-----------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 7.76
-------------------
Income from investment operations
Net investment income(a).................................. .02
Net gains on securities (both realized and unrealized).... .30
-------------------
Total from investment operations.......................... .32
-------------------
Less distributions
Dividends from net investment income...................... .05
Distributions from capital gains.......................... .06
-------------------
Total distributions..................................... .11
-------------------
Net asset value, end of period.............................. $ 7.97
===================
Total return(%)(d).......................................... 4.14
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 136
Ratio of expenses to average net assets
With expense reimbursement(%)(e).......................... 2.02
Without expense reimbursement(%)(e)....................... 3.66
Ratio of net investment income to average net
assets(%)(a)(e)........................................... .69
Portfolio turnover rate(%).................................. 24
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) Net investment (b) Total return (c) From 1997 (d) Total return (e) Annualized
income (loss) is net does not reflect a through April 1999, represents aggregate
of expenses sales charge. total expenses total return and
reimbursed by include fees paid does not reflect a
Manager. indirectly, if any, sales charge.
through an offset
arrangement.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
NOTES TO FINANCIAL STATEMENTS
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
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. Securities not traded on an exchange or Nasdaq, but traded in another
over-the-counter market are valued at the average between the current bid and
asked price in such markets. Short-term obligations and commercial paper are
valued at amortized cost, which approximates market. Debt securities (other than
short-term obligations and commercial paper) are valued on the basis of
valuations furnished by a pricing service authorized by the Board of Trustees
(the "Board"), which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board. As of December 31, 1999, the Fund's securities
valued by the Valuation Committee have no value and have been noted as such in
the Portfolio of Investments.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund has a net tax-basis capital loss 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 gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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, 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
<PAGE> 220
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
12
distributions during such period. Accordingly, the Fund may make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
FEES PAID INDIRECTLY -- From January 1, 1999 through April 15, 1999, the Fund
had an arrangement with its custodian whereby a percentage of quarterly
cumulative credits resulting from cash balances on deposit with the custodian
are used to offset custody fees, including transaction and out-of-pocket
expenses. For the period from January 1, 1999 through April 15, 1999, custodian
fees were reduced by $13,251 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding 12b-1 fees and certain other expenses) to an
annual rate of 1.95% of its 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $2,008.
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 $4,458,
$29,339, and $25,172 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 $5,727, $10,115, $6,644 and $74, 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 760,594 $ 4,417,001 587,033 $ 3,227,193
Issued on
reinvestment of
distributions....... 1,754 13,679 1,325 7,271
Repurchased.......... (760,739) (4,538,660) (453,035) (1,820,445)
-------- ----------- -------- -----------
Net (decrease)/
increase............ 1,609 $ (107,980) 135,323 $ 1,414,019
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 189,550 $ 1,317,798 367,268 $ 1,924,978
Issued on
reinvestment of
distributions....... 1,107 8,546 537 2,927
Repurchased.......... (112,554) (796,742) (125,329) (560,513)
-------- ----------- -------- -----------
Net increase......... 78,103 $ 529,602 242,476 $ 1,367,392
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 165,089 $ 1,098,147 355,153 $ 1,944,016
Issued on
reinvestment of
distributions....... 1,207 9,364 432 2,364
Repurchased.......... (119,605) (826,304) (148,169) (706,637)
-------- ----------- -------- -----------
Net increase......... 46,691 $ 281,207 207,416 $ 1,239,743
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 1, 1999
(COMMENCEMENT)
TO DECEMBER 31,
1999
- ---------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- ---------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 78,562 $ 577,741
Issued on
reinvestment of
distributions....... 222 1,725
Repurchased.......... (61,724) (457,460)
-------- -----------
Net increase......... 17,060 $ 122,006
======== ===========
</TABLE>
<PAGE> 221
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY ASIA PACIFIC FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 222
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY ASIA PACIFIC FUND
- --------------------------------------------------------------------------------
14
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 556,770 14,409
Keith J. Carlson.............. 556,770 14,409
Stanley Channick.............. 555,802 15,377
Roy J. Glauber................ 555,802 15,377
Edward M. Tighe............... 556,770 14,409
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- -----------------------------
FOR: AGAINST: ABSTAIN:
- -----------------------------
<S> <C> <C>
540,106 2,473 28,600
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
458,332 8,242 33,201 71,404
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
451,559 14,048 34,168 71,404
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
457,259 9,087 33,429 71,404
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
461,171 6,726 31,878 71,404
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
460,581 6,286 32,908 71,404
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
453,930 12,938 32,907 71,404
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
448,729 18,780 32,266 71,404
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
462,329 5,569 31,877 71,404
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
455,300 14,681 29,794 71,404
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 223
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 224
02IAPF123199
<PAGE> 225
[IVY FUNDS LOGO]
IVY PAN-EUROPE FUND
OVERVIEW
The Ivy Pan-Europe Fund is designed to provide exposure to high-quality
companies in mature foreign markets. The majority of the Fund is invested in
large-cap blue chip stocks in Western Europe. Additionally, the Fund strives to
provide exposure to what the management team believes to be quality,
undervalued, smaller-cap companies in Central and Eastern Europe. The Fund
employs a disciplined, value-driven investment style that focuses on a company's
long-term earnings capacity and asset values. The management team evaluates
opportunities on a variety of measures--buying stocks at a price that we believe
is a discount to the fair value.
The Fund is positioned to benefit from two main themes that we believe
could have a major impact on European markets currently and in the coming years:
accelerating economic growth and ongoing corporate restructuring. In our view,
these two factors helped to fuel strong stock market performance during 1999,
with the Ivy Pan-Europe Fund generating a return of 18.29% for the 12-month
period ending December 31, 1999. For the same period, the Morgan Stanley Capital
International Europe Index returned 15.89%. (For the Fund's total return with
sales charge and performance commentary, please refer to page 3.)
MARKET COMMENTARY
As we entered 1999, the Ivy Pan-Europe Fund was positioned with a significant
over-weighting in cyclical stocks. We believe large declines in stock prices in
this sector during the third and fourth quarters of 1998 created significant
value in a number of economically sensitive industries including paper and
forest products, metals and mining, steel, chemicals, and construction
companies. Our research shows that at the start of 1999, fears of a global
recession began to subside, and investors in Europe started to anticipate a
recovery in economic growth. We believe this led to sharp rises in prices of
European cyclical stocks, particularly during the first half of the year, and
contributed to the strong performance of the Fund during this time. The
management team used price strength in this sector to reduce the Fund's exposure
to cyclical stocks during the second half of 1999.
OPPORTUNITIES REMAIN IN EUROPE.
We remain optimistic about the prospects of economic activity in Europe.
In recent months, we believe there were a number of encouraging signs of growth
coming from the eurozone--the 11 nations that comprise the Economic and Monetary
Union (EMU)--particularly from the two largest economies, Germany and France.
According to our research, on average, gross domestic product (GDP) in Europe
grew more than 4% in the third quarter, on a seasonally adjusted basis, and
unemployment fell below 10% for the first time in years. We anticipate that
upgrades in earnings and GDP estimates across continental Europe may lead to
higher stock prices through 2000.
Within this environment, we expect interest rates and inflation to
remain relatively low. We believe the European Central Bank's half-point rise in
short-term interest rates in early November
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
December 31, 1999
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
[MACKENZIE LOGO]
<PAGE> 226
was precautionary and leaves real short-term rates at over 1%. In our opinion,
concerns about rising interest rates throughout 1999 put severe pressure on
interest-rate-sensitive sectors, particularly financial stocks. In the fourth
quarter of 1999, banks and insurance companies began to appear frequently on our
research screens as representing good long-term value. As a result, we increased
the size of some existing holdings in this sector and added a few new
securities, including three Swiss financial firms.
Our research shows that, in general, exports from Europe remained weak
throughout 1999. However, a recovery in Asian demand for European exports was a
very positive factor for some of the Fund's holdings. For example, we believe
that luxury goods companies showed a strong rebound in sales growth as Japanese
and other Asian consumers returned to the stores.
"WE REMAIN OPTIMISTIC ON THE PROSPECTS FOR ECONOMIC ACTIVITY IN EUROPE. IN
RECENT MONTHS, WE BELIEVE THERE WERE A NUMBER OF ENCOURAGING SIGNS OF GROWTH
COMING FROM THE EUROZONE, PARTICULARLY FROM THE TWO LARGEST ECONOMIES, GERMANY
AND FRANCE."
We believe that weakness in the euro, which according to our research
lost about 16% of its value relative to the dollar and even more relative to the
yen, should result in a sizable pickup in export growth in 2000. Our recent
economic data supports this belief, with third-quarter exports from France
showing the strongest increase in 10 years. Purchasing-power analysis, which
compares the cost to buy a basket of goods in one currency versus another,
indicates that exchange rates for deutsche mark-linked currencies, including the
euro (since its introduction in January 1999) are at their cheapest levels in 25
years relative to the dollar and the yen. We expect the euro to gain strength if
economic growth accelerates on the Continent, which should provide incremental
returns for US dollar-based investors in the coming year.
We believe that we have just started to see the impact of EMU on
European corporate profitability. Consolidation activity is taking place in many
industries throughout continental Europe and the UK, including telecoms,
pharmaceuticals, autos, energy, utilities, banks, and insurance companies. We
believe there is more to come, as industry leaders in Europe, despite being
international household names, are still small by US standards. Our research
shows that a wave of mergers and acquisitions, fueled by EMU, reached over $600
billion in 1998, and in 1999 doubled to over $1,200 billion. Recently proposed
tax changes in Germany, which effectively eliminates capital gains tax on asset
sales for corporations, could clear the way for long-overdue corporate
restructuring in that market. We expect these trends to continue across the
Continent over the next three to five years. In the short run, we think that
equity prices should continue to respond favorably to anticipated takeover
announcements. We believe that longer term, equity prices should benefit from
strong earnings growth as costs decline, productivity rises, and economies of
scale are realized.
THE IMPACT OF TECHNOLOGY.
As we approached the end of 1999, the technology mania that was pervasive in US
equity markets spread to the rest of the world. It seemed to us as though any
company with hopes of becoming an Internet player was suddenly awarded very
lofty valuations based on projections of cash flows to be generated 25 years
hence. Because Ivy Pan-Europe Fund is managed with a disciplined, value
approach, we looked at the high valuations of these companies with great
skepticism. The Internet is undeniably changing the way business is conducted
around the globe, However, with the absence of profits and the presence of a
high level of speculation, we believe these companies are more suitable for
funds managed with a more growth-oriented investment style or that specialize in
the technology sector, such as the Ivy Global Science & Technology Fund.
LOOKING AHEAD.
We are optimistic about European equity markets as we move into the new
millennium. In our view, low interest rates, controlled inflation, declining
unemployment, and a highly competitive currency may result in an acceleration in
economic activity over the next few years. Ongoing corporate restructuring, and
mergers and acquisitions activity should continue to keep the focus of such
corporations on improving profitability and shareholder value. We also expect
strong demand for equities driven by the growth of European pension and mutual
funds to continue to support European stock markets.
We believe that the combination of these factors should contribute to
accelerating top-line and higher bottom-line growth, providing a positive
backdrop for European equity markets in the year 2000.
2
<PAGE> 227
PERFORMANCE COMPARISON OF THE FUND SINCE
INCEPTION (5/97) OF A $10,000 INVESTMENT
[CHART]
IVY PAN-EUROPE FUND
PERFORMANCE COMMENTARY
For the 12 months ended December 31, 1999, the Ivy Pan-Europe Fund returned
18.29% compared to a return of 15.89% for the Morgan Stanley Capital
International (MSCI) Europe Index. The Fund's outperformance relative to its
benchmark was due primarily to its exposure to economically sensitive stocks in
the early part of the year. According to our research, at the start of 1999,
fears of a global recession began to subside, and investors in Europe began to
anticipate a recovery in economic growth. We believe this led to sharp rises in
prices of European cyclical stocks, particularly during the first four to five
months of the year. In addition, until late 1999, the Fund was underweight in
interest-rate-sensitive stocks, like banks and financials, which performed
poorly as interest rates rose across the Continent and in the UK. This
positioning also contributed to the Fund's relative outperformance.
The Morgan Stanley Capital International (MSCI) Europe Index is an unmanaged
index of stocks which assumes reinvestment of dividends and, unlike Fund
returns, does not reflect any fees or expenses. It is not possible to invest in
an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
IVY PAN-EUROPE FUND Class A(1) Class B(2) & C(3) Advisor Class(4)
AVERAGE ANNUAL TOTAL RETURN --------------------------------------------------------------------------------------------
FOR PERIODS ENDING w/ w/o w/ w/o w/ w/o
DECEMBER 31, 1999 Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
-------------------------------------------
B: B: B: B:
12.37% 17.37% 9.38% 14.38%
C: C: C: C:
1 year 11.48% 8.76% 16.23% 17.23% 10.99% 11.99% 18.50% 17.34%
- ---------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
9.78% 10.77% 5.88% 6.82%
C: C: C: C:
Since Inception(5) 9.01% 2.99% 9.97% 9.97% 7.04% 7.04% 4.75% 1.83%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class A performance figures include the maximum sales charge of 5.75%.
(2)Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5.00%.
(3)Class C performance figures are calculated with and without the applicable
CDSC, up to a maximum of 1.00%.
(4)Advisor Class shares are not subject to an initial sales charge or a CDSC.
(5)Class A and Class B commenced operations May 13, 1997; Class C commenced
operations January 29, 1998; Advisor Class commenced operations March 23, 1998.
Total returns were higher due to reimbursement of certain Fund expenses. See
Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy Pan-Europe Fund will fluctuate
and at redemption shares may be worth more or less than the amount of the
original investment.
3
<PAGE> 228
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 92.19% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AUSTRIA -- 0.75%
Bank Austria AG.......................... 766 $ 42,995
----------
BELGIUM -- 1.17%
Solvay S.A. ............................. 815 66,984
----------
CZECH REPUBLIC -- 0.14%
SPT Telekom a.s. ........................ 500 8,047
----------
DENMARK -- 3.87%
Jyske Bank A/S........................... 3,435 68,937
Sydbank A/S.............................. 1,186 48,722
Unidanmark A/S........................... 1,480 103,659
----------
221,318
----------
FINLAND -- 3.69%
Metso Oyj(a)............................. 2,000 25,859
Pohjola Insurance Group B................ 1,203 72,346
Stora Enso Oyj -- R Shares............... 6,500 112,774
----------
210,979
----------
FRANCE -- 14.14%
Alcatel S.A. ............................ 500 114,262
Assurances Banque Populaire.............. 595 58,325
Banque Nationale de Paris................ 1,189 109,163
Bongrain S.A. ........................... 173 57,100
Bouygues S.A. ........................... 142 89,808
Bull S.A. ............................... 6,500 52,055
Eurotunnel S.A. Warrants 2001(a)......... 9,200 277
Eurotunnel S.A. Warrants 2003(a)......... 9,200 830
Groupe Danone............................ 297 69,658
Scor S.A. ............................... 2,248 98,689
Societe Generale......................... 680 157,441
----------
807,608
----------
GERMANY -- 7.18%
Adidas-Salomon AG........................ 900 67,204
DaimlerChrysler AG....................... 1,708 133,359
Dyckerhoff AG............................ 2,250 67,655
Dyckerhoff AG Preferred.................. 750 23,153
Fresenius AG Preferred................... 320 60,298
Merck KGaA............................... 1,879 58,383
----------
410,052
----------
GREECE -- 1.61%
Hellenic Telecommunications Organization
S.A. -- ADR............................ 7,700 91,919
----------
HUNGARY -- 1.52%
BorsodChem Rt Sponsored GDR 144A......... 41 1,630
Magyar Tavkozlesi Rt..................... 12,200 85,009
----------
86,639
----------
IRELAND -- 0.92%
Bank of Ireland.......................... 6,600 52,260
----------
ITALY -- 1.22%
Banca Popolare di Milano................. 9,000 69,730
----------
NETHERLANDS -- 8.33%
Akzo Nobel NV............................ 1,822 90,944
Hagemeyer NV............................. 1,558 35,901
ING Groep NV............................. 664 39,892
Koninklijke KPN NV....................... 1,000 97,123
Koninklijke Philips Electronics NV....... 1,566 211,896
----------
475,756
----------
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
NORWAY -- 2.81%
Bergesen d.y. ASA -- B Shares............ 2,820 $ 48,069
Smedvig ASA -- A Shares.................. 9,050 112,602
----------
160,671
----------
PORTUGAL -- 1.46%
Portugal Telecom S.A. ................... 2,650 28,925
Portugal Telecom S.A. -- Sponsored ADR... 5,000 54,375
----------
83,300
----------
RUSSIA -- 0.03%
LUKoil Holding Co. -- Sponsored ADR...... 30 1,523
----------
SPAIN -- 2.81%
Telefonica S.A. ......................... 1,199 29,804
Telefonica S.A. -- Sponsored ADR......... 1,659 130,712
----------
160,516
----------
SWEDEN -- 2.60%
AssiDoman AB............................. 1,326 21,497
Electrolux AB............................ 5,065 126,877
----------
148,374
----------
SWITZERLAND -- 11.46%
Compagnie Financiere Richemont AG........ 28 66,470
Holderbank Financiere Glaris AG.......... 46 62,646
Jelmoli Holding AG Bearer................ 34 40,357
Nestle AG Registered..................... 30 54,669
Novartis AG Registered................... 88 128,531
Pargesa Holding AG -- B Shares........... 18 29,237
SGS Societe Generale de Surveillance
Holding S.A. .......................... 45 57,068
Sulzer AG Registered..................... 119 76,943
Swatch Group, (The) AG................... 80 91,658
UBS AG -- Registered..................... 175 47,010
----------
654,589
----------
UNITED KINGDOM -- 26.48%
Allied Zurich plc........................ 4,000 47,320
AstrZeneca Group plc..................... 789 33,248
Barclay's Bank Ordinary.................. 3,825 110,102
Bass plc................................. 7,700 95,372
British Airways plc...................... 12,000 77,942
Cadbury Schweppes plc.................... 10,480 61,397
Corporate Services Group plc............. 37,950 62,693
Diageo plc............................... 8,250 66,150
Gallaher Group plc....................... 21,890 92,963
Hanson plc............................... 13,050 107,687
Hazelwood Foods plc...................... 13,660 19,814
HSBC Holdings plc........................ 5,040 69,776
Imperial Chemical Industries plc......... 7,232 76,462
Jarvis Hotels plc........................ 14,468 27,399
Marks & Spencer plc...................... 8,600 40,889
Next Plc................................. 4,840 46,336
Nycomed Amersham plc..................... 3,900 24,214
PowerGen plc............................. 5,300 37,692
Royal & Sun Alliance Insurance Group
plc.................................... 14,300 106,594
Shell Transport & Trading Co. plc........ 11,422 94,667
Standard Chartered plc................... 4,270 66,411
Tate & Lyle plc.......................... 14,300 93,572
Waterford Wedgwood plc................... 52,744 53,555
----------
1,512,255
----------
</TABLE>
<PAGE> 229
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
VALUE
- --------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS -- 92.19%
(Cost -- $5,062,189)(b)................ $5,265,515
OTHER ASSETS, LESS LIABILITIES -- 7.81% 445,899
----------
NET ASSETS -- 100%....................... $5,711,414
==========
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal
income tax purposes.
