UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-1028
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Ivy Funds
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(Exact name of registrant as specified in charter)
6300 Lamar Avenue, Overland Park, Kansas 66202
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(Address of principal executive offices) (Zip code)
Kristen A. Richards
6300 Lamar Avenue
Overland Park, Kansas 66202
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(Name and address of agent for service)
Registrant's telephone number, including area code: 913-236-2000
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Date of fiscal year end: December 31, 2003
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Date of reporting period: June 30, 2003
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Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Ivy Funds
Cash Reserves Fund
Cundill Global Value Fund
Dividend Income Fund
European Opportunities Fund
Global Natural Resources Fund
International Fund
International Value Fund
Pacific Opportunities Fund
Semiannual Report
June 30, 2003
CONTENTS
3 President's Letter 5 Cash Reserves Fund 15 Cundill Global Value Fund 30 Dividend Income Fund 37 European Opportunities Fund 52 Global Natural Resources Fund 65 International Fund 80 International Value Fund 94 Pacific Opportunities Fund 108 Notes to Financial Statements 128 Independent Auditors' Report 129 Shareholder Meeting Results
This report is submitted for the general information of the shareholders of Ivy Funds. It is not authorized for distribution to prospective investors unless accompanied with or preceded by the Ivy Funds current prospectus and current Fund performance information.
President's Letter
June 30, 2003
Dear Shareholder
Enclosed is our report on your Fund's operations for the six months ended June 30, 2003.
Over the course of the last six months, we have seen a mixture of positive and negative economic news on a national and international front. The worst fears relating to war with Iraq have subsided. Some of the economic uncertainty that plagued the first half of 2003 has cleared as the result of the President's tax package and the Federal Reserve's monetary policy. We believe that the way has now been set for a potentially more positive outlook for the economy and financial assets.
Currently, we are experiencing a moderate economic recovery. The stock market has improved, and we believe that the prospects for growth continue to be positive. For the last six months, the S&P 500 Index increased 11.78 percent while the Nasdaq Composite Index experienced a better return, increasing 21.51 percent. The Dow Jones Industrial Average had a slightly lower, but still positive, return of 9.04 percent for the same period. Bonds also generally had positive returns during the period, as evidenced by the Citigroup Broad Investment Grade Index's increase of 4.0 percent for the period.
As a result of the 2003 Jobs and Growth Tax Relief Reconciliation Act, consumers can anticipate tax relief by early August at the latest. Increased disposable income and potentially prompt consumer spending could result. Even though we have witnessed an increase in business and consumer confidence, activity has been slow to improve. Despite this slow improvement, we believe that the Fed's aggressive monetary policy has the potential to lead to U.S. economic activity improvement in the second half of the year.
As you know, we believe the most prudent approach to achieving your long-term financial objectives is by developing and maintaining a personal financial plan. Despite uncertainties, ensuring you are prepared for whatever comes your way is one step you can take toward financial peace of mind. By developing a plan that is based on your time horizon, risk tolerance, and specific goals, you may be able to avoid common mistakes and empower yourself as you work toward your financial goals.
Maintaining a long-term perspective may be difficult. Market fluctuations can be disconcerting. Ultimately, we believe that it is essential for investors to look at the big picture, and to review their investments on a regular basis. Doing so will help ensure that your plan adheres to your current risk tolerance and adapts to market changes.
Your financial advisor is committed to helping you work toward your long-term financial objectives, and is available to answer any questions you may have about your specific needs. Together, you can work toward a sound financial future. Thank you for your ongoing dedication and partnership.
Respectfully,
Henry J. Herrmann
President
The opinions expressed in this letter are those of the President of the Ivy Funds and are current only through the end of the period of the report as stated on the cover. The President's views are subject to change at any time based on market and other conditions and no forecasts can be guaranteed.
THE INVESTMENTS OF CASH RESERVES FUND June 30, 2003 CORPORATE OBLIGATIONS Commercial Paper Banks - 6.59% Bank of America Corporation: 1.22%, 7-7-03 1.06%, 7-10-03 Citicorp, 1.03%, 7-31-03 Beverages - 2.60% Coca-Cola Company (The), 1.08%, 8-1-03 Containers - 3.25% Bemis Company, Inc.: 1.05%, 7-10-03 1.1%, 7-11-03 Electrical Equipment - 1.95% Emerson Electric Co., 1.01%, 7-18-03 Finance Companies - 4.53% PACCAR Financial Corp., 1.15%, 8-11-03 State Street Corporation, 0.98%, 7-18-03 Food and Related - 7.44% Golden Peanut Co.: 1.23%, 7-8-03 1.03%, 8-5-03 Nestle Capital Corp., 1.19%, 8-7-03 Health Care - Drugs - 4.88% Merck & Co., Inc., 1.18%, 7-15-03 Pfizer Inc., 1.17%, 7-16-03 See Notes to Schedule of Investments on page 8. Health Care - General - 4.87% Johnson & Johnson, 1.1%, 9-18-03 Household - General Products - 2.60% Kimberly-Clark Worldwide Inc., 1.12%, 7-9-03 Security and Commodity Brokers - 4.41% UBS Finance Delaware LLC, 1.31%, 7-1-03 Utilities - Telephone - 6.34% SBC International Inc., 1.12%, 7-17-03 Verizon Network Funding Corporation, 1.0%, 8-14-03 Total Commercial Paper - 49.46% Notes Banks - 5.26% Bank One, N.A., 1.2888%, 8-25-03 Wells Fargo & Company, 9.125%, 2-1-04 Health Care - Drugs - 2.66% Merck & Co., Inc., 4.489%, 2-22-04 (A) Real Estate Investments Trusts - 3.68% Brentwood Apartments of Mooresville, L.L.C. (Wachovia Bank, N.A.), 1.09%, 7-3-03 See Notes to Schedule of Investments on page 8. Retail - General Merchandise - 2.70% Wal-Mart Stores, Inc., 5.199%, 6-1-04 Utilities - Telephone - 5.50% BellSouth Corporation, 4.16%, 4-26-04 (A) SBC Communications Inc., 