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
VALUE
<S> <C> <C>
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation................ $ 853,690
Gross unrealized depreciation................ (650,364)
----------
Net unrealized appreciation.............. $ 203,326
==========
Purchases and sales of securities other than short-term
obligations aggregated $1,686,991 and $3,320,087,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 230
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $5,062,189)....... $5,265,515
Cash........................................................ 424,687
Receivables
Fund shares sold.......................................... 1,087
Dividends................................................. 18,097
Manager for expense reimbursement......................... 13,134
Deferred organization expenses.............................. 32,419
Other assets................................................ 4,950
----------
Total assets.............................................. 5,759,889
----------
LIABILITIES
Payables
Fund shares repurchased................................... 18,006
Management fee............................................ 4,675
12b-1 service and distribution fees....................... 3,244
Other payables to related parties......................... 3,647
Accrued expenses............................................ 18,903
----------
Total liabilities......................................... 48,475
----------
NET ASSETS.................................................. $5,711,414
==========
CLASS A
Net asset value and redemption price per share
($1,789,368/141,919 shares outstanding)................... $ 12.61
==========
Maximum offering price per share ($12.61 x 100/94.25)*...... $ 13.38
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($3,081,348/246,622 shares outstanding)............. $ 12.49
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($396,898/31,566 shares outstanding)................ $ 12.57
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($443,800/35,241 shares outstanding)................ $ 12.59
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $5,508,644
Accumulated net investment loss........................... (113)
Net unrealized appreciation on investments and foreign
currency transactions................................... 202,883
----------
NET ASSETS.................................................. $5,711,414
==========
</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> 231
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $11,071 foreign taxes withheld.......... $ 142,376
Interest.................................................. 4,085
---------
146,461
---------
EXPENSES
Management fee............................................ $57,684
Transfer agent............................................ 17,141
Administrative services fee............................... 5,768
Custodian fees............................................ 44,238
Blue Sky fees............................................. 27,312
Auditing and accounting fees.............................. 18,830
Shareholder reports....................................... 7,259
Amortization of organization expenses..................... 13,969
Fund accounting........................................... 20,273
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 42,616
Legal..................................................... 28,032
Other..................................................... 742
---------
293,104
Expenses reimbursed by Manager............................ (131,352)
Fees paid indirectly...................................... (6,652)
---------
Net expenses.......................................... 155,100
---------
NET INVESTMENT LOSS......................................... (8,639)
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 273,634
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 635,656
---------
Net gain on investment transactions................... 909,290
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 900,651
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 232
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1999 1998
------------------------
<S> <C> <C>
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (8,639) $ (25,551)
Net realized gain on investments and foreign currency
transactions............................................ 273,634 5,714
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 635,656 (416,183)
----------- ----------
Net increase (decrease) resulting from operations..... 900,651 (436,020)
----------- ----------
Class A distributions
Dividends from net investment income...................... (1,579) --
Distributions from capital gains.......................... (94,949) --
----------- ----------
Total distributions to Class A shareholders........... (96,528) --
----------- ----------
Class B distributions
Dividends in excess of net investment income.............. (1,539) --
Distributions from capital gains.......................... (143,090) --
----------- ----------
Total distributions to Class B shareholders........... (144,629) --
----------- ----------
Class C distributions
Dividends in excess of net investment income.............. (52) --
Distributions from capital gains.......................... (15,635) --
----------- ----------
Total distributions to Class C shareholders........... (15,687) --
----------- ----------
Advisor Class distributions
Dividends from net investment income...................... (434) --
Distributions from capital gains.......................... (22,631) --
----------- ----------
Total distributions to Advisor Class shareholders..... (23,065) --
----------- ----------
Fund share transactions (Note 4)
Class A................................................... (262,325) 1,378,851
Class B................................................... (870,975) 3,813,765
Class C................................................... (536,001) 921,918
Advisor Class............................................. 366,785 69,443
----------- ----------
Net (decrease) increase resulting from Fund share
transactions......................................... (1,302,516) 6,183,977
----------- ----------
TOTAL (DECREASE) INCREASE IN NET ASSETS..................... (681,774) 5,747,957
NET ASSETS
Beginning of period....................................... 6,393,188 645,231
----------- ----------
END OF PERIOD............................................. $ 5,711,414 $6,393,188
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 233
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9
<TABLE>
<CAPTION>
for the period
May 13, 1997
for the year ended (commencement)
CLASS A December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $11.27 $10.56 $10.02
--------------------------------------
Income from investment operations
Net investment income (loss)(a)........................... .04 (.01)(b) (.02)
Net gains on securities (both realized and unrealized).... 2.01 .72(b) .58
--------------------------------------
Total from investment operations.......................... 2.05 .71 .56
--------------------------------------
Less distributions
Dividends from net investment income...................... .01 -- --
Distributions from capital gains.......................... .70 -- .02
--------------------------------------
Total distributions..................................... .71 -- .02
--------------------------------------
Net asset value, end of period.............................. $12.61 $11.27 $10.56
======================================
Total return (%)............................................ 18.29(c) 6.72(c) 5.54(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,789 $1,862 $ 575
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............................ 2.33 2.49 2.20(f)
Without expense reimbursement (%)......................... 4.61 5.86 28.41(f)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .32 (.12) (.48)(f)
Portfolio turnover rate (%)................................. 30 25 5
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
May 13, 1997
for the year ended (commencement)
CLASS B December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $11.17 $10.54 $10.02
--------------------------------------
Income from investment operations
Net investment loss(a).................................... (.05) (.01)(b) (.03)
Net gains on securities (both realized and unrealized).... 1.98 .64(b) 56
--------------------------------------
Total from investment operations.......................... 1.93 .63 .53
--------------------------------------
Less distributions
Dividends in excess of net investment income.............. .01 -- --
Distributions from capital gains.......................... .60 -- .01
--------------------------------------
Total distributions..................................... .61 -- .01
--------------------------------------
Net asset value, end of period.............................. $12.49 $11.17 $10.54
======================================
Total return (%)............................................ 17.37(c) 5.98(c) 5.26(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $3,081 $3,604 $ 70
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............................ 3.04 3.27 3.29(f)
Without expense reimbursement (%)......................... 5.32 6.64 29.50(f)
Ratio of net investment loss to average net assets (%)(a)... (.39) (.90) (1.58)(f)
Portfolio turnover rate (%)................................. 30 25 5
</TABLE>
<PAGE> 234
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
10
<TABLE>
<CAPTION>
for the period
January 29, 1998
for the year ended (commencement)
CLASS C December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $11.17 $10.91
--------------------------------------
Income from investment operations
Net investment loss(a).................................... (.10) (.02)(b)
Net gains on securities (both realized and unrealized).... 2.02 .28(b)
--------------------------------------
Total from investment operations.......................... 1.92 .26
--------------------------------------
Less distributions
Distributions from capital gains.......................... .52 --
--------------------------------------
Total distributions..................................... .52 --
--------------------------------------
Net asset value, end of period.............................. $12.57 $11.17
======================================
Total return (%)............................................ 17.23(c) 2.38(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 397 $ 863
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............................ 3.13 3.26(f)
Without expense reimbursement (%)......................... 5.41 6.63(f)
Ratio of net investment loss to average net assets (%)(a)... (.48) (.89)(f)
Portfolio turnover rate (%)................................. 30 25
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
March 23, 1998
for the year ended (commencement)
ADVISOR CLASS December 31, to December 31,
- ----------------------------------------------------------------------------------------------------
1999 1998
SELECTED PER SHARE DATA --------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $11.28 $12.31
--------------------------------------
Income from investment operations
Net investment income (loss)(a)........................... .03 (.01)(b)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.05 (1.02)(b)
--------------------------------------
Total from investment operations.......................... 2.08 (1.03)
--------------------------------------
Less distributions
Dividends from net investment income...................... .02 --
Distributions from capital gains.......................... .75 --
--------------------------------------
Total distributions..................................... .77 --
--------------------------------------
Net asset value, end of period.............................. $12.59 $11.28
======================================
Total return (%)............................................ 18.50(c) (8.37)(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 444 $ 65
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............................ 2.03 2.41(f)
Without expense reimbursement (%)......................... 4.31 5.78(f)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .62 (.04)(f)
Portfolio turnover rate (%)................................. 30 25
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net investment income (loss) is (b) Based on average shares (c) Total return does not reflect a
net of expenses reimbursed by outstanding. sales charge.
Manager.
(d) Total return represents (e) Total expenses include fees (f) Annualized
aggregate total return and does not paid indirectly, if any, through an
reflect a sales charge. expense offset arrangement.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
NOTES TO FINANCIAL STATEMENTS
Ivy Pan-Europe Fund (the "Fund"), is a diversified series of shares of Ivy Fund.
The shares of beneficial interest are assigned no par value and an unlimited
number of shares of Class A, Class B, Class C and Advisor Class are authorized.
Ivy Fund was organized as a Massachusetts business trust under a Declaration of
Trust dated December 21, 1983 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there were no sales on the exchange
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. 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 December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund earned foreign source dividends of $153,447. These dividends were
subject to foreign withholding tax in the amount of $11,071. The Fund intends to
elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may file their share of foreign taxes paid as either a tax
credit or itemized deduction.
Pursuant to Code Section 852, the Fund designates $209,921 as long-term capital
gain distributions for its taxable year ended December 31, 1999.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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 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
<PAGE> 236
[IVY LEAF LOGO]
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IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
12
amount and character from distributions during such period. Accordingly, the
Fund may make reclassifications among certain of its capital accounts without
impacting the net asset value of the Fund.
FEES PAID INDIRECTLY -- From January 1, 1999 though April 15, 1999, the Fund had
an arrangement with its custodian whereby a percentage of quarterly cumulative
credits resulting from cash balances on deposit with the custodian are used to
offset custody fees, including transaction and out-of-pocket expenses. For the
period from January 1, 1999 through April 15, 1999, custody fees were reduced by
$6,652 under this arrangement.
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. At December 31, 1999, MIMI
owned 8.7% 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $1,024.
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 $4,506,
$32,101 and $6,009, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $5,627, $8,896, $2,211 and $407, for Class A, Class B, Class C and
Advisor Class, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 50,233 $ 596,501 252,535 $ 3,085,553
Issued on
reinvestment of
distributions....... 7,020 87,117 -- --
Repurchased.......... (80,556) (945,943) (141,799) (1,706,702)
-------- ----------- -------- -----------
Net (decrease)/
increase............ (23,303) $ (262,325) 110,736 $ 1,378,851
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 62,427 $ 731,751 445,347 $ 5,372,927
Issued on
reinvestment of
distributions....... 8,866 109,062) -- --
Repurchased.......... (147,401) (1,711,788) (129,254) (1,559,162)
-------- ----------- -------- -----------
Net (decrease)/
increase............ (76,108) $ (870,975) 316,093 $ 3,813,765
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 29, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 12,511 $ 146,752 162,521 $ 1,904,211
Issued on
reinvestment of
distributions....... 769 9,521 -- --
Repurchased.......... (58,978) (692,274) (85,257) (982,293)
-------- ----------- -------- -----------
Net (decrease)/
increase............ (45,698) $ (536,001) 77,264 $ 921,918
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 23, 1998
YEAR ENDED (COMMENCEMENT)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
- ----------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 29,782 $ 370,528 5,765 $ 69,889
Issued on
reinvestment of
distributions....... 1,882 23,059 -- --
Repurchased.......... (2,147) (26,802) (41) (446)
-------- ----------- -------- -----------
Net increase......... 29,517 $ 366,785 5,724 $ 69,443
======== =========== ======== ===========
</TABLE>
<PAGE> 237
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY PAN-EUROPE FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 238
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY PAN-EUROPE FUND
- --------------------------------------------------------------------------------
14
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 243,993 2,953
Keith J. Carlson.............. 243,993 2,953
Stanley Channick.............. 243,993 2,953
Roy J. Glauber................ 243,993 2,953
Edward M. Tighe............... 243,993 2.953
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
245,170 880 896
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
179,304 1,522 3,053 63,067
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
176,346 3,533 4,000 63,067
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
178,634 1,047 4,198 63,067
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
178,230 1,649 4,000 63,067
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
179,238 641 4,000 63,067
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
178,438 1,243 4,198 63,067
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
175,615 4,066 4,198 63,067
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
178,832 1,047 4,000 63,067
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
175,140 2,124 6,615 63,067
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 239
15
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
<PAGE> 240
02IPEF123199
<PAGE> 241
[IVY FUNDS LOGO]
IVY SOUTH AMERICA FUND
ANNUAL REPORT
This report and the financial statements continued 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
December 31, 1999
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
[MACKENZIE LOGO]
OVERVIEW
The Ivy South America Fund is managed using a combination of a top-down view of
each country and a bottom-up analysis of specific investment opportunities. We
believe that South American economies--like other emerging markets--tend to be
more vulnerable to macrolevel risks than developed economies. Therefore,
evaluating factors such as political and social stability, foreign trade
relationships, central bank policy, and currency valuations are a critical part
of each investment decision. Stock selection is based on a disciplined, value
approach that pinpoints companies that appear to us to be undervalued relative
to either their long-term growth prospects or underlying asset values. The
Fund's holdings are concentrated in what we view as high-quality companies
selected for both their defensive strengths and long-term prospects.
For the 12 months ended December 31, 1999,the Ivy South America Fund
returned 46.39% as compared to its benchmark, the Morgan Stanley Capital
International Emerging Markets Free Latin America Index, which was up 58.89%
for the same period.(For the Fund's total return with sales charge and
performance commentary, please refer to page 3.)
MARKET COMMENTARY
South American equity markets performed quite well in 1999.We believe that as
the extreme level of risk aversion following the Asian crisis began to subside
and interest rates declined from crisis-level peaks, investors anticipated a
recovery in economic growth in 2000, which drove stock prices higher.
We believe the fundamentals governing South American economies improved
substantially over the course of 1999. The devaluation of Brazil's currency, the
real, was viewed by economists and investors alike as the final milestone of
the emerging market crisis that, in our view, started with the devaluation of
the Thai baht in 1997. Our research shows that although Brazil's devaluation had
a negative impact on growth throughout the region in 1999, the downturn did not
appear to be as sharp as market participants expected. Our research indicates
that regional growth contracted by an estimated 0.2%, with accelerating global
growth and improving commodity prices over the course of the year offsetting
much of the negative impact of the Brazilian recession.
BRAZIL'S ECONOMY IMPROVES
The Fund's largest country allocation continues to be Brazil (57% of assets),
which we believe offers the most attractive valuations and the best long-term
growth potential in the region. In our opinion, over the course of 1999
significant improvements were made on the
<PAGE> 242
[IVY LEAF LOGO]
- -------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- -------------------------------------------------------------------------------
2
"South America's momentum toward free market policies continues to be strong. It
is our view that free market reforms, such as privatization, deregulation, and
trade liberalization, could continue to generate dramatic productivity gains
and contribute to corporate earnings growth going forward."
fiscal front in Brazil, which has long been the economy's Achilles' heel.
Progress toward International Monetary Fund performance criteria is ahead of
schedule, and prospects for Social Security and tax reforms in 2000 may be
quite good. If the Brazilian government meets fiscal targets, we believe
country risk should continue to fall--and with it, interest rates should
continue what our research shows is their long-term trend downward. We believe
that the combination of falling rates and increased investor confidence could
contribute quite significantly to rising prices.