4.18%, 6-5-04 Total Notes - 19.80% TOTAL CORPORATE OBLIGATIONS - 69.26% (Cost: $10,640,565) MUNICIPAL OBLIGATIONS California - 3.25% California Pollution Control Financing Authority, Environmental Improvement Revenue Bonds, Air Products Manufacturing Corporation, Taxable Series 1997A, 1.06%, 9-10-03 Maryland - 6.51% Mayor and City Council of Baltimore (City of Baltimore, Maryland), General Obligation Bonds, Consolidated Public Improvement Bonds, Series 2003D (Variable Rate Demand/Taxable), 1.1%, 7-3-03 TOTAL MUNICIPAL OBLIGATIONS - 9.76% (Cost: $1,500,000) See Notes to Schedule of Investments on page 8. UNITED STATES GOVERNMENT SECURITIES Federal Farm Credit Bank, 1.1%, 5-14-04 Federal Home Loan Bank: 1.31%, 4-13-04 1.37%, 5-3-04 1.05%, 7-16-04 Federal Home Loan Mortgage Corporation, 4.875%, 4-16-04 Student Loan Marketing Association, 1.4%, 2-20-04 United States Treasury Bills: 1.04%, 8-7-03 1.035%, 8-21-03 TOTAL UNITED STATES GOVERNMENT SECURITIES - 20.55% (Cost: $3,157,219) TOTAL INVESTMENT SECURITIES - 99.57% (Cost: $15,297,784) CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.43% NET ASSETS - 100.00%
Notes to Schedule of Investments
(A)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the total value of these securities amounted to $919,379 or 5.98% of net assets.
See Note 1 to financial statements for security valuation and other significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and depreciation of investments owned for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES
CASH RESERVES FUND
June 30, 2003
(In Thousands, Except for Per Share Amounts)ASSETS Investment securities - at value (cost - $15,298) (Notes 1 and 3) Cash Receivables: LIABILITIES Payable to Fund shareholders Accrued shareholder servicing (Note 2) Accrued management fee (Note 2) Accrued accounting services fee (Note 2) Other NET ASSETS Capital paid in Net asset value per share (net assets divided by shares outstanding): Capital shares outstanding: See Notes to Financial Statements. STATEMENT OF OPERATIONS
CASH RESERVES FUND
For the Six Months Ended June 30, 2003
(In Thousands)INVESTMENT INCOME Income (Note 1B): Expenses (Note 2): See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
CASH RESERVES FUND
(In Thousands)INCREASE (DECREASE) IN NET ASSETS Operations: Distributions to shareholders from net investment income (Note 1F):(1) Capital share transactions (Note 5) NET ASSETS Beginning of period End of period (1)See "Financial Highlights" on pages 12 - 14.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
CASH RESERVES FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months ended
ended December 31,Net asset value,
beginning of periodNet investment income Less dividends declared Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement *Not shown due to rounding.
(1)Based on average shares outstanding.
(2)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
CASH RESERVES FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months ended
ended December 31Net asset value, beginning of period Net investment income Less dividends declared Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement *Not shown due to rounding.
(1)Based on average shares outstanding.
(2)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
CASH RESERVES FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout Each Period:Net asset value, beginning of period Net investment income Less dividends declared Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement *Not shown due to rounding.
(1)Based on average shares outstanding.
(2)Annualized.
See Notes to Financial Statements.SHAREHOLDER SUMMARY OF CUNDILL GLOBAL VALUE FUND
Cundill Global Value Fund
GOAL
Seeks long-term capital growth. Any income realized will be incidental.
StrategyIvy Cundill Global Value Fund invests primarily in equity securities (including common stock, preferred stock and securities convertible into common stock) throughout the world, including emerging market countries, that the Fund's management team believes are trading below their estimated "intrinsic value."
"Intrinsic value" is the perceived realizable market value, determined through the management team's analysis of the companies' financial statements (and includes factors such as earnings, cash flows, dividends, business prospects, management capabilities and other catalysts for potentially increasing shareholder value).
Founded2000
Scheduled Dividend FrequencyAnnually (December)
Performance Summary - Advisors Class Shares
(This class is no longer available for investment.)
Per Share Data For the Six Months Ended June 30, 2003 Net asset value on $9.37 8.34 Change per share $1.03
Past performance is not necessarily indicative of future results.
SHAREHOLDER SUMMARY OF CUNDILL GLOBAL VALUE FUND
Because of ongoing market volatility, the Fund's performance may be subject to substantial short-term fluctuation and current performance may be less than the results shown below. Please check the Ivy Funds website at www.ivyfunds.com for more current performance information.
Average Annual Total Return(A) Period
Load(B)
Sales Load(C)
CDSC(D)
CDSC(E)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(F)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data is based on deduction of 5.75% sales load on the initial purchase in the periods.
(C)Performance data does not take into account the sales load deducted on an initial purchase.
(D)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end of each of the periods.
(E)Performance data does not reflect the effect of paying the applicable CDSC upon redemption at the end of each of the periods.
(F)9- 4-01 for Class A shares and 9-26-01 for Class B shares (the date on which shares were first acquired by shareholders).
Average Annual Total Return(A) Period
Class(C) (D)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(E) Cumulative return since inception of Class(E)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at the end of the first year after investment. Accordingly, these returns reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase.
(C)Performance data does not include the effect of sales charges, as Advisor Class shares are not subject to these charges.
(D)See Note 5 to financial statements.
(E)10-19-01 for Class C shares, 4-19-00 for Advisor Class shares and 11-5-2002 for Class I shares (the date on which shares were first acquired and continuously held by shareholders).
International investing involves special risks, including political, economic and currency risks.