CHILE CLIMBS BACK
We are also quite optimistic about prospects for Chile, as the economy appears
to be recovering from and a difficult 1999 when a sharp decline in demand for
Chilean exports from Asia and the drop in copper prices led the country into
recession. This year, we expect the market may be among the best cyclical
recovery stories in South America. In our view, Argentina should also benefit
from improving commodity prices and a domestic cyclical recovery.
LOOKING AHEAD
We believe that the end of the regional recession is in sight and that economic
growth may accelerate quite substantially in 2000. Currently, economists are
estimating that regional growth will slightly exceed 3% in 2000,although
upgrades to expectations may be likely.
In our opinion, mounting evidence of a cyclical recovery and relative
earnings strength should continue to drive markets higher as we move into 2000.
In addition to accelerating domestic demand, we anticipate that improving
commodity prices may provide an added boost to exports for the region, as
primary materials make up a large portion of the output for economies in the
region. Fund holdings, such as an iron ore exporter in Brazil, and copper
companies in Chile and Argentina should benefit.
We believe the Fund is well positioned to provide investors with exposure to
the long-term secular trends that may continue to improve prospects for
sustainable growth in the region. Despite emerging market turmoil in 1998,and
the Brazilian currency devaluation at the beginning of 1999,we believe South
America's momentum toward free market policies continues to be strong. It is
our view that free market reforms, such as privatization, deregulation, and
trade liberalization, could continue to generate dramatic productivity gains
and contribute to corporate earnings growth going forward.
Overall, we are positive on prospects for South American equity markets in
2000. The combination of improved growth and lower rates, with attractive
valuations, may already be attracting global portfolio flows back into the
region after a two-year hiatus.
<PAGE> 243
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3
PERFORMANCE COMPARISON OF THE FUND SINCE INCEPTION (11/94) OF A $10,000
INVESTMENT
[CHART]
Ivy South America Fund
Performance Commentary
The Ivy South America Fund returned 46.39% for the 12-month period ending
December 31,1999. This compares with the 58.89% rise in the Morgan Stanley
Capital International (MSCI) Emerging Markets Free (EMF) Latin America Index.
We believe the Fund underperformed its benchmark index due to its lack of
exposure to the Mexican market, the strongest performing Latin American market
in 1999,and the largest country weight in the Index.
The Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Latin America Index is an unmanaged index of stocks which assumes reinvestment
of dividends and, unlike Fund returns, does not reflect any fees or expenses.
It is not possible to invest in an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
IVY SOUTH AMERICA FUND Class A(1) Class B(2) & C(3) Advisor Class(4)
AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------------------------------------------
FOR PERIODS ENDING w/ w/o w/ w/o w/ w/o
DECEMBER 31,1999 Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
- ------------------------------------------------------------------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
40.29% 45.29% 30.34% 35.34%
1 year C: C: C: C:
37.97% 27.06% 44.59% 45.59% 39.25% 40.25% n/a n/a
- ------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
(.61)% (.20)% (4.99)% (4.60)%
C: C: C: C:
5 year (.61)% (5.22)% n/a n/a n/a n/a n/a n/a
- ------------------------------------------------------------------------------------------------------------------------
B: B: B: B:
(3.74)% (3.55)% (8.17)% (7.99)%
C: C: C: C:
Since Inception(5) (3.90)% (8.64)% 1.15% 1.15% (1.50)% (1.50)% 24.35% 22.31%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class A performance figures include the maximum sales charge of 5.75%.
(2)Class B performance figures are calculated with and without the applicable
Contingent Deferred Sales Charge (CDSC), up to a maximum of 5.00%.
(3)Class C performance figures are calculated with and without the applicable
CDSC, up to a maximum of 1.00%.
(4)Advisor Class shares are not subject to an initial sales charge or a CDSC.
(5)Class A and Class B commenced operations November 1,1994.Class C commenced
operations April 30,1996; Advisor Class commenced operations July 1,1999.
Total returns in some periods were higher due to reimbursement of certain Fund
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy South America Fund will
fluctuate and at redemption shares may be worth more or less than the amount of
the original investment.
<PAGE> 244
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 94.17% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 15.33%
Banco de Galicia y Buenos Aires S.A.
de C.V. ........................... 12,666 $ 62,958
Banco Frances S.A. .................. 8,424 66,558
Bansud S.A.(a)....................... 8,809 20,528
Inversiones y Representaciones S.A.
(IRSA)............................. 15,109 48,960
Perez Companc S.A. -- B.............. 10,555 54,048
Quilmes Industrial S.A. ADR.......... 2,830 33,783
Telecom Argentina S.A. Sponsored
ADR................................ 2,700 92,475
Telefonica de Argentina S.A. --
Sponsored ADR...................... 2,700 83,362
----------
462,672
----------
BRAZIL -- 56.77%
Banco Bradesco S.A. Preferred(a)(with
560,772 rights(a))................. 8,636,032 70,473
Banco Itau S.A. ..................... 970,000 83,830
Centrais Electricas Brasileiras S.A.
(Electrobras) Preferred............ 4,808,000 115,541
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar................ 3,050,000 102,035
Companhia de Saneamento Basico do
Estado de Sao Paulo (SABESP) (with
1,278 rights(a))................... 320,030 37,856
Companhia Energetica de Minas Gerais
(Cemig) Preferred.................. 3,368,933 76,075
Companhia Paranaense de Energia
(COPEL)............................ 6,800,000 45,497
Companhia Siderurgica de Tubarao
Preferred.......................... 3,400,000 55,924
Companhia Vale do Rio Doce --
Preferred A(a) (with 8,300
nontradeable debentures(a))........ 4,900 136,604
Embratel Participacoes S.A. ADR...... 2,600 70,850
Gerdau S.A. ......................... 2,200,000 58,879
Light Servicos de Eletricidade
S.A. .............................. 230,153 25,537
Petroleo Brasileiro S.A.
(Petrobras)........................ 954,000 244,682
Rossi Residencial S.A. GDR........... 10,000 12,812
Tam -- Cia de Invetimentos em
Transportes Preferred(a)........... 2,450,000 68,302
Tele Centro Oeste Celular
Participacoes S.A. ................ 11,400,000 24,154
Tele Centro Sul Participacoes S.A.
ADR................................ 520 47,190
Tele Norte Leste Participacoes S.A.
ADR (Telemar)...................... 2,600 66,300
Tele Sudeste Celular Participacoes
S.A. ADR........................... 520 20,182
Telecomunicacoes de Minas Gerais
(Telemig) -- Preferred B........... 582,043 22,684
Telecomunicacoes de Sao Paulo
ADR(a)............................. 2,600 63,537
Telecomunicacoes de Sao Paulo
Rights(a).......................... 3,205,936 75,970
Telemig Celular Participacoes S.A.
ADR................................ 130 6,004
Telemig Celular S.A. Preferred
C(a)............................... 11,317 208
Telesp Celular S.A. Preferred B...... 673,807 53,724
Uniao de Bancos Brasileiros S.A
(Unibanco) -- Units................ 1,189,847 79,610
Usinas Siderurgicas de Minas Gerais
S.A. (Usiminas) Preferred A........ 9,010 49,232
----------
1,713,692
----------
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
CHILE -- 12.17%
A.F.P. Provida S.A. -- Sponsored
ADR................................ 2,100 $ 45,150
Antofagasta Holdings plc............. 11,700 81,745
Banco Santander Chile Sponsored
ADR................................ 1,000 15,250
Cristalerias de Chile Sponsored
ADR................................ 2,600 37,375
Empresa Nacional Electricidad S.A. --
Sponsored ADR...................... 2,793 39,626
Gener S.A. Sponsored ADR............. 1,728 26,784
Laboratorio Chile S.A. ADR........... 2,500 45,469
Madeco S.A. Sponsored ADR............ 3,700 41,163
Sociedad Quimica y Minera de Chile
S.A. Sponsored ADR................. 1,100 34,719
----------
367,281
----------
COLOMBIA -- 1.25%
Bancolombia S.A. Sponsored ADR....... 6,100 28,212
Cementos Diamante GDR 144A(a)........ 8,300 9,597
----------
37,809
----------
MEXICO -- 1.84%
Panamerican Beverages Inc. .......... 2,700 55,519
----------
PERU -- 4.93%
Banco Wiese ADR(a)................... 7,200 8,550
Credicorp Limited.................... 5,273 63,276
Southern Peru Copper Corp. .......... 1,900 29,331
Telefonica del Peru S.A. -- Class
B.................................. 36,600 47,626
----------
148,783
----------
VENEZUELA -- 1.88%
Cia Anonima Nacional Telefonos de
Venezuela ADR (CANTV).............. 2,300 56,637
----------
TOTAL INVESTMENTS -- 94.17%
(Cost -- $3,099,791)(b)............ 2,842,393
OTHER ASSETS, LESS LIABILITIES -- 5.83% 175,978
----------
NET ASSETS -- 100%................... $3,018,371
==========
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 December 31, 1999, net unrealized depreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation................ $ 577,546
Gross unrealized depreciation................ (834,944)
----------
Net unrealized depreciation.............. $ (257,398)
==========
Purchases and sales of securities other than short-term
obligations aggregated $68,853 and $908,216, respectively, for
the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 245
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $3,099,791)....... $2,842,393
Cash........................................................ 6,762
Receivables
Fund shares sold.......................................... 158,627
Dividends and interest.................................... 14,257
Manager for expense reimbursement......................... 13,180
Other assets................................................ 5,431
----------
Total assets.............................................. 3,040,650
----------
LIABILITIES
Payables
Management fee............................................ 2,297
12b-1 service and distribution fees....................... 1,308
Other payables to related parties......................... 3,357
Accrued expenses............................................ 15,317
----------
Total liabilities......................................... 22,279
----------
NET ASSETS.................................................. $3,018,371
==========
CLASS A
Net asset value and redemption price per share
($1,478,009/188,750 shares outstanding)................... $ 7.83
==========
Maximum offering price per share ($7.83 x 100/94.25)*....... $ 8.31
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($1,236,668/159,973 shares outstanding)............. $ 7.73
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($141,110/18,500 shares outstanding)................ $ 7.63
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($162,584/20,833 shares outstanding)................ $ 7.80
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $4,011,687
Accumulated net realized loss on investments and foreign
currency transactions................................... (727,673)
Accumulated net investment loss........................... (8,513)
Net unrealized depreciation on investments and foreign
currency transactions................................... (257,130)
----------
NET ASSETS.................................................. $3,018,371
==========
</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> 246
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $10,778 foreign taxes withheld.......... $ 90,376
Interest.................................................. 3,408
---------
93,784
---------
EXPENSES
Management fee............................................ $25,779
Transfer agent............................................ 16,948
Administrative services fee............................... 2,578
Custodian fees............................................ 38,764
Blue Sky fees............................................. 30,600
Auditing and accounting fees.............................. 19,036
Shareholder reports....................................... 6,111
Amortization of organization expenses..................... 10,280
Fund accounting........................................... 20,026
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 14,398
Legal..................................................... 26,512
Other..................................................... 376
---------
220,648
Expenses reimbursed by Manager.............................. (155,981)
---------
Net expenses.............................................. 64,667
---------
NET INVESTMENT INCOME....................................... 29,117
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (67,947)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 995,732
---------
Net gain on investment transactions................... 927,785
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 956,902
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 247
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1999 1998
------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income..................................... $ 29,117 $ 87,659
Net realized loss on investments and foreign currency
transactions............................................ (67,947) (677,203)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 995,732 (1,807,210)
---------- -----------
Net increase (decrease) resulting from operations..... 956,902 (2,396,754)
---------- -----------
Class A distributions
Dividends from net investment income...................... (58,620) --
Distributions from capital gains.......................... -- (44,650)
---------- -----------
Total distributions to Class A shareholders........... (58,620) (44,650)
---------- -----------
Class B distributions
Dividends from net investment income...................... (37,286) --
Distributions from capital gains.......................... -- (28,480)
---------- -----------
Total distributions to Class B shareholders........... (37,286) (28,480)
---------- -----------
Class C distributions
Dividends from net investment income...................... (11,584) --
Distributions from capital gains.......................... -- (4,060)
---------- -----------
Total distributions to Class C shareholders........... (11,584) (4,060)
---------- -----------
Advisor Class distributions
Dividends from net investment income...................... (7,352) --
---------- -----------
Total distributions to Advisor Class shareholders..... (7,352) --
---------- -----------
Fund share transactions (Note 5)
Class A................................................... (611,825) (2,470,662)
Class B................................................... (59,625) (1,266,307)
Class C................................................... (43,807) (184,076)
Advisor Class............................................. 133,814 --
---------- -----------
Net decrease resulting from Fund share transactions... (581,443) (3,921,045)
---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 260,617 (6,394,989)
NET ASSETS
Beginning of period....................................... 2,757,754 9,152,743
---------- -----------
END OF PERIOD............................................. $3,018,371 $ 2,757,754
========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ -- $ 76,439
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 248
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
8
<TABLE>
<CAPTION>
CLASS A for the year ended December 31,
- -----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.58 $ 8.96 $ 8.51 $ 6.88 $ 8.37
-------------------------------------------------
Income (loss) from investment operations
Net investment income(a).................................. .12 .21 .06 .01 .01
Net gains or losses on securities (both realized and
unrealized)............................................. 2.45 (3.44) .53 1.66 (1.45)
-------------------------------------------------
Total from investment operations.......................... 2.57 (3.23) .59 1.67 (1.44)
-------------------------------------------------
Less distributions
Dividends from net investment income...................... .32 -- .04 -- --
Distributions from capital gains.......................... -- .15 .10 .04 --
Returns of capital........................................ -- -- -- -- .05
-------------------------------------------------
Total distributions..................................... .32 .15 .14 .04 .05
-------------------------------------------------
Net asset value, end of period.............................. $ 7.83 $ 5.58 $ 8.96 $ 8.51 $ 6.88
=================================================
Total return (%)(b)......................................... 46.39 (36.07) 7.03 24.22 (17.28)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,478 $ 1,638 $5,671 $4,016 $ 2,015
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 2.20 2.38 2.45 2.55 2.61
Without expense reimbursement (%)......................... 8.25 5.09 3.18 4.89 9.26
Ratio of net investment income to average net assets
(%)(a).................................................... 1.44 1.96 .65 .24 .22
Portfolio turnover rate (%)................................. 3 26 10 20 45
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B for the year ended December 31,
- -----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
SELECTED PER SHARE DATA ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.52 $ 8.94 $ 8.48 $ 6.88 $ 8.37
-------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .05 .12 (.01) (.03) (.02)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.44 (3.39) .53 1.63 (1.47)
-------------------------------------------------
Total from investment operations.......................... 2.49 (3.27) .52 1.60 (1.49)
-------------------------------------------------
Less distributions
Dividends from net investment income...................... .28 -- -- -- --
Distributions from capital gains.......................... -- .15 .06 -- --
-------------------------------------------------
Total distributions..................................... .28 .15 .06 -- --
-------------------------------------------------
Net asset value, end of period.............................. $ 7.73 $ 5.52 $ 8.94 $ 8.48 $ 6.88
=================================================
Total return (%)(b)......................................... 45.29 (36.59) 6.18 23.26 (17.90)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,237 $ 972 $3,028 $2,025 $ 684
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 2.98 3.18 3.23 3.33 3.36
Without expense reimbursement (%)......................... 9.03 5.89 3.96 5.67 10.01
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .66 1.16 (.13) (.54) (.53)
Portfolio turnover rate (%)................................. 3 26 10 20 45
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 249
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9
<TABLE>
<CAPTION>
for the period
April 30, 1996
(commencement)
CLASS C for the year ended December 31, to December 31,
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
SELECTED PER SHARE DATA --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.48 $ 8.89 $ 8.46 $ 7.96
--------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss)(a)........................... .03 .12 (.02) (.02)
Net gains or losses on securities (both realized and
unrealized)............................................. 2.45 (3.38) .53 .55
--------------------------------------------------------
Total from investment operations.......................... 2.48 (3.26) .51 .53
--------------------------------------------------------
Less distributions
Dividends from net investment income...................... .33 -- -- --
Distributions from capital gains.......................... -- .15 .08 .03
--------------------------------------------------------
Total distributions..................................... .33 .15 .08 .03
--------------------------------------------------------
Net asset value, end of period.............................. $ 7.63 $ 5.48 $ 8.89 $ 8.46
========================================================
Total return (%)............................................ 45.59(b) (36.69)(b) 6.06(b) 6.66(d)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands){................... $ 141 $ 148 $ 453 $ 111
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 2.94 3.21 3.30 3.46(e)
Without expense reimbursement (%)......................... 8.99 5.92 4.03 5.80(e)
Ratio of net investment income (loss) to average net assets
(%)(a).................................................... .70 1.13 (.20) (.68)(e)
Portfolio turnover rate (%)................................. 3 26 10 20
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
July 1, 1999
(commencement)
ADVISOR CLASS to December 31,
- ----------------------------------------------------------------------------------
1999
SELECTED PER SHARE DATA --------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 6.60
--------------------
Income from investment operations
Net investment income(a).................................. .04
Net gains on securities (both realized and unrealized).... 1.55
--------------------
Total from investment operations.......................... 1.59
--------------------
Less distributions
Dividends from net investment income...................... .39
--------------------
Total distributions..................................... .39
--------------------
Net asset value, end of period.............................. $ 7.80
====================
Total return (%)(d)......................................... 24.35
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 163
Ratio of expenses to average net assets(e)
With expense reimbursement (%)............................ 1.43
Without expense reimbursement (%)......................... 7.48
Ratio of net investment income (loss) to average net assets
(%)(a)(e)................................................. 2.21
Portfolio turnover rate (%)................................. 3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) Net investment (b) Total return (c) From 1995 to (d) Total return (e) Annualized
income (loss) is net does not reflect a 1998, total expenses represents aggregate
of expenses sales charge. included fees paid total return and
reimbursed by indirectly, through does not reflect a
Manager. an expense offset sales charge.
arrangement.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 250
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS
Ivy South America Fund (the "Fund"), is a non-diversified series of shares of
Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C and Advisor Class are
authorized. Ivy Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated December 21, 1983 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates. Actual results
could differ from those estimates.
SECURITY VALUATION -- Securities traded on a U.S. or foreign stock exchange, or
The Nasdaq Stock Market, Inc. ("Nasdaq") system, are valued at the last quoted
sale price reported as of the close of regular trading on the exchange on which
the security is traded most extensively. If there were no sales on the exchange
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. 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 December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends are recorded on the ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund earned foreign source dividends of $101,154. These dividends were
subject to foreign withholding tax in the amount of $10,778. The Fund intends to
elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may report their share of foreign taxes paid as either a tax
credit or itemized deduction.
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 gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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> 251
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
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 its 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $210.
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
$3,682, $9,447 and $1,269, 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 $9,631, $6,454, $819 and $44, 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>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 66,279 $ 407,015 131,225 $ 1,039,478
Issued on
reinvestment of
distributions....... 6,707 50,105 6,020 34,396
Repurchased.......... (177,951) (1,068,945) (476,199) (3,544,536)
-------- ----------- -------- -----------
Net decrease......... (104,965) $ (611,825) (338,954) $(2,470,662)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 60,567 $ 400,074 27,768 $ 209,828
Issued on
reinvestment of
distributions....... 3,330 24,579 3,019 16,992
Repurchased.......... (80,045) (484,278) (193,307) (1,493,127)
-------- ----------- -------- -----------
Net decrease......... (16,148) $ (59,625) (162,520) $(1,266,307)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 48,657 $ 323,014 3,891 $ 32,908
Issued on
reinvestment of
distributions....... 952 6,929 161 902
Repurchased.......... (58,075) (373,750) (28,074) (217,886)
-------- ----------- -------- -----------
Net decrease......... (8,466) $ (43,807) (24,022) $ (184,076)
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 1, 1999
(COMMENCEMENT)
TO DECEMBER 31, 1999
- ---------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- ---------------------------------------------
<S> <C> <C> <C> <C>
Sold................. 19,933 $ 127,043
Issued on
reinvestment of
distributions....... 987 7,352
Repurchased.......... (87) (581)
-------- -----------
Net increase......... 20,833 $ 133,814
======== ===========
</TABLE>
<PAGE> 252
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY SOUTH AMERICA FUND
- --------------------------------------------------------------------------------
12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY SOUTH AMERICA FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 253
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 245,505 18,367
Keith J. Carlson.............. 245,505 18,367
Stanley Channick.............. 245,505 18,367
Roy J. Glauber................ 245,505 18,367
Edward M. Tighe............... 245,505 18,367
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
253,976 1,828 8,068
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION: Not applicable.
3.2 BORROWING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
197,393 5,711 11,011 49,757
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
199,909 3,304 10,902 49,757
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
198,575 4,529 11,011 49,757
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
200,917 3,036 10,162 49,757
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
197,991 5,222 10,902 49,757
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
198,263 4,950 10,902 49,757
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
199,905 3,036 11,174 49,757
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
197,372 5,732 11,011 49,757
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 254
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
14
<PAGE> 255
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 256
02ISAF123199
<PAGE> 257
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless proceeded 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
December 31, 1999
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
[Mackenzie Logo]
IVY INTERNATIONAL SMALL COMPANIES FUND
Overview
The goal of the Ivy International Small Companies Fund is to provide investors
with access to investment opportunities in foreign stock markets, focusing on
issuers whose market capitalization is less than $1 billion and that are
diversified across a wide range of geographic, economic and industry sectors.
Countries are selected on the basis of a mix of factors that include long-term
economic growth prospects, anticipated inflation levels and the effect of
applicable government policies on local business conditions. The Fund is
co-managed by Ivy's international investment team and Henderson Investors of
London, England. Each management team is responsible for 50% of the portfolio
and applies its own distinct investment style.
As a result of outperformance by large-cap stocks over the past few
years, we believe many investors have overlooked the opportunity that
international small-cap stocks currently offer relative to their larger-stock
counterparts. History has shown that, in many cases, successful small companies
can respond more quickly to change, and may be in a better position to find and
exploit market niches in today's dynamic environment. We believe that while many
of the world's large companies are restructuring to compete more effectively in
the global economy, smaller, more flexible companies are better poised to
capitalize on evolving opportunities.
For the 12 months ended December 31, 1999, the Ivy International Small
Companies Fund was up 39.45%, as compared to the HSBC James Capel World
(Excluding-US) Small Company Index, which returned 33.61% for the same period.
(For the Fund's total return with sales charge and performance commentary,
please refer to page 4.)
Market Commentary
Ivy Management, Inc.
The portion of the Fund managed by Ivy Management, Inc. employs a disciplined,
value-driven investment style that focuses on a company's long-term earnings
capacity. The management team believes that less liquid, smaller companies often
offer better fundamental value on a number of measures than larger-cap stocks.
Opportunities are evaluated on a variety of measures--the result of which is
that stocks are purchased at what the management team believes to be a discount
to their fair value. In addition to traditional measures, such as price to
earnings and price to cash flow ratios, the team focuses on asset values, such
as replacement cost and breakup value, when appropriate. While quantitative
factors are paramount, qualitative factors, such as political and social
stability, foreign trade relationships, central bank policy, and currency
valuations, are also critical parts of the investment decision. The management
team's research shows
<PAGE> 258
2
that current valuations in the Ivy International Small Companies Fund are, on
average about half those of broader indices; and, in many cases, companies in
the Fund boast higher growth rates. The team believes that if investors start
looking deeper for value, international small caps may be due for a period of
substantial outperformance.
Ivy's management team believes the popularity of technology stocks in 1999
that was pervasive in US equity markets is spreading world-wide. It seemed as
though any company interested in becoming an Internet player was awarded
unusually high valuations based on future cash flows. Because Ivy utilizes a
disciplined, value philosophy, this technology mania was approached with
skepticism. While the Internet is that current valuations in the Ivy
International Small Companies Fund are, on average, about undeniably changing
the way business is conducted around the globe, in the opinion of the Ivy
international management team, the absence of profits by these companies and the
presence of speculation calls for caution on the part of investors.
"As part of a long-term strategy, we believe that experienced investors are
aware that international exposure is an important piece of a well-diversified
and balanced portfolio."
Values in Europe.
While the introduction of the euro went smoothly, Ivy's research concluded that
the currency began to weaken immediately--losing nearly 16% of its value
relative to the dollar and even more relative to the yen, which should result in
a sizable pickup in export growth in 2000. Ivy's research shows unemployment
dipped below 10% throughout Europe for the first time in seven years, sparking
consumer sentiment. Ivy's management team expects the euro to gain strength if
economic growth on the Continent continues to accelerate, which may provide
incremental returns for US dollar-based investors in the coming year.
Interest rates ended 1999 where they began--although concerns about an
increase throughout the year put severe pressure on rate-sensitive sectors,
particularly financial stocks. Going forward, Ivy expects interest rates and
inflation to remain relatively low throughout Europe.
The Ivy team also remains optimistic for the prospects for Central and
Eastern Europe, particularly the Czech Republic and Hungary. The management team
believes that countries in this region are on track to join the Economic and
Monetary Union (EMU) by 2003, which should provide a boost to economic activity
as direct investment into Central and Eastern Europe would result in further
economic integration with the West.
Ivy continues to believe that some of the most attractive values can be
found in European consumer companies, many of which are overlooked by investors
who are focusing their attention on technology-related companies. During the
year, holdings in retailers from Germany and the United Kingdom were added to
the portfolio. Ivy's management team believes that the strength in the European
economic cycle should support consumer confidence and improve sentiment toward
the retail sector.
Europe's economic recovery is leading Ivy's management team towards
more economically sensitive stocks. As economists upgrade European growth
forecasts, Ivy believes that companies that are most sensitive to economic
growth should provide the best chance for positive earnings surprises. The Fund
remains overweight in cyclicals such as paper and construction, as well as
capital goods producers.
Asia recovers.
Ivy's research shows that Japan experienced a rapidly expanding
economy in the first half of 1999, although momentum slowed during the second
half of the year. Overall, Ivy's research also indicates that the economies in
Asia staged a recovery in 1999 as well. In less than two years, industrial
production in the crisis economies in Asia are back to their precrisis levels.
Ivy believes a combination of looser monetary conditions and a strong recovery
in exports aided in the first stage of economic growth throughout Asia. Ivy's
management
<PAGE> 259
3
team expects that the second phase of the recovery to be driven by domestic
demand, as Asia's economic statistics indicate that domestic conditions are
improving across the region.
Henderson Investors.
Henderson Investors manages 50% of the assets of the Ivy International Small
Companies Fund. Henderson's management team believes that investing in companies
with an orientation toward strong growth characteristics could benefit the Fund.
Henderson initially began managing 50% of the Fund's assets in February
1999 with allocations in the United Kingdom and Europe. Henderson believes the
year was characterized by growing confidence about global economic growth.
According to Henderson, the expansion of the US economy continued with few
apparent signs of inflation. At the same time, Japan appeared to be on the road
to recovery, and evidence from Europe suggested stronger economic growth.
Henderson believes this stronger growth led to higher interest rates. In the US,
the Federal Funds rate rose by 75 basis points, while the Bank of England and
the European Central Bank (ECB) both raised interest rates by 50 basis points.
These interest rate hikes did little more than reverse the easing undertaken
over the previous months in the face of global financial crisis.
Henderson believes that the main currency stories concerned the yen,
which strengthened against the dollar, as well as the euro, which weakened
against the dollar. Henderson believes that in Europe net exports and investment
drove economic growth with no apparent signs of inflation. Interest rates ended
the year unchanged, after a 50 basis point reduction by the ECB in April was
reversed in November. In local currency terms, European equities performed well.
However, according to Henderson, returns for US-dollar investors were depressed
by currency weakness with smaller-company shares slightly underperforming larger
companies. The allocation to Europe (65% of the assets managed by Henderson)
changed little during the year. Of that, approximately half is invested in
technology-oriented companies, and much of the remainder is invested in service
and consumer-related areas.
Henderson's management team believes that in the UK, strong consumption
helped boost economic growth. The Bank of England cut interest rates by 125
basis points in the first half of the year. However, with indications of a
tighter labor market and concerns about the future path of inflation, these cuts
were partially reversed with two 25-basis point rises in September and November.
According to Henderson, smaller companies experienced strong performance in the
first half of the year, helped by corporate activity. Weakness during the summer
months was offset by the strength in technology stocks during the final quarter
of the year. Henderson's allocation to the UK has remained around 30% during the
year, with 48% in software and computer services and the remainder in media and
other service sectors.
Henderson believes that following very strong performance in 1999, the
Fund begins 2000 in a good position to take advantage of the global recovery,
which Henderson believes is likely to continue into the new year. Henderson's
orientation towards stocks with strong growth characteristics should benefit the
Fund. Going forward, the most likely changes Henderson will make to its asset
allocation will be a reduction in European companies in favor of some initial
investments in the Far East.
<PAGE> 260
4
Performance Comparison of the Fund Since
Inception (1/97) of a $10,000 Investment
[CHART]
Ivy International Small Companies Fund
Performance Commentary
For the 12 months ended December 31, 1999, the Ivy International Small Companies
Fund returned 39.45%. This compares favorably to the HSBC James Capel World
(Excluding-US) Small Company Index, which returned 33.61% for the same period.
Contributing to this outperformance was the Fund's allocation to the Asian
countries that performed well as the region recovered from the financial crisis
of 1997 and 1998, its allocation to technology stocks, which performed very well
in 1999, as well as the positive performance of the Fund's European holdings.
During this period, the Fund participated in Initial Public Offering (IPO)
securities, which also contributed favorably to the Fund's performance. The
availability of IPOs is limited and as the Fund's assets increase, IPOs will
likely become a smaller component of the overall Fund performance. Future
performance of the Fund, therefore, may be lower than during this past 12-month
period.
The HSBC James Capel World (Excluding-US) Small Company Index is an unmanaged
index of stocks which assumes reinvestment of dividends and, unlike Fund
returns, does not reflect any fees or expenses. It is not possible to invest in
an index.
Performance is calculated for Class A shares of the Fund unless otherwise
noted. The performance of all other share classes will vary relative to that of
Class A shares based on differences in their respective sales loads and fees.
<TABLE>
<CAPTION>
IVY INTERNATIONAL SMALL Class A(1) Class B(2) & C(3) Advisor Class(4) Class 1(5)
----------------------------------------------------------------------------------------------
COMPANIES FUND
AVERAGE ANNUAL TOTAL RETURN w/ w/o w/ w/o w/ w/o w/ w/o
FOR PERIODS ENDING Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
DECEMBER 31, 1999 ----------------------------------------------------------------------------------------------
w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B: B: B: B:
33.24% 38.24% 24.70% 29.70%
C: C: C: C:
1 year 31.43% 22.96% 37.36% 38.36% 28.61% 29.61% n/a n/a n/a n/a
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
B: B: B: B:
6.98% 7.84% 2.85% 3.69%
C: C: C: C:
Since Inception(6) 6.58% 2.19% 7.92% 7.92% 3.28% 3.28% 25.87% 23.79% n/a n/a
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class I shares are not subject to an initial sales charge or a CDSC.
There were no Class I shares outstanding.
(6) Class A, Class B and Class C commenced operations January 1, 1997;
Advisor Class commenced operations July 1, 1999.
Total returns were higher due to reimbursement of certain Fund
expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of Ivy
International Small Companies Fund will fluctuate and at redemption
shares may be worth more or less than the amount of the original
investment.
<PAGE> 261
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 88.17% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
ASIA/PACIFIC -- 8.93%
- -------------------------------------
HONG KONG -- 3.32%
China Hong Kong Photo Products
Holdings, Ltd. ..................... 220,000 $ 28,301
Jardine International Motor Holdings
Ltd. ............................... 48,000 24,082
Orient Overseas International Ltd. ... 80,000 31,131
VTech Holdings Limited................ 13,000 42,310
----------
125,824
----------
MALAYSIA -- 1.09%
Berjaya Sports Toto Berhad............ 20,000 41,486
----------
NEW ZEALAND -- 2.56%
Fletcher Challenge Building........... 13,000 19,118
Tourism Holdings Limited.............. 41,845 78,123
----------
97,241
----------
PHILIPPINES -- 0.93%
Universal Robina Corporation.......... 198,000 35,375
----------
SINGAPORE -- 1.03%
Clipsal Industries Limited............ 12,000 13,253
Elec & Eltek International Co.