SHAREHOLDER SUMMARY OF CUNDILL GLOBAL VALUE FUND
Portfolio HighlightsOn June 30, 2003, Cundill Global Value Fund had net assets totaling $10,079,187 invested in a diversified portfolio of:
82.44% Common Stocks 17.56% Cash and Cash Equivalents and Unrealized Gain on
Open Forward Currency Contracts
As a shareholder of Cundill Global Value Fund, for every $100 you had invested on
June 30, 2003, your Fund owned:
Multi-Industry Stocks Cash and Cash Equivalents and Unrealized Gain on Open Forward Currency Contracts Financial Services Stocks Consumer Services Stocks Consumer Nondurables Stocks Health Care Stocks Business Equipment and Services Stocks Consumer Durables Stocks Raw Materials Stocks Capital Goods Stocks Retail Stocks
THE INVESTMENTS OF CUNDILL GLOBAL VALUE FUND June 30, 2003 COMMON STOCKS Beverages - 4.28% Coca-Cola West Japan Company Limited Broadcasting - 13.40% Nippon Broadcasting System, Incorporated Nippon Television Network Corporation Tokyo Broadcasting System, Inc. Liberty Media Corporation, Class A* Business Equipment and Services - 6.12% Alderwoods Group, Inc.* Asatsu-DK Inc. Capital Equipment - 1.94% Sulzer AG, Registered Shares Chemicals - Specialty - 2.14% Henkel Kommanditgesellschaft auf Aktien Consumer Electronics - 2.17% Nintendo Co., Ltd. Cosmetics and Toiletries - 4.06% Shiseido Company, Limited Finance Companies - 4.24% AIFUL Corporation Health Care - Drugs - 4.15% Sankyo Co., Ltd. Household - General Products - 3.04% Lion Corporation Insurance - Property and Casualty - 5.72% Fairfax Financial Holdings Limited NIPPONKOA Insurance Company, Limited See Notes to Schedule of Investments on page 20. Multiple Industry - 16.60% CITIC Pacific Limited First Pacific Company Limited* Jardine Strategic Holdings Limited Onex Corporation Teck Cominco Limited, Class B Restaurants - 0.96% McDonald's Corporation Security and Commodity Brokers - 6.74% Brascan Corporation, Class A Nikko Cordial Corporation Tobacco - 4.67% Korea Tobacco & Ginseng Corporation Korea Tobacco & Ginseng Corporation, GDR (A) Utilities - Telephone - 2.21% Videsh Sanchar Nigam Limited, ADR TOTAL COMMON STOCKS - 82.44% (Cost: $7,768,946)
UNREALIZED GAIN ON OPEN FORWARD
CURRENCY CONTRACTS - 0.52%Eurodollar, 12-10-03 (B) HongKong Dollar, 9-9-03 (B) HongKong Dollar, 12-10-03(B) HongKong Dollar, 1-29-04(B) HongKong Dollar, 1-29-04(B) Japanese Yen, 9-9-03 (B) Japanese Yen, 1-29-04 (B) Japanese Yen, 1-29-04(B) Korean Won, 1-29-04(B) Korean Won, 1-29-04 (B) Korean Won, 12-10-03 (B) Swiss Franc, 12-10-03 (B) Swiss Franc, 1-29-04 (B)
See Notes to Schedule of Investments on page 20. SHORT-TERM SECURITIES Commercial Paper - 0.51%
Chemicals - Petroleum and Inorganicdu Pont (E.I.) de Nemours and Company, 1.11169%, Master Note Repurchase Agreement - 18.45% J.P. Morgan Securities Inc., 0.96% Repurchase Agreement dated 6-30-03, to be repurchased at $1,860,050 on 7-1-03(C) TOTAL SHORT-TERM SECURITIES - 18.96% (Cost: $1,911,000) TOTAL INVESTMENTS - 101.92% (Cost: $9,679,946) LIABILITIES, NET OF CASH AND OTHER ASSETS-(1.92%) NET ASSETS - 100.00%
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the total value of this security amounted to 0.58% of net assets.
(B)Principal amounts are denominated in the indicated foreign currency where applicable. (EUR - Euro, HKD - Hong Kong Dollar, Y - Japanese Yen, KRW - Korean Won, CHF - Swiss Franc)
(C)Collateralized by $1,883,600 United States Treasury Bond, 7.5% due 11-15-2016; market value and accrued interest aggregate $1,897,161.
See Note 1 to financial statements for security valuation and other significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and depreciation of investments owned for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES
CUNDILL GLOBAL VALUE FUND
June 30, 2003
(In Thousands, Except for Per Share Amounts)ASSETS Investment securities - at value (cost - $7,820) (Notes 1 and 3) Repurchase agreement - at value (cost - $1,860) Cash Receivables: LIABILITIES Payable for investment securities purchased Payable to Fund shareholders Accrued shareholder servicing (Note 2) Accrued management fee (Note 2) Accrued distribution and service fees (Note 2) Accrued accounting services fee (Note 2) Other NET ASSETS Capital paid in Accumulated undistributed income (loss): $10,079 Net asset value per share (net assets divided by shares outstanding): Capital shares outstanding:
STATEMENT OF OPERATIONS (Continued)
CUNDILL GLOBAL VALUE FUND
For the Six Months Ended June 30, 2003
(In Thousands)REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3) Realized net gain on securities Realized net loss on forward currency contracts Realized net loss on foreign currency transactions Unrealized appreciation in value of securities during the period Unrealized appreciation in value of forward currency
contracts during the period
STATEMENT OF CHANGES IN NET ASSETS
CUNDILL GLOBAL VALUE FUND
(In Thousands)INCREASE IN NET ASSETS Operations: Distributions to shareholders from (Note 1F):(1) Capital share transactions (Note 5) NET ASSETS Beginning of period End of period *Not shown due to rounding.
(1)See "Financial Highlights" on pages 25 - 29.
FINANCIAL HIGHLIGHTS
CUNDILL GLOBAL VALUE FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Net investment income Capital gains Total distributions Net asset value, end of period Total return(3) Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Commencement of operations of the class. (2)Based on average shares outstanding. (3)Total return calculated without taking into account the sales load deducted on an initial purchase. (4)Annualized.
FINANCIAL HIGHLIGHTS
CUNDILL GLOBAL VALUE FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:For the six
months
ended
6-30-03For the
period from
9-26-01(1)
to
12-31-01Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Net investment income Capital gains Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Commencement of operations of the class. (2)Based on average shares outstanding. (3)Annualized.
FINANCIAL HIGHLIGHTS
CUNDILL GLOBAL VALUE FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout Each Period:For the
period from
10-19-01(1)
to
12-31-01Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Net investment income Capital gains Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Commencement of operations of the class. (2)Based on average shares outstanding. (3)Annualized.
FINANCIAL HIGHLIGHTS
CUNDILL GLOBAL VALUE FUND
Advisor Class Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:
ended December 31,
period from
4-19-00(2)toNet asset value, beginning of period $8.34 $9.55 $10.07 $10.00 Income (loss) from investment operations: 0.01 0.04(3) 0.03 0.05 1.02 (1.17) (0.25) 0.41 Total from investment operations 1.03 (1.13) (0.22) 0.46 Less distributions from: Net investment income (0.00) (0.00) (0.02) (0.19) Capital gains (0.00) (0.08) (0.28) (0.20) Total distributions (0.00) (0.08) (0.30) (0.39) Net asset value, end of period $9.37 $8.34 $ 9.55 $10.07 Total return 12.35% -11.86% -2.13% 4.66% Net assets, end of period (in millions) $3 $2 $1 $1 Ratio of expenses to average net assets with reimbursement 2.29%(4) 1.83% 1.40% 1.95%(4) Ratio of net investment income net to average net assets with reimbursement 0.39%(4) 0.47% 0.37% 0.70%(4) Ratio of expenses to average net assets without reimbursement 3.08%(4) 4.52% 10.30% 19.15%(4) Ratio of net investment loss to average net assets without reimbursement -0.40%(4) -2.22% -8.53% -16.50%(4) Portfolio turnover rate 13% 122% 57% 53% (1)See Note 5 to financial statements. (2)Commencement of operations of the class. (3)Based on average shares outstanding. (4)Annualized.
FINANCIAL HIGHLIGHTS
CUNDILL GLOBAL VALUE FUND
Class I Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Net investment income Capital gains Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)See Note 5 for financial statements. (2)Commencement of operations of the class. (3)Annualized. SHAREHOLDER SUMMARY OF DIVIDEND INCOME FUND
Dividend Income Fund
GOALS
Seeks to provide income and long-term capital growth.
StrategyThe Fund commenced operations on June 30, 2003. The Fund seeks to achieve its goals by investing primarily in dividend-paying common stocks that Waddell & Reed Ivy Investment Company, the Fund's investment manager, believes also demonstrate favorable prospects for long-term capital growth. Although the Fund invests primarily in large companies, it may invest in companies of any size. The Fund will invest primarily in domestic securities but may also invest up to 25% of its total assets in foreign securities.
Founded2003
Scheduled Dividend FrequencyQuarterly (March, June, September and December)
Performance Summary - Class A Shares
Per Share Data For the Fiscal Period Ended June 30, 2003 Net asset value on Change per share
Past performance is not necessarily indicative of future results.
STATEMENT OF ASSETS AND LIABILITIES
DIVIDEND INCOME FUND
June 30, 2003
(In Thousands, Except for Per Share Amounts)ASSETS Cash NET ASSETS Capital paid in Net asset value per share (net assets divided by shares outstanding): Capital shares outstanding: See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
DIVIDEND INCOME FUND
(In Thousands)INCREASE IN NET ASSETS Operations: Distributions to shareholders from (Note 1F):(1) Capital share transactions (Note 5) NET ASSETS Beginning of period End of period (1)See "Financial Highlights" on pages 33-36.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DIVIDEND INCOME FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout the Period:
period from
6-30-03(1)
to
6-30-03Net asset value, beginning of period Income from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return(2) Net assets, end of period (in thousands) Ratio of expenses to average net assets Ratio of net investment income to average net assets Portfolio turnover rate (1)Commencement of operations of the class.
(2)Total return calculated without taking into account the sales load deducted on an initial purchase.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DIVIDEND INCOME FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout the Period:Net asset value, beginning of period Income from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets Ratio of net investment income to average net assets Portfolio turnover rate (1)Commencement of operations of the class.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DIVIDEND INCOME FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout the Period:Net asset value, beginning of period Income from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets Ratio of net investment income to average net assets Portfolio turnover rate (1)Commencement of operations of the class.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DIVIDEND INCOME FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout the Period:Net asset value, beginning of period Income from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets Ratio of net investment income to average net assets Portfolio turnover rate (1)Commencement of operations of the class.
See Notes to Financial Statements.SHAREHOLDER SUMMARY OF EUROPEAN OPPORTUNITIES FUND
European Opportunities Fund
GOAL
Seeks long-term capital growth by investing in the securities markets of Europe.
StrategyIvy European Opportunities Fund invests at least 80% of its net assets in the equity securities (including common stock, preferred stock and securities convertible into common stock) of European companies, which may include:
large European companies, or European companies of any size that provide special investment opportunities (such as privatized companies, those providing exceptional value, or those engaged in initial public offerings);
small-capitalization companies in the more developed markets of Europe
companies operating in Europe's emerging market
The Fund's manager uses a "bottom-up" investment approach, focusing on prospects for long-term earnings growth.
Founded1999
Scheduled Dividend FrequencyAnnually (December)
Performance Summary - Class A Shares
Per Share Data For the Six Months Ended June 30, 2003 Net asset value on Change per share
Past performance is not necessarily indicative of future results.