Ltd. ............................... 8,000 25,920
----------
39,173
----------
EUROPE -- 77.23%
- -------------------------------------
AUSTRIA -- 0.91%
Mayr-Melnhof Karton AG................ 750 34,579
----------
CZECH REPUBLIC -- 0.61%
Inzenyrske a Prumyslove Stavby
(IPS)............................... 5,500 23,187
----------
DENMARK -- 1.23%
Jyske Bank A/S........................ 1,500 30,104
Sydbank A/S........................... 400 16,432
----------
46,536
----------
FINLAND -- 4.57%
F-Secure Oyj(a)....................... 2,500 72,667
Metso Oyj(a).......................... 3,770 48,745
Rapala Normark Oyj.................... 5,102 24,546
YIT-Yhtyma Oyj........................ 2,500 27,313
----------
173,271
----------
FRANCE -- 7.79%
Assurances Banque Populaire........... 291 28,525
Bongrain S.A. ........................ 75 24,754
Bull S.A.(a).......................... 5,000 40,042
Consodata SA(a)....................... 2,000 90,207
Etam Developpement S.A. .............. 1,636 41,814
MGI Coutier........................... 700 22,501
Scor S.A. ............................ 510 22,389
Unibail............................... 200 25,118
----------
295,350
----------
GERMANY -- 17.76%
BERU AG............................... 2,500 73,419
Dyckerhoff AG......................... 1,150 34,579
Escada AG Preferred................... 200 22,652
GFK AG(a)............................. 1,500 61,641
Intershop Communications AG(a)........ 359 100,391
Merck KGaA............................ 640 19,886
Nemetschek AG(a)...................... 400 21,650
SinnerSchrader AG(a).................. 2,550 121,404
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
Telegate AG(a)........................ 1,600 $ 92,693
Wanderer-Werke AG(a).................. 390 35,963
Zapf Creation AG(a)................... 2,700 89,305
----------
673,583
----------
HUNGARY -- 1.53%
Danubius Hotel & Spa Rt............... 1,200 21,731
Pick Szeged Rt........................ 775 36,154
----------
57,885
----------
IRELAND -- 1.98%
Ryanair Holdings plc(a)............... 6,897 75,005
----------
ITALY -- 0.95%
Banca Popolare di Milano.............. 4,650 36,027
----------
NETHERLANDS -- 4.96%
Athlon Groep NV....................... 1,577 34,063
Beter Bed Holding NV.................. 1,015 26,959
Devote NV(a).......................... 3,200 84,193
Samas Groep NV........................ 3,448 42,854
----------
188,069
----------
NORWAY -- 2.99%
Ekornes ASA........................... 4,354 43,610
Tandberg Television ASA(a)............ 5,059 69,869
----------
113,479
----------
PORTUGAL -- 2.72%
Companhia de Seguros Mundial
Confianca S.A.(a)................... 750 38,842
Lusomundo-SGPS S.A.(a)................ 2,010 28,205
SIVA-SGPS S.A. ....................... 2,593 36,282
----------
103,329
----------
SPAIN -- 1.01%
Bodegas y Bebidas S.A. ............... 1,500 13,862
Enaco, S.A.(a)........................ 5,000 24,556
----------
38,418
----------
SWEDEN -- 1.29%
Finnveden AB.......................... 3,400 48,753
----------
SWITZERLAND -- 4.84%
Swisslog Holding AG................... 500 145,246
Zehnder Holding AG -- Class B......... 70 38,482
----------
183,728
----------
UNITED KINGDOM -- 22.09%
Admiral plc........................... 1,900 47,158
Care U.K. plc......................... 5,455 19,034
Corporate Services Group plc.......... 13,275 21,930
DIAGONAL plc.......................... 9,600 58,408
Druid Group plc....................... 1,850 57,397
F.I. Group plc........................ 7,400 91,536
Fitness First plc(a).................. 6,000 93,801
House of Fraser plc................... 17,400 20,752
Informa Group plc..................... 9,000 88,265
Jarvis Hotels plc..................... 8,370 15,851
Johnson Service Group plc............. 9,000 44,459
Luminar plc........................... 4,560 64,674
Nycomed Amersham plc.................. 2,650 16,453
RM plc................................ 4,500 62,191
Taylor Nelson Sofres plc.............. 17,500 77,140
Waterford Wedgwood plc................ 58,100 58,993
----------
838,042
----------
</TABLE>
<PAGE> 262
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
6
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
SOUTH AMERICA -- 2.01%
- -------------------------------------
BRAZIL -- 1.33%
Rossi Residencial S.A. GDR............ 7,600 $ 9,737
Tam-cia De Invetimentos em Transportes
Preferred(a)........................ 710,000 19,794
Tele Centro Oeste Celular
Participacoes S.A. ................. 9,900,000 20,976
----------
50,507
----------
CHILE -- 0.68%
A.F.P. Provida S.A. -- Sponsored
ADR................................. 800 17,200
Cristalerias de Chile Sponsored ADR... 600 8,625
----------
25,825
----------
TOTAL INVESTMENTS -- 88.17%
(Cost -- $2,536,191)(b)............. 3,344,672
OTHER ASSETS, LESS LIABILITIES -- 11.83% 448,947
----------
NET ASSETS -- 100%.................... $3,793,619
==========
</TABLE>
<TABLE>
- --------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
<S> <C> <C>
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 December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation................ $1,040,325
Gross unrealized depreciation................ (231,844)
----------
Net unrealized appreciation.............. $ 808,481
==========
Purchases and sales of securities other than short-term
obligations aggregated $2,595,242 and $3,304,135,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 263
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $2,536,191)....... $3,344,672
Cash........................................................ 421,932
Receivables
Fund shares sold.......................................... 46,687
Dividends and interest.................................... 4,654
Manager for expense reimbursement......................... 6,877
Deferred organization expenses.............................. 19,258
Other assets................................................ 5,661
----------
Total assets....................................... 3,849,741
----------
LIABILITIES
Payables
Fund shares repurchased................................... 29,978
Management fee............................................ 2,948
12b-1 service and distribution fees....................... 2,078
Other payables to related parties......................... 2,958
Accrued expenses............................................ 18,160
----------
Total liabilities......................................... 56,122
----------
NET ASSETS.................................................. $3,793,619
==========
CLASS A
Net asset value and redemption price per share
($1,069,245/85,911 shares outstanding).................... $ 12.45
==========
Maximum offering price per share ($12.45 x 100/94.25)*...... $ 13.21
==========
CLASS B
Net asset value, offering price and redemption price** per
share ($1,237,634/100,618 shares outstanding)............. $ 12.30
==========
CLASS C
Net asset value, offering price and redemption price*** per
share ($1,196,222/96,600 shares outstanding).............. $ 12.38
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($290,518/23,286 shares outstanding)................ $ 12.48
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $3,234,250
Accumulated net realized loss on investments and foreign
currency transactions................................... (274,223)
Undistributed net investment income....................... 24,503
Net unrealized appreciation on investments and foreign
currency transactions................................... 809,089
----------
NET ASSETS.................................................. $3,793,619
==========
</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> 264
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of $5,926 foreign taxes withheld........... $ 47,616
Interest.................................................. 2,517
----------
50,133
----------
EXPENSES
Management fee............................................ $28,729
Transfer agent............................................ 10,849
Administrative services fee............................... 2,857
Custodian fees............................................ 57,216
Blue Sky fees............................................. 32,094
Auditing and accounting fees.............................. 20,229
Shareholder reports....................................... 11,598
Amortization of organization expenses..................... 9,954
Fund accounting........................................... 20,669
Trustees' fees............................................ 9,240
12b-1 service and distribution fees....................... 21,319
Legal..................................................... 33,569
Other..................................................... 1,357
----------
259,680
Expenses reimbursed by Manager............................ (178,983)
Fees paid indirectly...................................... (3,356)
----------
Net expenses.......................................... 77,341
----------
NET INVESTMENT LOSS......................................... (27,208)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss on investments and foreign currency
transactions............................................ (51,710)
Net change in unrealized depreciation on investments and
foreign currency transactions,
net of taxes of $1,672.................................. 1,075,611
----------
Net gain on investment transactions................... 1,023,901
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 996,693
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 265
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss....................................... $ (27,208) $ (4,366)
Net realized loss on investments and foreign currency
transactions............................................ (51,710) (147,128)
Net change in unrealized depreciation on investments and
foreign currency transactions........................... 1,075,611 331,298
---------- ----------
Net increase resulting from operations................ 996,693 179,804
---------- ----------
Class A distributions
Dividends in excess of net investment income.............. -- (15,583)
Distributions from capital gains.......................... (2,645) (858)
---------- ----------
Total distributions to Class A shareholders........... (2,645) (16,441)
---------- ----------
Class B distributions
Dividends in excess of net investment income.............. -- (9,725)
Distributions from capital gains.......................... (3,066) (962)
---------- ----------
Total distributions to Class B shareholders........... (3,066) (10,687)
---------- ----------
Class C distributions
Dividends in excess of net investment income.............. -- (7,930)
Distributions from capital gains.......................... (2,646) (1,046)
---------- ----------
Total distributions to Class C shareholders........... (2,646) (8,976)
---------- ----------
Advisor Class distributions
Distributions from capital gains.......................... (682) --
---------- ----------
Total distributions to Advisor Class shareholders..... (682) --
---------- ----------
Fund share transactions (Note 4)
Class A................................................... (219,679) (51,932)
Class B................................................... (128,120) (16,818)
Class C................................................... (217,497) (517,473)
Advisor Class............................................. 239,851 --
---------- ----------
Net decrease resulting from Fund share transactions... (325,445) (586,223)
---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 662,209 (442,523)
NET ASSETS
Beginning of period....................................... 3,131,410 3,573,933
---------- ----------
END OF PERIOD............................................. $3,793,619 $3,131,410
---------- ----------
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 24,503 $ 9,017
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 266
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
10
<TABLE>
<CAPTION>
for the year ended
CLASS A December 31,
- -----------------------------------------------------------------------------------------------
1999 1998 1997
SELECTED PER SHARE DATA ---------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.95 $ 8.66 $ 10.00
----------------------------
Income (loss) from investment operations
Net investment (loss) income(a)........................... (.05) .04 (.01)
Net gains or losses on securities (both realized and
unrealized)............................................. 3.58 .41 (1.24)
----------------------------
Total from investment operations.......................... 3.53 .45 (1.25)
----------------------------
Less distributions
Dividends in excess of net investment income.............. -- .15 --
Distributions from capital gains.......................... .03 .01 .09
----------------------------
Total distributions..................................... .03 .16 .09
----------------------------
Net asset value, end of period.............................. $12.45 $ 8.95 $ 8.66
============================
Total return (%)(b).............................. 39.45 5.24 (12.52)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,069 $ 980 $ 992
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 2.33 2.47 2.50
Without expense reimbursement (%)......................... 8.56 6.38 4.87
Ratio of net investment (loss) income to average net assets
(%)(a).................................................... (.47) .39 (.11)
Portfolio turnover rate (%)................................. 98 18 10
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the year ended
CLASS B December 31,
- -----------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
---------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.92 $ 8.63 $ 10.00
----------------------------
Income (loss) from investment operations
Net investment loss(a).................................... (.13) (.03) (.05)
Net gains or losses on securities (both realized and
unrealized)............................................. 3.54 .41 (1.27)
----------------------------
Total from investment operations.......................... 3.41 .38 (1.32)
----------------------------
Less distributions
Dividends in excess of net investment income.............. -- .08 --
Distributions from capital gains.......................... .03 .01 .05
----------------------------
Total distributions..................................... .03 .09 .05
----------------------------
Net asset value, end of period.............................. $12.30 $ 8.92 $ 8.63
============================
Total return (%)(b)......................................... 38.24 4.46 (13.19)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,238 $1,027 $ 1,007
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 3.10 3.24 3.31
Without expense reimbursement (%)......................... 9.33 7.15 5.68
Ratio of net investment loss to average net assets (%)(a)... (1.23) (.38) (.91)
Portfolio turnover rate (%)................................. 98 18 10
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 267
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
11
<TABLE>
<CAPTION>
for the year ended
CLASS C December 31,
- -----------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999 1998 1997
---------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 8.97 $ 8.65 $ 10.00
----------------------------
Income (loss) from investment operations
Net investment loss(a).................................... (.12) (.03) (.06)
Net gains or losses on securities (both realized and
unrealized)............................................. 3.56 .42 (1.25)
----------------------------
Total from investment operations.......................... 3.44 .39 (1.31)
----------------------------
Less distributions
Dividends in excess of net investment income.............. -- .06 --
Distributions from capital gains.......................... .03 .01 .04
----------------------------
Total distributions..................................... .03 .07 .04
----------------------------
Net asset value, end of period.............................. $12.38 $ 8.97 $ 8.65
============================
Total return (%)(b)......................................... 38.36 4.55 (13.14)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,196 $1,125 $ 1,574
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 3.04 3.16 3.23
Without expense reimbursement (%)......................... 9.27 7.07 5.60
Ratio of net investment loss to average net assets (%)(a)... (1.18) (.30) (.83)
Portfolio turnover rate (%)................................. 98 18 10
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
July 1, 1999
(commencement)
ADVISOR CLASS to December 31,
- ------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999
----------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.94
--------------------
Income from investment operations
Net investment income(a).................................. --
Net gains on securities (both realized and unrealized).... 2.57
--------------------
Total from investment operations.......................... 2.57
--------------------
Less distributions
Distributions from capital gains.......................... .03
--------------------
Total distributions..................................... .03
--------------------
Net asset value, end of period.............................. $12.48
====================
Total return (%)(d)......................................... 25.87
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 291
Ratio of expenses to average net assets
With expense reimbursement (%)............................ 1.83(e)
Without expense reimbursement (%)......................... 8.06(e)
Ratio of net investment income to average net assets
(%)(a).................................................... .03(e)
Portfolio turnover rate (%)................................. 98
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) Net investment (b) Total return (c) Total expenses (d) Total return (e) Annualized
income (loss) is net does not reflect a includes fees paid represents aggregate
of expenses sales charge. indirectly, if any, total return and
reimbursed by through an expense does not reflect a
Manager. offset arrangement. sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 268
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
12
NOTES TO FINANCIAL STATEMENTS
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
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. 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 December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends, on foreign securities are recorded on the ex-dividend date.
If such information is not available on the ex-dividend date, corporate actions
are recorded as soon as reliable information is available from the Fund's
sources. Realized gains and losses from security transactions are calculated on
an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
The Fund earned foreign source dividends of $53,542. These dividends were
subject to foreign withholding tax in the amount of $5,926. The Fund intends to
elect to pass through to its shareholders their proportionate share of such
taxes. Shareholders may report their share of foreign taxes paid as either a tax
credit or itemized deduction.
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 gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes 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 invest-
<PAGE> 269
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
ments 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.
FEES PAID INDIRECTLY -- From January 1, 1999 through April 15, 1999, the Fund
had an arrangement with its custodian whereby a percentage of quarterly
cumulative credits resulting from cash balances on deposit with the custodian
are used to offset custody fees, including transaction and out-of-pocket
expenses. For the period from January 1, 1999 through April 15, 1999, custodian
fees were reduced by $3,356 under this arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and Investment Adviser of the Fund.
For its services, IMI receives a fee monthly at the annual rate of 1.00% of the
Fund's average net assets. Beginning January 29, 1999, Henderson Investment
Management Limited is subadvisor to fifty percent of the portfolio of the Fund.
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 its 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $268.
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
$2,256, $10,075 and $8,988, for Class A, Class B and Class C, respectively, are
reflected as 12b-1 service and distribution fees in the Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned subsidiary of MIMI, is the
transfer and shareholder servicing agent for the Fund. For those services, the
Fund pays a monthly fee plus certain out-of-pocket expenses. Such fees and
expenses of $3,503, $4,099, $3,141 and $106, for Class A, Class B, Class C and
Advisor Class, respectively, are reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI receive compensation from the
Fund, which is reflected as Trustees' fees in the Statement of Operations.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C and Advisor Class were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold...................... 4,001 $ 40,825 26,321 $ 245,402
Issued on reinvestment of
distributions............ 193 2,395 1,617 14,226
Repurchased............... (27,755) (262,899) (33,027) (311,560)
------- --------- -------- ---------
Net decrease.............. (23,561) $(219,679) (5,089) $ (51,932)
======= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold...................... 12,882 $ 130,668 19,191 $ 172,197
Issued on reinvestment of
distributions............ 154 1,882 729 6,395
Repurchased............... (27,522) (260,670) (21,580) (195,410)
------- --------- -------- ---------
Net decrease.............. (14,486) $(128,120) (1,660) $ (16,818)
======= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- ----------------------------------------------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold...................... 23,289 $ 264,888 44,807 $ 433,078
Issued on reinvestment of
distributions............ 48 588 83 735
Repurchased............... (52,051) (482,973) (101,503) (951,286)
------- --------- -------- ---------
Net decrease.............. (28,714) $(217,497) (56,613) $(517,473)
======= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 1, 1999
(COMMENCEMENT)
TO DECEMBER 31,
1999
- -----------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- -----------------------------------------------
<S> <C> <C> <C> <C>
Sold...................... 23,921 $ 246,124
Issued on reinvestment of
distributions............ 55 682
Repurchased............... (690) (6,955)
------- ---------
Net increase.............. 23,286 $ 239,851
======= =========
</TABLE>
<PAGE> 270
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY INTERNATIONAL SMALL COMPANIES FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 271
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On January 29, 1999, a special shareholders' meeting was held. The Fund's
shareholders were asked to approve new Subadvisory Agreement between the Fund
and Henderson Investment Management Limited to act as subadvisor to fifty
percent of the portfolio of the Fund. The shareholders approved as follows:
<TABLE>
<CAPTION>
NUMBER OF VOTES
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
183,972 3,346 4,974
</TABLE>
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 175,504 1,598
Keith J. Carlson.............. 175,504 1,598
Stanley Channick.............. 174,053 3,049
Roy J. Glauber................ 174,053 3,049
Edward M. Tighe............... 175,504 1,598
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
175,094 254 1,754
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
132,326 367 1,856 42,553
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
126,100 6,593 1,856 42,553
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
128,109 4,584 1,856 42,553
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
130,839 1,854 1,856 42,553
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
130,714 2,084 1,751 42,553
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
127,588 5,105 1,856 42,553
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
127,588 5,105 1,856 42,553
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
130,839 367 3,343 42,553
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- ------------------------------------------
<S> <C> <C> <C>
126,204 5,002 3,343 42,553
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 272
02IISC123199
<PAGE> 273
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6139
800.456.5111
DECEMBER 31, 1999
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
IVY EUROPEAN OPPORTUNITIES FUND
OVERVIEW
We would like to take this opportunity to welcome you as a shareholder of the
Ivy European Opportunities Fund. The Ivy European Opportunities Fund returned
215.58% from May 5, 1999, its performance measurement date, through December 31,
1999. For this same period, its benchmark index, the Morgan Stanley Capital
International Europe Index, returned 14.96% (because this Index is only
calculated on a month-end basis, this return is from April 30, 1999 through
December 31, 1999, rather than since the performance measurement date of the
Fund). Approximately 50% of the Fund's performance during this time period is
directly attributed to its investment in Initial Public Offerings (IPOs). The
availability of IPOs is limited and as the Fund's assets increase, IPOs will
likely become a smaller component of the overall Fund performance. Future
performance of the Fund, therefore, will likely be lower than during the period
May 5, 1999 through December 31, 1999. Past performance does not guarantee
future results. (For the Fund's total return with sales charge and performance
commentary, please refer to page 3.)