SHAREHOLDER SUMMARY OF EUROPEAN OPPORTUNITIES FUND
Because of ongoing market volatility, the Fund's performance may be subject to substantial short-term fluctuation and current performance may be less than the results shown below. Please check the Ivy Funds website at www.ivyfunds.com for more current performance information.
Average Annual Total Return(A) Period
Load(B)
Sales Load(C)
CDSC(D)
CDSC(E)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(F)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data is based on deduction of 5.75% sales load on the initial purchase in the periods.
(C)Performance data does not take into account the sales load deducted on an initial purchase.
(D)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end of each of the periods.
(E)Performance data does not reflect the effect of paying the applicable CDSC upon redemption at the end of each of the periods.
(F)5-4-99 for Class A shares and 5-24-99 for Class B shares (the date on which shares were first acquired by shareholders).
Average Annual Total Return(A) Period
Class(C) (D)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(E)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at the end of the first year after investment. Accordingly, these returns reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase.
(C)Performance data does not include the effect of sales charges, as Advisor Class and Class I shares are not subject to these charges.
(D)See Note 5 to financial statements.
(E)10-24-99 for Class C shares, 5-3-99 for Advisor Class shares and 3-16-00 for Class I shares (the date on which shares were first acquired by shareholders).
A large portion of the Fund's since inception return is attributable to investments in initial public offerings without which the Fund's return would have been lower.
International investing involves special risks, including political, economic and currency risks.
SHAREHOLDER SUMMARY OF EUROPEAN OPPORTUNITIES FUND
Portfolio HighlightsOn June 30, 2003, European Opportunities Fund had net assets totaling $65,288,864 invested in a diversified portfolio of:
98.52% Common Stocks and Right 1.48% Cash and Cash Equivalents
As a shareholder of European Opportunities Fund, for every $100 you had invested on
June 30, 2003, your Fund owned:
Capital Goods Stocks Business Equipment and Services Stocks Retail Stocks Consumer Nondurables Stocks Utilities Stocks Financial Services Stocks Consumer Durables Stocks Shelter Stocks Consumer Services Stocks Energy Stocks Health Care Stocks Raw Materials Stocks Miscellaneous Stocks Transportation Stocks Cash and Cash Equivalents
THE INVESTMENTS OF EUROPEAN OPPORTUNITIES FUND June 30, 2003 COMMON STOCKS AND RIGHT Air Transportation - 2.33% EasyJet plc (A)* Apparel - 2.57% PUMA Aktiengesellschaft Rudolf Dassler Sport (A) Banks - 4.02% Credit Suisse Group, Registered Shares (A) KBC Bank and Insurance Holding Company NV (A) Royal Bank of Scotland Group plc (The) (A) Business Equipment and Services - 9.94% Andritz AG (A) Buhrmann NV (A)* Group 4 Falck A/S (A) PHS Group plc (A) Savills plc (A) Capital Equipment - 3.45% IHC Caland N.V. (A) Weir Group PLC (The) (A) Chemicals - Specialty - 1.72% Henkel Kommanditgesellschaft auf Aktien (A) Communications Equipment - 1.61% Filtronic plc (A) Sagem SA (A) Construction Materials - 4.13% Compagnie de Saint-Gobain (A) Lafarge (A) Lafarge, Rights (A)* Finance Companies - 1.48% Kensington Group plc (A) See Notes to Schedule of Investments on page 43. Food and Related - 4.20% Coca-Cola Hellenic Bottling Company S.A. (A) Unilever N.V., Certicaaten Van Aandelen (A) Gold and Precious Metals - 1.18% Centamin Egypt Limited (A)* Health Care - Drugs - 1.80% Roche Holdings AG, Genussschein (A) Health Care - General - 1.63% PLIVA d.d., GDR Smith & Nephew plc (A) Homebuilders, Mobile Homes - 5.05% Heijmans N.V., Certicaaten Van Aandelen (A) Persimmon plc (A) Taylor Woodrow plc (A) Insurance - Property and Casualty - 1.50% Benfield Group Limited (A)* Storebrand ASA (A)* Leisure Time Industry - 1.96% Wembley plc (A) Motor Vehicles - 5.49% Bayerische Motoren Werke
Aktiengesellschaft (A)Porsche AG (A) Volkswagen Aktiengesellschaft (A) Multiple Industry - 2.73% Continental Aktiengesellschaft (A) Investor AB, Class C (A) See Notes to Schedule of Investments on page 43. Non-Residential Construction - 4.91% Eiffage (A) Technip-Coflexip (A) Petroleum - Domestic - 1.88% Compania Espanola de Petroleos, S.A. (A) Petroleum - International - 2.07% "Shell" Transport and Trading Company, p.l.c. (The) (A) Publishing - 2.50% Wolters Kluwer nv, Certicaaten Van Aandelen (A) Restaurants - 2.97% Punch Taverns plc (A)* Retail - Food Stores - 4.50% Delhaize Brothers and Co. "The Lion" (A) Koninklijke Ahold N.V. (A) Retail - General Merchandise - 2.36% Folli-Follie SA (A) Retail - Specialty Stores - 2.96% JJB Sports plc (A) Matalan PLC (A) Timesharing and Software - 2.88% ebookers plc (A)* NDS Group plc, ADR* Tobacco - 4.71% Altadis, S.A. (A) Imperial Tobacco Group PLC (A) Utilities - Electric - 4.16% Public Power Corporation S.A. (A)* Red Electrica de Espana, S.A. (A) See Notes to Schedule of Investments on page 43. Utilities - Gas and Pipeline - 2.22% Centrica plc (A) Utilities - Telephone - 3.61% Koninklijke KPN N.V. (A)* Telecom Italia S.p.A. (A) TOTAL COMMON STOCKS AND RIGHT - 98.52% (Cost: $61,573,604)
Amount in
ThousandsSHORT-TERM SECURITY Repurchase Agreement - 2.49% J.P. Morgan Securities Inc., 0.96% Repurchase Agreement dated 6-30-03, to be repurchased at $1,626,043 on 7-1-03 (B) (Cost: $1,626,000) TOTAL INVESTMENTS - 101.01% (Cost: $63,199,604) LIABILITIES, NET OF CASH AND OTHER ASSETS -(1.01)% NET ASSETS - 100.00%
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A)Listed on an exchange outside the United States.