The Ivy European Opportunities Fund pursues its goal of long-term
capital appreciation through investing in European companies, including those
operating in emerging Europe and small-capitalization companies operating in the
developed markets of Europe. In pursuing its primary goal of long-term capital
appreciation, the Fund focuses on companies with strong growth dynamics,
regardless of their market capitalization.
MARKET COMMENTARY
European markets achieved good returns during 1999, despite the weakness of the
euro. Our research indicates that although the returns for dollar-based
investments for the first 10 months of the year were marginal, investors'
enthusiasm for stocks related to new or high technology companies contributed to
a nearly 25% rise in the markets during the final 10 weeks of the year.
We believe that economic optimism was a clear trend in the European
markets during 1999. This optimism was fueled by the strong performance of
telecommunications and technology-related stocks, and the industrial-cyclical
and commodity sectors returning to favor--particularly in the first half of the
year. In our view, this was not surprising. Economists' expectations of global
economic growth continued rising through the first quarter, and valuations
relative to the broader market were attractive following the Asian economic
crisis that began in July 1997 and continued into 1998. Our research indicates
that oil stocks were the beneficiary of OPEC-regulated supply restraints, which
helped the price of oil move from $10 a barrel in December 1998 to $24 a barrel
in December 1999.
Technology stocks, which underperformed during the Asian crisis,
staged a strong recovery, with share prices of leading European companies up
strongly in 1999, according to our research. It is our belief that the recovery
was aided by the positive impact of economic growth revisions, which are so
important for industrial stocks in general. But,
<PAGE> 274
2
to a larger extent, we think the rebound was driven by increasing awareness in
the investment community of the potential for new technology developments, such
as data services through mobile phones and interactive TV. We believe enthusiasm
was fueled by increasingly optimistic statements from leading industry players
and by the high prices paid for key assets in corporate transactions. While we
are still comfortable with the valuation of many such companies, others now
appear somewhat excessive. We will attempt to avoid such stocks.
LOOKING ACROSS EUROPE.
At the country level, Finland was once again the star performer in 1999.
According to our studies, Finland's success was mainly due to the continued
accomplishments of Nokia, the country's largest company and the leading producer
of mobile phones. Norway, in contrast to last year, performed well during 1999,
benefiting from the recovery in commodity prices, which are crucial to the
Norwegian economy.
"...WE ANTICIPATE THAT THE COMBINATION OF WHAT WE BELIEVE TO BE A SOUND ECONOMIC
BACKDROP IN EUROPE AND THE DEVELOPING CAPITAL MARKET SHOULD PRESENT POTENTIAL
INVESTMENT OPPORTUNITIES."
The Spanish and Italian markets, which our research indicates were
among the best performers in 1998, were close to the worst in 1999. We believe
this region contains few large companies with cyclical or technology
exposure, and is overrepresented in banks and insurance companies, which
performed poorly in Europe in 1999. Italy was further encumbered by the takeover
of Telecom Italia by Olivetti, illustrating the potential need for further
reform of the corporate code.
In the largest markets, France significantly outperformed Germany. We
believe that investor sentiment toward Germany was erratic because of concerns
over the perceived lack of commitment to structural reform and potentially vital
changes to capital gains tax legislation, which could allow for more efficient
capital allocation and corporate consolidation, especially in the financial
sector. Our research shows the volume of IPOs across Europe more than doubled in
each of the last three years, fueled by a record number of new offerings in
Germany. Germany also launched the Neuer Market, a junior stock exchange akin to
the NASDAQ in the US and which attracts young, high-growth technology companies.
Other European markets have followed suit, and now have, or will have,
equivalent exchanges. This trend could present the Fund with new investment
opportunities; and, in many cases we have initiated and subsequently built up
positions. In other instances, where the share price has risen above our target
prices, we have taken profits.
We believe the changing corporate attributes within Europe have led to
continuing restructuring. We have been alert to these opportunities. However,
this is not a new theme, and, in our opinion, much of the immediate potential is
reflected in share prices.
Over the last year, our research indicates that investor attention was
focused primarily on large-cap growth companies. Ironically, however, for the
first time in recent years, overall, small-cap companies performed slightly
better than large-cap companies. In our view, this may be due to the excess and
enthusiasm afforded large companies at the end of 1998 in anticipation of the
launch of the euro. We continue to find potential opportunities in smaller
companies.
LOOKING AHEAD.
We believe that the prices of many technology companies may have gotten ahead of
themselves, reflecting their future potential rather than their current value.
We suspect that the momentum and thirst for technology may be evident again in
2000, but the market could become much more discerning. We expect the Fund to
continue to have technology exposure, but with increasing care. Smaller
companies, especially in non-technology areas, have been seriously out of favor,
and we believe that careful funding may present some potentially promising
returns. Finally, we anticipate the mergers and acquisitions momentum should
continue, and the Fund will be poised to attempt to take advantage of whatever
emerges, whether it is IPO activity or consolidation.
We maintain our confidence in the European economies. While we expect
an increase in both inflation and interest rates, we believe the increases
should be modest. We also foresee that the euro should recover from its
disappointing debut. The year may be volatile and challenging, but we anticipate
that the combination of what we believe to be a sound economic backdrop in
Europe and the developing capital market should present potential investment
opportunities.
<PAGE> 275
3
PERFORMANCE COMPARISON OF THE FUND SINCE
ITS PERFORMANCE MEASUREMENT DATE
(5/5/99) OF A $10,000 INVESTMENT
[CHART]
IVY EUROPEAN OPPORTUNITIES FUND
PERFORMANCE COMMENTARY
For the period May 5, 1999 to December 31, 1999, the Ivy European Opportunities
Fund returned 215.58%. This compares very favorably to the Morgan Stanley
Capital International (MSCI) Europe Index, which was up 14.96% (because this
Index is only calculated on a month-end basis, this return is from April 30,
1999 through December 31, 1999, rather than since the performance measurement
date of the Fund). During the eight-month period, the Ivy European Opportunities
Fund invested extensively in securities of companies in their initial public
offering (IPOs), which had a favorable impact on the Fund's performance.
Approximately 50% of the Fund's performance during this time period is directly
attributed to its investment in IPOs. The availability of IPOs is limited and as
the Fund's assets increase, IPOs will likely become a smaller component of the
overall Fund performance. Future performance of the Fund, therefore, will likely
be lower than during the period May 5, 1999 through December 31, 1999. Past
performance does not guarantee future results.
The Morgan Stanley Capital International (MSCI) Europe Index is an unmanaged
index of stocks which assumes reinvestment of dividends and, unlike Fund
returns, does not reflect any fees or expenses. It is not possible to invest in
an index.
Performance is calculated for Class A shares of the Fund unless otherwise noted.
The performance of all other share classes will vary relative to that of Class A
shares based on differences in their respective sales loads and fees.
The Ivy European Opportunities Fund was initially seeded on April 26, 1999,
commenced operations on May 3, 1999 and received initial subscriptions on May 3,
1999. Performance is calculated beginning May 5, 1999, the date proceeds from
share sales were invested according to the Ivy European Opportunities Fund's
investment objectives.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4) Class I(5)
---------------- ---------------------------------- ---------------- ----------------
IVY EUROPEAN OPPORTUNITIES FUND w/ w/o w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING ------ ------ --------------- ---------------- ------ ------ ------ ------
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
B: B: B: B:
204.41% 209.41% 203.51% 208.51%
C: C: C: C:
Since Inception(6) 197.43% 196.35% 50.80% 51.80% 50.43% 51.43% 217.16% 214.88% n/a n/a
------ ------ ----- ----- ----- ----- ------ ------ --- ---
</TABLE>
(1) Class A performance figures include the maximum sales charge of 5.75%.
(2) Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%.
(3) Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%.
(4) Advisor Class shares are not subject to an initial sales charge or a
CDSC.
(5) Class I shares are not subject to an inital sales charge or a CDSC.
There were no Class I shares outstanding.
(6) Class A commenced operations May 4, 1999; Class B commenced operations
May 24, 1999; Class C commenced operations October 24, 1999; Advisor
Class commenced operations May 3, 1999.
Total returns in some periods were higher due to reimbursement of
certain Fund expenses. See Financial Highlights.
All charts and tables reflect past results and assume reinvestment of
dividends and capital gain distributions. Future results will, of
course, be different. The investment return and principal value of Ivy
European Opportunities Fund will fluctuate and at redemption shares may
be worth more or less than the amount of the original investment.
<PAGE> 276
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
4
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES -- 62.98% SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
EUROPE -- 54.65%
- --------------------------------------
AUSTRIA -- 1.51%
Yline Internet Business Services
AG(a)................................ 8,000 $ 499,547
-----------
FINLAND -- 0.35%
F-Secure Oyj(a)........................ 4,000 116,267
-----------
FRANCE -- 7.81%
Bull S.A.(a)........................... 100,000 800,839
Canal Plus............................. 3,500 506,914
Integra S.A.(a)........................ 600 86,839
Sagem ADP S.A.(a)...................... 3,003 1,113,667
Technip S.A............................ 325 33,161
Transiciel S.A......................... 400 48,070
-----------
2,589,490
-----------
GERMANY -- 13.60%
Brainpool TV AG(a)..................... 5,000 338,277
Brokat Infosystems AG(a)............... 350 69,459
Direkt Anlage Bank AG(a)............... 3,500 80,685
Epcos AG(a)............................ 1,000 74,170
Freenet.de AG(a)....................... 3,250 361,580
Intershop Communications AG(a)......... 250 69,911
Kamps AG............................... 360 24,897
Kamps AG -- New(a)..................... 6,252 416,715
Mannesmann AG.......................... 3,000 722,859
ProSieben Media AG..................... 10,000 580,332
SAP AG................................. 2,000 978,246
SinnerSchrader AG(a)................... 4,000 190,437
TOMORROW Internet AG(a)................ 4,000 204,469
Zapf Creation AG(a).................... 12,000 396,911
-----------
4,508,948
-----------
GREECE -- 2.55%
Hellenic Telecommunications
Organization S.A..................... 17,000 402,158
Interamerican Insurance Co.(a)......... 1,200 39,495
Panafon Hellenic Telecom S.A........... 30,000 402,416
-----------
844,069
-----------
IRELAND -- 1.93%
Esat Telecom Group plc(a).............. 7,000 640,500
-----------
NETHERLANDS -- 5.94%
Buhrmann NV............................ 50,000 749,220
IHC Caland NV.......................... 618 22,454
Numico NV.............................. 700 25,988
Philips Electronics NV................. 8,000 1,082,485
VNU NV................................. 1,200 62,760
Wolters Kluwer NV...................... 800 26,942
-----------
1,969,849
-----------
NORWAY -- 6.77%
EniTel ASA(a).......................... 52,000 1,552,786
Tandberg Television ASA(a)............. 50,000 690,542
-----------
2,243,328
-----------
PORTUGAL -- 0.34%
PT Multimedia(a)....................... 2,000 113,200
-----------
SPAIN -- 4.25%
TelePizza, S.A.(a)..................... 275,000 1,157,658
Terra Networks, S.A.(a)................ 4,650 252,843
-----------
1,410,501
-----------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
EQUITY SECURITIES SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
SWEDEN -- 1.86%
Swedish Match AB....................... 100,000 $ 347,652
Ticket Travel Group AB................. 35,000 270,396
-----------
618,048
-----------
SWITZERLAND -- 3.15%
Charles Voegele Holding AG(a).......... 4,250 759,340
Distefora Holding AG(a)................ 200 48,353
Fantastic Corporation(a)............... 350 64,548
Kaba Holding AG........................ 50 45,292
Kudelski SA(a)......................... 6 35,609
Selecta Group 65 20,303
Swisslog Holding AG.................... 250 72,623
-----------
1,046,068
-----------
UNITED KINGDOM -- 4.59%
Bass plc............................... 10,000 123,859
BT plc................................. 4,500 108,790
Burmah Castrol plc..................... 5,500 104,156
Cadbury Schweppes plc.................. 18,000 105,454
ebookers.com plc ADR(a)................ 2,000 34,625
Eidos plc(a)........................... 1,050 92,230
Garban plc............................. 10,000 35,457
Greene King plc........................ 8,600 67,432
Lonmin plc............................. 14,500 154,006
Man (E D & F) Group plc................ 12,000 79,779
NDS Group plc(a)....................... 5,000 152,500
Reckitt Benckiser plc.................. 10,500 98,829
Royal & Sun Alliance Insurance Group
plc.................................. 24,000 178,899
TI Group plc........................... 14,000 103,793
Vodafone AirTouch PLC 16,500 81,175
-----------
1,520,984
-----------
NORTH AMERICA -- 8.33%
- --------------------------------------
UNITED STATES -- 8.33%
Global TeleSystems Group, Inc.(a)...... 40,000 1,385,000
Jazztel plc ADR(a) 5,000 325,625
MIH Ltd.(a)............................ 11,000 649,000
OpenTV Corporation(a).................. 5,000 401,250
-----------
2,760,875
-----------
TOTAL INVESTMENTS -- 62.98%
(Cost -- $17,506,131)(b)............. 20,881,674
OTHER ASSETS, LESS LIABILITIES -- 37.02% 12,272,582
-----------
NET ASSETS -- 100%..................... $33,154,256
===========
ADR -- American Depository Receipt
(a) Non-income producing security
(b) Cost is approximately the same for Federal income tax
purposes.
OTHER INFORMATION:
At December 31, 1999, net unrealized appreciation based on
cost for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation............... $ 3,510,134
Gross unrealized depreciation............... (134,591)
-----------
Net unrealized appreciation............. $ 3,375,543
===========
Purchases and sales of securities other than short-term
obligations aggregated $4,053,912 and $4,370,404,
respectively, for the period ended December 31, 1999.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE> 277
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $17,506,131)...... $20,881,674
Cash........................................................ 8,815,068
Receivables
Fund shares sold.......................................... 3,887,136
Dividends and interest.................................... 6,224
Manager for expense reimbursement......................... 13,207
Deferred offering costs..................................... 19,361
Other assets................................................ 349
-----------
Total assets.............................................. 33,623,019
-----------
LIABILITIES
Payables
Investments purchased..................................... 963
Fund shares repurchased................................... 373,389
Management fee............................................ 17,802
12b-1 service and distribution fees....................... 9,050
Other payables to related parties......................... 47,232
Accrued expenses............................................ 20,327
-----------
Total liabilities......................................... 468,763
-----------
NET ASSETS.................................................. $33,154,256
===========
CLASS A
Net asset value and redemption price per share
($13,932,440/813,425 shares outstanding).................. $ 17.13
===========
Maximum offering price per share ($17.13 x 100/94.25)*...... $ 18.18
===========
CLASS B
Net asset value, offering price and redemption price** per
share ($5,899,771/344,456 shares outstanding)............. $ 17.13
===========
CLASS C
Net asset value, offering price and redemption price*** per
share ($8,075,891/471,387 shares outstanding)............. $ 17.13
===========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($5,246,154/304,565 shares outstanding)............. $ 17.23
===========
NET ASSETS CONSIST OF
Capital paid-in........................................... $29,795,301
Undistributed net investment income....................... 14,512
Net unrealized appreciation on investments and foreign
currency transactions................................... 3,344,443
-----------
NET ASSETS.................................................. $33,154,256
===========
</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> 278
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 3, 1999 (COMMENCEMENT) TO DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 10,383
Interest.................................................. 46,914
----------
57,297
----------
EXPENSES
Management fee............................................ $27,735
Transfer agent............................................ 1,888
Administrative services fee............................... 2,774
Custodian fees............................................ 33,363
Blue Sky fees............................................. 1,633
Auditing and accounting fees.............................. 5,305
Shareholder reports....................................... 327
Amortization of deferred offering costs................... 35,631
Fund accounting........................................... 11,488
Trustees' fees............................................ 5,684
12b-1 service and distribution fees....................... 11,583
Legal..................................................... 35,866
Other..................................................... 111
----------
173,388
Expenses reimbursed by Manager............................ (107,722)
----------
Net expenses.......................................... 65,666
----------
NET INVESTMENT LOSS......................................... (8,369)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 1,182,131
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 3,344,443
----------
Net gain on investment transactions..................... 4,526,574
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $4,518,205
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 279
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT)
TO DECEMBER 31,
-------------------
1999
-------------------
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment loss....................................... $ (8,369)
Net realized gain on investments and foreign currency
transactions............................................ 1,182,131
Net change in unrealized appreciation on investments and
foreign currency transactions........................... 3,344,443
-----------
Net increase resulting from operations................ 4,518,205
-----------
Class A distributions
Dividends in excess of net investment income.............. (9,491)
Distributions from capital gains.......................... (261,490)
-----------
Total distributions to Class A shareholders........... (270,981)
-----------
Class B distributions
Dividends in excess of net investment income.............. (658)
Distributions from capital gains.......................... (203,781)
-----------
Total distributions to Class B shareholders........... (204,439)
-----------
Class C distributions
Dividends in excess of net investment income.............. (3,087)
Distributions from capital gains.......................... (152,341)
-----------
Total distributions to Class C shareholders........... (155,428)
-----------
Class I distributions
Distributions from capital gains.......................... (9)
-----------
Total distributions to Class I shareholders........... (9)
-----------
Advisor Class distributions
Dividends in excess of net investment income.............. (5,049)
Distributions from capital gains.......................... (558,976)
-----------
Total distributions to Advisor Class shareholders..... (564,025)
-----------
Fund share transactions (Note 4)
Class A................................................... 12,671,199
Class B................................................... 5,297,153
Class C................................................... 7,546,989
Advisor Class............................................. 4,315,592
-----------
Net increase resulting from fund share transactions... 29,830,933
-----------
NET ASSETS AT END OF PERIOD................................. $33,154,256
===========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 14,512
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 280
8
[IVY LEAF LOGO]
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
May 4, 1999
(commencement)
CLASS A to December 31,
- --------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999
------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.01
------------------------
Income from investment operations
Net investment loss(a).................................... --
Net gains on securities (both realized and unrealized).... 16.35
------------------------
Total from investment operations.......................... 16.35
------------------------
Less distributions
Dividends in excess of net investment income.............. .01
Distributions from capital gains.......................... 9.22
------------------------
Total distributions..................................... 9.23
------------------------
Net asset value, end of period.............................. $ 17.13
========================
Total return (%)(b)......................................... 215.58
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $13,932
Ratio of expenses to average net assets (%)(c)
With expense reimbursement (%)............................ 2.22
Without expense reimbursement (%)......................... 6.10
Ratio of net investment loss to average net assets
(%)(a)(c)................................................. (.15)
Portfolio turnover rate (%)................................. 108
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
May 24, 1999
(commencement)
CLASS B to December 31,
- --------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999
------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.21
------------------------
Income from investment operations
Net investment loss(a).................................... (.01)
Net gains on securities (both realized and unrealized).... 16.15
------------------------
Total from investment operations.......................... 16.14
------------------------
Less distributions
Distributions from capital gains.......................... 9.22
------------------------
Total distributions....................................... 9.22
------------------------
Net asset value, end of period.............................. $ 17.13
========================
Total return (%)(b)......................................... 209.41
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 5,900
Ratio of expenses to average net assets (%)(c)
With expense reimbursement (%)............................ 2.96
Without expense reimbursement (%)......................... 6.84
Ratio of net investment loss to average net assets
(%)(a)(c)................................................. (.89)
Portfolio turnover rate (%)................................. 108
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 281
9
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
October 24, 1999
(commencement)
CLASS C to December 31,
- --------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999
------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $11.57
------------------------
Income from investment operations
Net investment loss(a).................................... (.01)
Net gains on securities (both realized and unrealized).... 6.00
------------------------
Total from investment operations.......................... 5.99
------------------------
Less distributions
Dividends in excess of net investment income.............. .01
Distributions from capital gains.......................... .42
------------------------
Total distributions..................................... .43
------------------------
Net asset value, end of period.............................. $17.13
========================
Total return (%)(b)......................................... 51.80
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $8,076
Ratio of expenses to average net assets (%)(c)
With expense reimbursement (%)............................ 2.96
Without expense reimbursement (%)......................... 6.84
Ratio of net investment loss to average net assets
(%)(a)(c)................................................. (.89)
Portfolio turnover rate (%)................................. 108
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
for the period
May 3, 1999
(commencement)
ADVISOR CLASS to December 31,
- --------------------------------------------------------------------------------------
SELECTED PER SHARE DATA 1999
------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.01
------------------------
Income from investment operations
Net investment income(a).................................. --
Net gains on securities (both realized and unrealized).... 16.46
------------------------
Total from investment operations.......................... 16.46
------------------------
Less distributions
Dividends in excess of net investment income.............. .02
Distributions from capital gains.......................... 9.22
------------------------
Total distributions..................................... 9.24
------------------------
Net asset value, end of period.............................. $ 17.23
========================
Total return (%)(b)......................................... 217.16
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 5,246
Ratio of expenses to average net assets (%)(c)
With expense reimbursement (%)............................ 1.93
Without expense reimbursement (%)......................... 5.81
Ratio of net investment income to average net assets
(%)(a)(c)................................................. .14
Portfolio turnover rate (%)................................. 108
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net investment loss is net of (b) Total return represents (c) Annualized
expenses reimbursed by Manager. aggregate total return and does
not reflect a sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 282
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS
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
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. 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 December 31, 1999,
there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is accrued on a daily basis. Corporate actions,
including dividends are recorded on the ex-dividend date. If such information is
not available on the ex-dividend date, corporate actions are recorded as soon as
reliable information is available from the Fund's sources. Realized gains and
losses from security transactions are calculated on an identified cost basis.
CASH -- The Fund classifies as cash amounts on deposit with the Fund's
custodian. These amounts earn interest at variable interest rates. At December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"), as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and
capital gains, if any, are declared in December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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 are being amortized over a one year
period beginning May 3, 1999, the date the Fund commenced operations. Offering
costs have been paid by Mackenzie Investment Management Inc. (MIMI) and will be
reimbursed by the Fund.
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 non-deductible deferred offering costs. As
<PAGE> 283
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
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) 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
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. At December 31, 1999, MIMI
owned 4.76% 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $48,186.
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
$2,342, $4,903 and $4,338 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 $822, $348, $335 and $383 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, Class I and Advisor Class
were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 4, 1999
(COMMENCEMENT)
TO DECEMBER 31, 1999
- -------------------------------------------------------------------
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Sold..................................... 848,535 $13,288,709
Issued on reinvestment of
distributions........................... 9,961 167,529
Repurchased.............................. (45,071) (785,039)
------- -----------
Net increase............................. 813,425 $12,671,199
======= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 4, 1999
(COMMENCEMENT)
TO DECEMBER 31, 1999
- -------------------------------------------------------------------
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Sold..................................... 340,876 $ 5,238,984
Issued on reinvestment of
distributions........................... 4,266 69,748
Repurchased.............................. (686) (11,579)
------- -----------
Net increase............................. 344,456 $ 5,297,153
======= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 24, 1999
(COMMENCEMENT)
TO DECEMBER 31, 1999
- -------------------------------------------------------------------
CLASS C SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Sold..................................... 465,614 $ 7,449,188
Issued on reinvestment of
distributions........................... 7,527 127,207
Repurchased.............................. (1,754) (29,406)
------- -----------
Net increase............................. 471,387 $ 7,546,989
======= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 4, 1999
(COMMENCEMENT)
TO DECEMBER 31, 1999
- -------------------------------------------------------------------
CLASS I SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Sold..................................... 1 $ 10
Issued on reinvestment of
distributions........................... 1 9
Repurchased.............................. (2) (19)
------- -----------
Net change............................... -- $ --
======= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT)
TO DECEMBER 31, 1999
- -------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Sold..................................... 262,585 $ 3,838,799
Issued on reinvestment of
distributions........................... 42,286 481,911
Repurchased.............................. (306) (5,118)
------- -----------
Net increase............................. 304,565 $ 4,315,592
======= ===========
</TABLE>
<PAGE> 284
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY EUROPEAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY EUROPEAN OPPORTUNITIES FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations and the changes in its net assets for the period May
3, 1999 (commencement of operations) through December 31, 1999, and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and brokers, provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 285
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............. 54,737 0
Keith J. Carlson............... 54,737 0
Stanley Channick............... 54,737 0
Roy J. Glauber................. 54,737 0
Edward M. Tighe................ 54,737 0
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- -----------------------------
FOR: AGAINST: ABSTAIN:
- -----------------------------
<S> <C> <C>
54,737 0 0
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.2 BORROWING:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- -------------------------------------------
BROKER NON-
FOR: AGAINST: ABSTAIN: VOTES:*
- -------------------------------------------
<S> <C> <C> <C>
54,737 0 0 0
</TABLE>
- ---------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner (or other persons entitled to vote) nor has discretionary
power to vote on a particular matter.
<PAGE> 286
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
14
<PAGE> 287
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 288
02IEOF123199
<PAGE> 289
[IVY FUNDS LOGO]
ANNUAL REPORT
This report and the financial statements contained herein are submitted for the
general information of the shareholders. This report is not authorized for
distribution to prospective investors, unless preceded or accompanied by an
effective prospectus.
IVY Management, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432-6138
800.456.5111
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
Pricewaterhouse Coopers 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
IVY INTERNATIONAL STRATEGIC BOND FUND
OVERVIEW
From its performance measurement date of May 12, 1999 through December 31,
1999, the Ivy International Strategic Bond Fund outperformed its benchmark, the
Lehman Brothers Aggregate Bond Index. Over this eight-month reporting period,
the Fund returned 3.19% versus -0.64% for the Index. (For the Fund's total
return with sales charge and performance commentary, please refer to page 4.) In
our opinion, factors contributing to the Fund's strong performance include its
multisector approach--investing in Asia, Latin America, and Eastern Europe. We
believe high yield bonds from around the world, a de-emphasis of currency risks,
and strong high-grade government bond markets during 1999 also helped the Fund
outpace its benchmark over the same time period.
MARKET COMMENTARY
Our research shows that the best-performing debt investments in 1999 were
found in emerging market countries as reflected in the JP Morgan Emerging
Markets Bond Index (EMBI)--Global, which posted a 24% gain for 1999.
Approximately 27% of the Fund's holdings are concentrated in emerging market
sovereign bonds that are components of the EMBI--Global. These bonds accounted
for much of the Fund's gain during the year.
The Fund's emphasis is on relatively underpriced bonds in countries
that are making progress toward fiscal stability and political maturity. This
means that we prefer to buy bonds whose yields do not reflect economic and
political improvements in the country that issued them.
A number of the bonds in the emerging market nations in which the Fund
invests are investment grade, including those from Poland, Malaysia, South
Korea, and South Africa. We believe Poland is in the process of making a
successful transition to a market economy, and may be a candidate for admission
to the Economic and Monetary Union (EMU) within the next few years. Our research
confirms that Korea and Malaysia were victims of the Asian currency crisis of
1997 and the subsequent severe recessions. In our view, both markets have dealt
aggressively with their problems and have experienced enormous improvements in
their fiscal condition. Our research indicates that the bond market recognized
the improvement by reducing the premium the market has to pay for financing in
dollars, from over 3% greater than US Treasuries to about 1.5% over US
Treasuries. This change in credit premiums allowed these issues to post positive
returns for the year, even though other investment grade bonds ended the year in
negative territory.
The Fund also holds non-investment grade bonds in emerging markets,
such as Mexico and Turkey. Mexico, we
<PAGE> 290
[IVY LEAF LOGO]
IVY INTERNATIONAL STRATEGIC BOND FUND
2
believe, has become highly integrated with the US, providing the Mexican economy
with a newfound stability. In our view, the country's economic policies have
vastly improved, especially in the monetary arena. In our opinion, Mexico's most
impressive advance is that the presidential election, scheduled to take place
later in 2000, should lead to a smooth, politically mature change in power. We
believe this could boost the Fund's bonds to investment grade status over time.
"The Fund's emphasis is on relatively underpriced bonds in countries that are
making progress toward fiscal stability and political maturity. This means that
we prefer to buy bonds whose yields do not reflect economic and political
improvements in the country that issued them.
As much as NAFTA candidacy induced both political and economic change
in Mexico, we believe Turkey's performance has been catalyzed by its
long-awaited acceptance as a candidate for membership in EMU. In our view, this
has induced reform of the banking and pension systems, and exchange-rate policy.
It may also heighten political stability and improve Turkey's human rights
record, as the European Union has not looked favorably upon the war with the
Kurds. We believe the change in exchange-rate policy alone caused domestic
interest rates to fall from 80% to 40%, putting Turkey under the 60%+ inflation
rate and reducing the country's debt accumulation in inflation-adjusted or
"real" terms.
Investing in foreign, high yield corporate debt.
The Fund also invests in foreign high yield corporate debt. In this
category, the Fund holds bonds from Mexico, Poland, and the United Kingdom. The
return on Mexican high yield corporate bonds, as determined by JP Morgan, was
15.9% in 1999. The Fund holds bonds issued by a television network, a paper
firm, and an AT&T affiliate. The television network not only dominates the
Mexican airwaves, but also, research shows the network reaches the large US
Hispanic population and produces shows for the entire Spanish-speaking world.
The Fund also holds bonds of a Polish telephone company and two
telecommunications companies in the UK. The Polish telephone company is in the
process of selling a 35% share to a more advanced foreign partner, and the
anticipation of this event is already boosting the bond's price.
The Ivy International Strategic Bond Fund is underweight in the
domestic government bond markets of highly rated countries. Government bonds in
the developed world, other than Japan, performed poorly in 1999, where European
markets in the single-currency zone (the 11 EMU countries) were down 2% to 3% in
domestic terms, and 16% to 17% in US-dollar terms. Our research shows that on a
hedged basis (the Fund was largely hedged versus the euro), eurozone bonds were
roughly flat for the year. The Fund's weighting in the euro-government sector
was 7% at year-end.
Canada and Australia both performed well during 1999, finishing up
about 4% for the year. We believe this performance was entirely due to currency
appreciation, as these bond markets were down 1.5% and 2.5%, respectively. The
Fund finished 1999 with approximately a 4% weighting in Canada. Going forward,
we anticipate more investment in this market due to what we believe is the
potential for further currency appreciation. The Canadian trade surplus
increased dramatically in 1999, which we believe was due primarily to a strong
US economy and strong oil and other commodity prices. Our analysis also
indicates that foreign direct investment into Canada has surged, further helping
to support the Canadian dollar. Australia also offers attractive investment
opportunities, which we will consider as we move forward. The Reserve Bank of
Australia is likely to tighten monetary policy in an effort to cool off red-hot
domestic demand and a ballooning trade deficit. We think that this, along with
firm commodity prices, should keep the Australian dollar strong.
The Fund also held bonds of New Zealand and Singapore, both on a
currency-hedged basis. The New Zealand market ended the year up 0.4% with the
currency hedged. Singaporean government bonds were purchased for their stability
in an
<PAGE> 291
unstable world. This city-state's bonds returned about 6%,including principal
gain, coupon, and pick-up from the currency from the time they were purchased
for the Fund to year-end. Singapore is a low-inflation economy that runs
surpluses in both trade and the government accounts. We believe these qualities,
in a recovering region and in a country that issues bonds merely to set a
benchmark, proved to be a recipe for stability.
The Fund also holds local currency instruments in Mexico and Poland. In
our view, Mexican treasury bills were one of the Fund's best investments in
1999. Mexican treasury bills returned 33.9% last year, according to JP Morgan.
Over the last five months--the time period when the Fund held these
instruments--they returned over 9%.
The Fund added investments in Poland, where the currency, the zloty,
slipped for most of the year.
During 1999, bond yields climbed to over 16%, but then declined somewhat due, we
believe, to the central bank's tightening and the passage of a series of tax
reform bills.
The Fund also holds US corporate bonds, ranging from the low investment
grade designation of BBB to the high yield bracket. Our strategy in the US is to
hold a set of bonds from a diverse set of industries, including real estate,
clothing, pharmaceuticals, heavy-equipment manufacturing, and gaming. The high
yield market rose 1.7% last year. The BBB-rated corporate bonds lost -0.5% over
the same 12-month time period.
Finally, the Fund held a higher-than-normal cash component, at 18% of
the Fund's net assets. We believe this extra cash benefited the Fund last year,
but we are looking to deploy it as opportunities arise.
<PAGE> 292
[IVY LEAF LOGO]
IVY INTERNATIONAL STRATEGIC BOND FUND
4
PERFORMANCE COMPARISON OF THE FUND SINCE ITS PERFORMANCE MEASUREMENT DATE
(5/12/99) OF A $10,000 INVESTMENT
[CHART]
IVY INTERNATIONAL STRATEGIC BOND FUND
PERFORMANCE COMMENTARY
The Ivy International Strategic Bond Fund posted a 3.19% return from its
performance measurement date of May 12, 1999 to December 31, 1999. This compares
favorably to its benchmark, the Lehman Brothers Aggregate Bond Index, which
returned -0.64% over the same eight-month reporting period. We believe the
Fund's investments in Asia, Latin America, and Eastern Europe, along with high
yield bonds from around the world, a de-emphasis of currency risk, and
high-grade government bond markets during 1999 all supported the Fund over the
same time period.
The Lehman Brothers Aggregate Bond Index is an unmanaged index of bonds which
assumes reinvestment of dividends and, unlike Fund returns, does not reflect any
fees or expenses. It is not possible to invest in an index.
Performance is calculated for Advisor Class shares of the Fund unless otherwise
noted. Advisor Class shares have no sales load and lower distribution and other
operating expenses as compared to other share classes, and therefore may show
higher returns. The performance of all other share classes will vary relative to
that of Advisor Class shares based on the differences in their respective sales
loads and fees.
The Ivy International Strategic Bond 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 Ivy International
Strategic Bond Fund's investment objectives.
<TABLE>
<CAPTION>
Class A(1) Class B(2) & C(3) Advisor Class(4) Class I(5)
IVY INTERNATIONAL STRATEGIC ----------------------------------------------------------------------------------------------
BOND FUND w/ w/o w/ w/o w/ w/o w/ w/o
AVERAGE ANNUAL TOTAL RETURN Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb. Reimb.
FOR PERIODS ENDING ----------------------------------------------------------------------------------------------
DECEMBER 31, 1999 w/ w/o w/ w/o
CDSC CDSC CDSC CDSC
- ---------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Since Inception(6) (1.85)% (19.11)% n/a n/a n/a n/a 3.19% (4.75)% n/a n/a
</TABLE>
1 Class A performance figures include the maximum sales charge of 4.75%.
2 Class B performance figures are calculated with and without the
applicable Contingent Deferred Sales Charge (CDSC), up to a maximum of
5.00%. There were no Class B shares outstanding.