(B)Collaterized by $1,646,960 United States Treasury Bond, 7.5% due 11-15-16; market value and accrued interest aggregate $1,658,818.
See Note 1 to financial statements for security valuation and other significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and depreciation of investments owned for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES
EUROPEAN OPPORTUNITIES FUND
June 30, 2003
(In Thousands, Except for Per Share Amounts)ASSETS Investment securities - at value (cost - $63,200) (Notes 1 and 3) Receivables: LIABILITIES Payable for investment securities purchased Payable to Fund shareholders Accrued shareholder servicing (Note 2) Accrued management fee (Note 2) Due to custodian Accrued distribution and service fees (Note 2) Accrued accounting services fee (Note 2) Other NET ASSETS Capital paid in Accumulated undistributed income (loss): Net asset value per share (net assets divided by shares outstanding): Capital shares outstanding: See Notes to Financial Statements.
STATEMENT OF OPERATIONS
EUROPEAN OPPORTUNITIES FUND
For the Six Months Ended June 30, 2003
(In Thousands)INVESTMENT INCOME Income (Note 1B): Expenses (Note 2): REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3) Realized net loss on securities Realized net gain on foreign currency transactions Unrealized appreciation in value of securities during the period *Not shown due to rounding.
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
EUROPEAN OPPORTUNITIES FUND
(In Thousands)DECREASE IN NET ASSETS Operations: Distributions to shareholders from (Note 1F):(1) Capital share transactions (Note 5) NET ASSETS Beginning of period End of period (1)See "Financial Highlights" on pages 47 - 51. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
EUROPEAN OPPORTUNITIES FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months
ended
ended December 31,
period from
5- 4-99(1)
toNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return(4) Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)Commencement of operations of the class.
(2)Based on average shares outstanding.
(3)Includes redemption fees added to capital.
(4)Total return calculated without taking into account the sales load deducted on an initial purchase.
(5)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
EUROPEAN OPPORTUNITIES FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months
ended
ended December 31,
period
from
5- 24-99(1)
toNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Commencement of operations of the class.
(2)Based on average shares outstanding.
(3)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
EUROPEAN OPPORTUNITIES FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
six months
ended
ended December 31,
period
from
10- 24-99(1)
toNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Commencement of operations of the class.
(2)Based on average shares outstanding.
(3)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
EUROPEAN OPPORTUNITIES FUND
Advisor Class Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:
six months
ended
ended December 31,
period
from
5- 3-99(2)
toNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)See Note 5 to financial statements.
(2)Commencement of operations of the class.
(3)Based on average shares outstanding.
(4)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
EUROPEAN OPPORTUNITIES FUND
Class I Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:
months ended
year ended
December 31
period from
3-16-00(2)
toNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)See Note 5 to financial statements.
(2)Commencement of operations of the class.
(3)Based on average shares outstanding.
(4)Annualized.
See Notes to Financial Statements.SHAREHOLDER SUMMARY OF GLOBAL NATURAL RESOURCES FUND
Global Natural Resources Fund
GOAL
Seeks long-term growth. Any income realized will be incidental.
StrategyIvy Global Natural Resources Fund invests at least 80% of its net assets in equity securities (including common stock, preferred stock and securities convertible into common stock) of companies of any size throughout the world that own, explore or develop natural resources and other basic commodities or supply goods and services to such companies.
The Fund's investment manager uses an equity style that focuses on both growth and value. Companies targeted for investment have strong management and financial positions, adding balance with established low cost, low debt producers and positions that are based on anticipated commodity price trends. The Fund may have some emerging markets exposure in an attempt to achieve higher returns over the long-term.
Founded1997
Scheduled Dividend FrequencyAnnually (December)
Performance Summary - Class A Shares
Per Share Data For the Six Months Ended June 30, 2003 Net asset value on Change per share
Past performance is not necessarily indicative of future results.
SHAREHOLDER SUMMARY OF GLOBAL NATURAL RESOURCES FUND
Because of ongoing market volatility, the Fund's performance may be subject to substantial short-term fluctuation and current performance may be less than the results shown below. Please check the Ivy Funds website at www.ivyfunds.com for more current performance information.
Average Annual Total Return(A) Period
Load(B)
Sales Load(C)
CDSC(D)
CDSC(E)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(F)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data is based on deduction of 5.75% sales load on the initial purchase in the periods.
(C)Performance data does not take into account the sales load deducted on an initial purchase.
(D)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end of each of the periods.
(E)Performance data does not reflect the effect of paying the applicable CDSC upon redemption at the end of each of the periods.
(F)1-2-97 for Class A shares and Class B shares (the date on which shares were first acquired by shareholders).
Average Annual Total Return(A) Period 1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(E)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at the end of the first year after investment. Accordingly, these returns reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase.
(C)Performance data does not include the effect of sales charges, as Advisor Class shares are not subject to these charges.
(D)See Note 5 to financial statements.
(E)1-2-97 for Class C shares and 4-8-99 for Advisor Class shares (the date on which shares were first acquired by shareholders).
International investing involves special risks, including political, economic and currency risk.