3 Class C performance figures are calculated with and without the
applicable CDSC, up to a maximum of 1.00%. There were no Class C shares
outstanding.
4 Advisor Class shares are not subject to an initial sales charge or a
CDSC.
5 Class I shares are not subject to an initial sales charge or a
CDSC. There were no Class I shares outstanding.
6 Class A commenced operations October 20, 1999; Advisor Class commenced
operations May 3, 1999.
Total returns were higher due to reimbursement of certain Fund expenses. See
Financial Highlights.
All charts and tables reflect past results and assume reinvestment of dividends
and capital gain distributions. Future results will, of course, be different.
The investment return and principal value of Ivy International Strategic Bond
Fund will fluctuate and at redemption shares may be worth more or less than the
amount of the original investment.
<PAGE> 293
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
CORPORATE BONDS -- 30.14% PRINCIPAL VALUE
- ---------------------------------------------------------------
<S> <C> <C>
MEXICO -- 5.58%
Alestra 144A, 12.125%, 05/15/06(a)..... $ 25,000 $ 25,188
Grupo Industrial Durango S.A. (GIDUSA),
12.625%, 08/01/03(a)................. 30,000 30,038
Grupo Televisa S.A., 13.51%,
05/15/08(a).......................... 25,000 22,781
----------
78,007
----------
POLAND -- 1.67%
Telekomunikacja Polska S.A. Finance BV
(TPSA) 144A, 7.75%, 12/10/09......... 25,000 23,281
----------
SUPERNATIONAL -- 3.19%
European Investment Bank, 4.00%,
04/15/09............................. 50,000 44,520
----------
UNITED KINGDOM -- 3.89%
NTL Communications Corp., 9.25%,
11/15/06(a).......................... 30,000 30,445
RSL Communications, 10.50%,
11/15/08(a).......................... 25,000 23,937
----------
54,382
----------
UNITED STATES -- 15.81%
CBS Corp., 7.15%, 05/20/05............. 25,000 24,531
Freeport-McMoRan Copper & Gold, Inc.,
7.50%, 11/15/06(a)................... 25,000 18,375
International Knife & Saw, 11.375%,
11/15/06(a).......................... 25,000 19,156
K-mart Corporation, 8.375%,
12/01/04(a).......................... 25,000 24,719
Spieker Properties, 7.35%, 12/01/17.... 25,000 22,313
TE Products Pipeline Co., 7.51%,
01/15/28............................. 25,000 21,719
Terex Corp., 8.875%, 04/01/08(a)....... 25,000 23,562
Tommy Hilfiger USA, 6.50%, 06/01/03.... 25,000 23,750
Trump Atlantic City Associates, 11.25%,
05/01/06(a).......................... 25,000 20,500
Watson Pharmaceuticals, 7.125%,
05/15/08............................. 25,000 22,313
----------
220,938
----------
TOTAL CORPORATE BONDS
(Cost -- $439,692)..................... 421,128
----------
GOVERNMENT OBLIGATIONS -- 51.68%
- --------------------------------------
CANADA -- 3.48%
Province of Ontario, 4.875%,
06/02/04............................. 75,000 48,590
----------
FRANCE -- 3.39%
French Treasury Note, 3.50%,
07/12/04............................. 50,000 47,394
----------
KAZAKHSTAN -- 1.90%
Republic of Kazakhstan, 13.625%,
10/18/04(a).......................... 25,000 26,500
----------
MALAYSIA -- 3.75%
Malaysia Government Bond, 8.75%,
06/01/09............................. 50,000 52,375
----------
</TABLE>
<TABLE>
- ---------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------
GOVERNMENT OBLIGATIONS PRINCIPAL VALUE
<S> <C> <C>
MEXICO -- 8.41%
Mexican Cetes, 0.00%, 01/13/00......... $271,590 $ 28,461
United Mexican States, 11.50%,
05/15/26(a).......................... 75,000 89,063
----------
117,524
----------
NEW ZEALAND -- 5.69%
New Zealand Government, 7.00%,
07/15/09............................. 50,000 25,563
New Zealand Government, 8.00%,
04/15/04............................. 100,000 53,923
----------
79,486
----------
PHILIPPINES -- 5.31%
Republic of Philippines, 9.875%,
01/15/19(a).......................... 75,000 74,156
----------
POLAND -- 6.05%
Poland Government Bond, 12.00%,
10/12/01............................. 150,000 34,855
Republic of Poland RSTA Bond, 4.00%,
10/27/24............................. 75,000 49,687
----------
84,542
----------
SINGAPORE -- 4.35%
Singapore Government, 4.375%,
10/15/05............................. 100,000 60,747
----------
SOUTH AFRICA -- 3.68%
Republic of South Africa, 9.125%,
05/19/09............................. 50,000 51,438
----------
SOUTH KOREA -- 3.76%
Republic of Korea, 8.875%, 04/15/08.... 50,000 52,500
----------
TURKEY -- 1.91%
Republic of Turkey, 12.00%,
12/15/08(a).......................... 25,000 26,687
----------
TOTAL GOVERNMENT OBLIGATIONS
(Cost -- $718,406)................... 721,939
----------
TOTAL INVESTMENTS -- 81.82%
(Cost -- $1,158,098)(b).............. 1,143,067
Other Assets, Less
Liabilities -- 18.18%................ 253,928
----------
NET ASSETS -- 100%..................... $1,396,995
==========
(a) Below investment grade security
(b) Cost is approximately the same for Federal
income tax purposes.
OTHER INFORMATION:
At December 31, 1999, net unrealized depreciation based on cost
for financial statement and Federal income tax purposes is as
follows:
Gross unrealized appreciation................. $ 21,745
Gross unrealized depreciation................. (36,776)
----------
Net unrealized depreciation....................... $ (15,031)
==========
Purchases and sales of securities other than U.S. Government
securities and short-term obligations aggregated $1,180,090 and
$26,304, respectively, for the period ended December 31, 1999.
</TABLE>
Forward foreign currency exchange contracts at December 31, 1999 were:
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER
----------------------------------
CURRENCY EXPIRATION LOCAL VALUE IN EXCHANGE UNREALIZED
SOLD DATE CURRENCY IN US $ FOR US $ APPRECIATION
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro February 2000 30,000 $31,149 $(30,185) $ 964
New Zealand Dollar February 2000 163,000 86,423 (85,079) 1,344
Singapore Dollar February 2000 101,000 61,275 (60,762) 513
------
$2,821
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 294
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost -- $1,158,098)....... $1,143,067
Cash........................................................ 253,065
Receivables
Open forward foreign currency contracts................... 2,821
Fund shares sold.......................................... 13,399
Dividends and interest.................................... 19,613
Manager for expense reimbursement......................... 13,834
Deferred offering costs..................................... 18,234
Other assets................................................ 44
----------
Total assets.............................................. 1,464,077
----------
LIABILITIES
Payables
Management fee............................................ 845
Other payables to related parties......................... 53,435
Accrued expenses............................................ 12,802
----------
Total liabilities......................................... 67,082
----------
NET ASSETS.................................................. $1,396,995
==========
CLASS A
Net asset value and redemption price per share ($7,362/749
shares outstanding)....................................... $ 9.83
==========
Maximum offering price per share ($9.83 x 100/95.25)*....... $ 10.32
==========
ADVISOR CLASS
Net asset value, offering price and redemption price per
share ($1,389,633/140,401 shares outstanding)............. $ 9.90
==========
NET ASSETS CONSIST OF
Capital paid-in........................................... $1,370,201
Undistributed net investment income....................... 39,064
Net unrealized depreciation on investments and foreign
currency transactions................................... (12,270)
----------
NET ASSETS.................................................. $1,396,995
==========
</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> 295
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 3, 1999 (COMMENCEMENT) TO DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 57,747
--------
EXPENSES
Management fee............................................ $ 5,823
Transfer agent............................................ 439
Administrative services fee............................... 776
Custodian fees............................................ 18,606
Blue Sky fees............................................. 145
Auditing and accounting fees.............................. 5,305
Shareholder reports....................................... 46
Amortization of deferred offering costs................... 33,560
Fund accounting........................................... 9,798
Trustees' fees............................................ 5,684
12b-1 service and distribution fees....................... 28
Legal..................................................... 24,483
Other..................................................... 11
--------
104,704
Expenses reimbursed by Manager............................ (94,971)
--------
Net expenses............................................ 9,733
--------
NET INVESTMENT INCOME....................................... 48,014
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investments and foreign currency
transactions............................................ 5,339
Net change in unrealized depreciation on investments and
foreign currency transactions........................... (12,270)
--------
Net loss on investment transactions..................... (6,931)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 41,083
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 296
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- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
8
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
DECEMBER 31,
-------------------
1999
-------------------
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income..................................... $ 48,014
Net realized gain on investments and foreign currency
transactions............................................ 5,339
Net change in unrealized depreciation on investments and
foreign currency transactions........................... (12,270)
----------
Net increase resulting from operations................ 41,083
----------
Class A distributions
Dividends from net investment income...................... (121)
----------
Total distributions to Class A shareholders........... (121)
----------
Advisor Class distributions
Dividends
From net investment income.............................. (47,893)
In excess of net investment income...................... (2,141)
----------
Total distributions to Advisor Class shareholders..... (50,034)
----------
Fund share transactions (Note 4)
Class A................................................... 6,059
Advisor Class............................................. 1,400,008
----------
Net increase resulting from Fund share transactions... 1,406,067
----------
NET ASSETS AT END OF PERIOD................................. $1,396,995
==========
UNDISTRIBUTED NET INVESTMENT INCOME......................... $ 39,064
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 297
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
9
<TABLE>
<CAPTION>
For the period
October 19, 1999
(commencement)
CLASS A to December 31,
- ---------------------------------------------------------------------------------------
1999
SELECTED PER SHARE DATA ------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.70
------------------
Income from investment operations
Net investment income(a).................................. .85
Net losses on securities (both realized and unrealized)... (.56)
------------------
Total from investment operations.......................... .29
------------------
Less dividends from net investment income................. .16
------------------
Net asset value, end of period.............................. $ 9.83
------------------
------------------
Total return (%)(b)......................................... 3.04
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ 7
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 1.73
Without expense reimbursement (%)......................... 13.96
Ratio of net investment income to average net assets
(%)(a)(c)................................................. 5.71
Portfolio turnover rate (%)................................. 3
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
May 3, 1999
(commencement)
ADVISOR CLASS to December 31,
- ---------------------------------------------------------------------------------------
1999
SELECTED PER SHARE DATA ------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.01
------------------
Income from investment operations
Net investment income(a).................................. .40
Net losses on securities (both realized and unrealized)... (.09)
------------------
Total from investment operations.......................... .31
------------------
Less distributions
Dividends
From net investment income.............................. .40
In excess of net investment income...................... .02
------------------
Total distributions................................... .42
------------------
Net asset value, end of period.............................. $ 9.90
------------------
------------------
Total return (%)(b)......................................... 3.19
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $1,390
Ratio of expenses to average net assets(c)
With expense reimbursement (%)............................ 1.25
Without expense reimbursement (%)......................... 13.48
Ratio of net investment income to average net assets
(%)(a)(c)................................................. 6.19
Portfolio turnover rate (%)................................. 3
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net investment income is (b) Total return represents (c) Annualized
net of expenses reimbursed aggregate total return and
by Manager. does not reflect a sales
charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 298
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
10
NOTES TO FINANCIAL STATEMENTS
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 December
31, 1999, there were no Board valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Interest income is accrued on a daily basis.
Corporate actions 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 December
31, 1999, the interest rate was 3.75%.
FEDERAL INCOME TAXES -- The Fund intends to qualify for tax treatment applicable
to regulated investment companies under the Internal Revenue Code of 1986 (the
"Code", as amended, and distribute all of its taxable income to its
shareholders. Therefore, no provision has been recorded for Federal income or
excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared monthly. Distributions from capital gains, if any, are declared in
December.
FOREIGN CURRENCY TRANSLATIONS -- Foreign currency transactions from foreign
investment activity are translated into U.S. dollars on the following basis: (i)
market value of securities, and dividends and interest receivable, are
translated at the closing daily rate of exchange; and (ii) purchases and sales
of investment securities are translated at the rate at which related foreign
contracts are obtained or at the exchange rate prevailing on the date of the
transaction.
For foreign securities, the Fund does not isolate that portion of gains and
losses on investment securities that is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities.
For tax reporting purposes, 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 December 31, 1999. Forward foreign currency contracts are reflected
as both a forward foreign currency contract to buy and a forward foreign
currency contract to sell. Forward foreign currency contracts to buy generally
are used to acquire exposure to foreign currencies, while forward foreign
currency contracts to sell are used to hedge the Fund's investments against
currency fluctuations. Also, a forward foreign currency contract to buy or sell
can offset a previously acquired opposite forward foreign currency contract.
Forward foreign currency contracts are marked-to-market daily. The change in a
contract's market value is recorded by the Fund as an unrealized gain or loss.
When the contract is closed or delivery is taken, the Fund records a realized
gain or loss equal to the difference
<PAGE> 299
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
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 are being amortized over a one year
period beginning May 3, 1999, the date the Fund commenced operations. Offering
costs have been paid by Mackenzie Investment Management Inc. (MIMI) and will be
reimbursed by the Fund.
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 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 .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 its 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 December 31, 1999, MIMI owned
73.92% 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 year ended December 31, 1999, the net amount of underwriting
discount retained by IMDI was $54.
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 $28
for Class A 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 $31 and $408 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.
4. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B, Class C, Class I and Advisor Class
were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
OCTOBER 20, 1999
(COMMENCEMENT) TO
DECEMBER 31, 1999
- --------------------------------------------------------------------
CLASS A SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 50,838 $ 507,150
Issued on reinvestment of distributions....... 12 121
Repurchased................................... (50,101) (501,212)
------- ---------
Net increase.................................. 749 $ 6,059
======= =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
DECEMBER 31, 1999
- --------------------------------------------------------------------
CLASS B SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 1 $ 10
Repurchased................................... (1) (10)
------- ---------
Net change.................................... -- $ --
======= =========
</TABLE>
<PAGE> 300
[IVY LEAF LOGO]
- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
12
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
DECEMBER 31, 1999
- --------------------------------------------------------------------
CLASS C SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 1 $ 10
Repurchased................................... (1) (10)
------- ---------
Net change.................................... -- $ --
======= =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
DECEMBER 31, 1999
- --------------------------------------------------------------------
CLASS I SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C>
Sold.......................................... 1 $ 10
Repurchased................................... (1) (10)
------- ---------
Net change.................................... -- $ --
======= =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 3, 1999
(COMMENCEMENT) TO
DECEMBER 31, 1999
- --------------------------------------------------------------------
ADVISOR CLASS SHARES AMOUNT
- --------------------------------------------------------------------
<S> <C> <C>
Sold......................................... 136,460 $1,361,035
Issued on reinvestment of distributions...... 5,070 50,034
Repurchased.................................. (1,129) (11,061)
------- ----------
Net increase................................. 140,401 $1,400,008
======= ==========
</TABLE>
<PAGE> 301
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
IVY INTERNATIONAL STRATEGIC BOND FUND (THE "FUND"):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Fund at December 31, 1999, the
results of its operations and the changes in its net assets for the period May
3, 1999 (commencement of operations) through December 31, 1999, and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities owned at
December 31, 1999 by correspondence with the custodian and brokers, provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
February 4, 2000
<PAGE> 302
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- --------------------------------------------------------------------------------
IVY INTERNATIONAL STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
14
SHAREHOLDER MEETING RESULTS
(UNAUDITED)
On September 30, 1999, a special shareholder meeting (the "Meeting") was held at
the offices of Mackenzie Investment Management Inc., Boca Raton, Florida, for
the following purposes (and with the following results):
PROPOSAL 1: With respect to Ivy Fund, to elect Trustees.
<TABLE>
<CAPTION>
- ---------------------------------------------------
NOMINEE: FOR: WITHHOLD:
- ---------------------------------------------------
<S> <C> <C>
James W. Broadfoot............ 101,274 0
Keith J. Carlson.............. 101,274 0
Stanley Channick.............. 101,274 0
Roy J. Glauber................ 101,274 0
Edward M. Tighe............... 101,274 0
</TABLE>
The other Trustees of Ivy Fund previously elected by shareholders whose term of
office continued after the meeting were John S. Anderegg, Jr., Paul H. Broyhill,
Frank W. DeFriece, Jr., Joseph G. Rosenthal, Richard N. Silverman and J. Brendan
Swan.
PROPOSAL 2: With respect to the Fund, to ratify or reject the action of the
Board of Trustees in selecting PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending December 31, 1999.
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
PROPOSAL 3: With respect to the Fund, to approve or disapprove the revision of
certain fundamental investment policies.
3.1 DIVERSIFICATION: Not applicable
3.2 BORROWING:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
3.3 SENIOR SECURITIES:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
3.4 UNDERWRITING:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
3.5 REAL ESTATE:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
3.6 COMMODITIES:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
3.7 LOANS:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
3.8 CONCENTRATION:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
3.9 OTHER POLICIES:
<TABLE>
<CAPTION>
- ----------------------------
FOR: AGAINST: ABSTAIN:
- ----------------------------
<S> <C> <C>
101,274 0 0
</TABLE>
<PAGE> 303
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
15
<PAGE> 304
02IISB123199