SHAREHOLDER SUMMARY OF GLOBAL NATURAL RESOURCES FUND
Portfolio HighlightsOn June 30, 2003, Global Natural Resources Fund had net assets totaling $39,286,474 invested in a diversified portfolio of:
84.75% Common Stocks 15.25% Cash and Cash Equivalents and Unrealized Loss on Open Forward Currency Contracts
As a shareholder of Global Natural Resources Fund, for every $100 you had invested on
June 30, 2003, your Fund owned:
Energy Stocks Raw Materials Stocks Cash and Cash Equivalents and Unrealized Loss on Open Forward Currency Contracts Capital Goods Stocks Multi-Industry Stocks Shelter Stocks Transportation Stocks Financial Services Stocks Business Equipment and Services Stocks
THE INVESTMENTS OF THE GLOBAL NATURAL RESOURCES FUND June 30, 2003 COMMON STOCKS Aluminum - 0.51% Alcan Inc. (A) Capital Equipment - 1.89% Pason Systems Inc. (A) Coal - 5.71% Arch Coal, Inc. Peabody Energy Corporation Construction Materials - 5.03% Cemex, S.A. de C.V., ADR Lafarge North America Inc. Electrical Equipment - 2.06% NQL Drilling Tools Inc. (A)* Forest and Paper Products - 10.53% Aracruz Celulose S.A., ADR Cascades Inc. (A) Domtar Inc. (A) Sappi Limited (A) Sappi Limited, ADR Smurfit-Stone Container Corporation* Votorantim Celulose e Papel S.A., ADR Gold and Precious Metals - 12.11% Anglo American Platinum Corporation Limited (A) Compania de Minas Buenaventura S.A.A., ADR Gold Fields Limited (A) Gold Fields Limited, ADR IAMGOLD Corporation (A) Impala Platinum Holdings Limited (A) LionOre Mining International Ltd. (A)* Mvelaphanda Resources Limited (A) Sons of Gwalia Ltd (A) See Notes to Schedule of Investments on page 57. Mining - 7.35% Cameco Corporation (A) Freeport-McMoRan Copper & Gold Inc., Class B Harmony Gold Mining Company Limited (A) Inco Limited (A)* Newmont Mining Corporation Outokumpu Oyj (A) Multiple Industry - 12.33% Agricore United (A) Companhia Vale do Rio Doce, ADR Compton Petroleum Corporation (A)* Gabriel Resources Ltd. (A)* Randgold Resources Limited, ADR* Sino-Forest Corporation, Class A (A)* Trican Well Service Ltd. (A)* Petroleum - Canada - 8.19% Blue Mountain Energy Ltd. (A)* Bow Valley Energy Ltd. (A)* Canadian Oil Sands Trust (A) Nabors Industries Ltd.* PetroKazakhstan Inc., Class A (A)* Talisman Energy Inc. (A) TriQuest Energy Corp. (A)* Petroleum - Domestic - 1.59% Pioneer Natural Resources Company* Valero Energy Corporation Petroleum - International - 2.57% Brooklyn Energy Corporation (A)(B)* Mustang Resources Inc., Class A (A)* Petroleo Brasileiro S.A. - Petrobras Petroleum - Services - 11.45% CHC Helicopter Corporation, Class A (A) ENSCO International Incorporated National-Oilwell, Inc.* Noble Corporation* Precision Drilling Corporation (A)* Varco International, Inc.* Western Oil Sands Inc., Class A (A)* See Notes to Schedule of Investments on page 57. Steel - 0.87% Steel Dynamics, Inc.* Trucking and Shipping - 2.56% Stelmar Shipping Ltd.* TOTAL COMMON STOCKS - 84.75% (Cost: $28,434,832)
UNREALIZED LOSS ON OPEN FORWARD
CURRENCY CONTRACTS - (0.12%)Canadian Dollar, 10-23-03 (C) South African Rand, 10-23-03 (C) SHORT-TERM SECURITIES - 15.18% Repurchase Agreement J.P. Morgan Securities Inc., 0.96% Repurchase Agreement dated 6-30-03, to be repurchased at $5,964,159 on 7-1-03 (D) (Cost: $5,964,000) TOTAL INVESTMENTS - 99.81% (Cost: $34,398,832) CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.19% NET ASSETS - 100.00%
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A)Listed on an exchange outside the United States.
(B)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the total value of this security amounted to 0.82% of net assets.
(C)Principal amounts are denominated in the indicated foreign currency where applicable. (CAD - Canadian Dollar, ZAR - South African Rand)
(D)Collateralized by $6,038,400 United States Treasury Bond, 7.5% due 11-15-2016; market value and accrued interest aggregate $6,081,875.
See Note 1 to financial statements for security valuation and other significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and depreciation of investments owned for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES
GLOBAL NATURAL RESOURCES FUND
June 30, 2003
(In Thousands, Except for Per Share Amounts)ASSETS Investment securities - at value (cost - $28,435) (Notes 1 and 3) Repurchase agreement - at value (cost - $5,964) Cash Receivables: LIABILITIES Payable for investment securities purchased Payable to Fund shareholders Accrued shareholder servicing (Note 2) Accrued management fee (Note 2) Accrued distribution and service fees (Note 2) Accrued accounting services fee (Note 2) Accrued administrative fee (Note 2) Other NET ASSETS Capital paid in Accumulated undistributed income (loss): Net asset value per share (net assets divided by shares outstanding): Capital shares outstanding: See Notes to Financial Statements.
STATEMENT OF OPERATIONS
GLOBAL NATURAL RESOURCES FUND
For the Six Months Ended June 30, 2003
(In Thousands)INVESTMENT LOSS Income (Note 1B): Expenses (Note 2): REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1 AND 3)See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
GLOBAL NATURAL RESOURCES FUND
(In Thousands)INCREASE IN NET ASSETS NET ASSETS (1)See "Financial Highlights" on pages 61 - 64.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
GLOBAL NATURAL RESOURCES FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:For the six
months endedFor the fiscal year ended December 31, 6-30-03 2002 2001 2000 1999 1998 Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value end of period Total return(3) Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement 0.29% Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding. (2)Includes redemption fees added to capital. (3)Total return calculated without taking into account the sales load deducted on an initial purchase. (4)Annualized. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
GLOBAL NATURAL RESOURCES FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:For the six
months endedNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment loss to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1) Based on average shares outstanding. (2) Annualized. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
GLOBAL NATURAL RESOURCES FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout Each Period:For the six
months endedNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment loss to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding. (2)Annualized. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
GLOBAL NATURAL RESOURCES FUND
Advisor Class Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:For the six
months
endedFor the fiscal year
ended December 31,For the period
from
4-8-99(2)6-30-03 12-31-99 Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)See Note 5 to financial statements. (2)Commencement of operations of the class. (3)Based on average shares outstanding. (4)Annualized. See Notes to Financial Statements. SHAREHOLDER SUMMARY OF INTERNATIONAL FUND
International Fund
GOALS
Seeks long-term growth. Consideration of current income is secondary to this principal objective.
Strategy
Ivy International Fund invests at least 80% of its net assets in equity securities (including common stock, preferred stock and securities convertible into common stock) principally traded in European, Pacific Basin and Latin American markets.
WRIICO uses an investment approach that focuses on:analyzing a company's financial statements;
taking advantage of overvalued or undervalued markets
building a portfolio that is diversified by both region and sector
Some of the Fund's investments may produce income (such as dividends), although it is expected that any income realized would be incidental.
Founded
1986
Scheduled Dividend FrequencyAnnually (December)
Performance Summary - Class A Shares
Per Share Data For the Six Months Ended June 30, 2003 Net asset value on Change per share
Past performance is not necessarily indicative of future results.
SHAREHOLDER SUMMARY OF INTERNATIONAL FUND
Because of ongoing market volatility, the Fund's performance may be subject to substantial short-term fluctuation and current performance may be less than the results shown below. Please check the Ivy Funds website at www.ivyfunds.com for more current performance information.
Average Annual Total Return(A) Period
Load(B)
Sales Load(C)
CDSC(D)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(F)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data is based on deduction of 5.75% sales load on the initial purchase in the periods.
(C)Performance data does not take into account the sales load deducted on an initial purchase.
(D)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end of each of the periods.
(E)Performance data does not reflect the effect of paying the applicable CDSC upon redemption at the end of each of the periods.
(F)10-22-93 for Class B shares (the date on which shares were first acquired by shareholders).
Average Annual Total Return(A) Period
Class(C) (D)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(E) Cumulative return since inception of Class(F)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at the end of the first year after investment. Accordingly, these returns reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase.
(C)Performance data does not include the effect of sales charges, as Advisor Class and Class I shares are not subject to these charges.
(D)See Note 5 to financial statements.
(E)4-30-96 for Class C shares, 10-22-93 for Class I shares (the date on which shares were first acquired by shareholders).
(F)7-3-02 for Advisor Class shares (the date on which shares were first acquired and continuously held by shareholders).
International investing involves special risks, including political, economic and currency risks.
SHAREHOLDER SUMMARY OF INTERNATIONAL FUND
Portfolio HighlightsOn June 30, 2003, International Fund had net assets totaling $188,801,775 invested in a diversified portfolio of:
89.75% Common Stocks 10.25% Cash and Cash Equivalents
As a shareholder of International Fund, for every $100 you had invested on
June 30, 2003, your Fund was invested by geographic region and by
industry, respectively, as follows:
Europe Pacific Basin Cash and Cash Equivalents Mexico Scandinavia Canada Middle East Financial Services Stocks Cash and Cash Equivalents Consumer Goods Stocks Utilities Stocks Energy Stocks Health Care Stocks Capital Goods Stocks Raw Materials Stocks Business Equipment and Services Multi-Industry Stocks Consumer Services Retail Stocks Technology Stocks
THE INVESTMENTS OF INTERNATIONAL FUND June 30, 2003 COMMON STOCKS Australia - 3.62% National Australia Bank Limited (A) News Corporation Limited (The) (A) Austria - 1.41% Erste Bank der oesterreichischen
Sparkassen AG (A)Belgium - 1.03% Fortis (A) China - 0.91% China Telecom Corporation Limited (A)* Canada - 2.14% EnCana Corporation (A) Shoppers Drug Mart Corporation (A) (B)* Finland - 0.95% Nokia Oyj (A) France - 8.13% AXA (A) Sanofi-Synthelabo (A) Schneider Electric SA (A) STMicroelectronics N.V. (A) TF1 SA (A) Technip-Coflexip (A) TotalFinaElf, S.A. (A) VINCI (A) Germany - 7.24% BASF Aktiengesellschaft (A) Deutsche Bank Aktiengesellschaft (A) Deutsche Boerse AG (A) Deutsche Telekom AG, Registered Shares (A)* Henkel Kommanditgesellschaft auf Aktien (A) Siemens AG (A) Hong Kong - 1.03% Hutchison Whampoa Limited, Ordinary Shares (A) Israel - 0.58% Check Point Software Technologies Ltd.* See Notes to Schedule of Investments on page 71. Italy - 3.25% Banca Nazionale Lavoro S.p.A. (A)* Eni S.p.A. (A) Snam Rete Gas S.p.A. (A) Telecom Italia Mobile S.p.A. (A) Japan - 10.77% Canon Inc. (A) Kirin Brewery Company, Limited (A) Mitsubishi Corporation (A) NTT DoCoMo, Inc. (A) Nissan Motor Co., Ltd. (A) Nomura Holdings, Inc. (A) Ricoh Company, Ltd. (A) SMC Corporation (A) Sharp Corporation (A) Sumitomo Chemical Company, Limited (A) Korea - 3.52% POSCO (A) Samsung Electronics Co., Ltd. (A) Mexico - 3.47% Fomento Economico Mexicano, S.A. de C.V., ADR Grupo Financiero BBVA Bancomer, S.A. de C.V., Class B (A)* Telefonos de Mexico, S.A. de C.V., ADR Netherlands - 4.74% ABN AMRO Holding N.V. (A) Euronext N.V. (A) ING Groep N.V., Certicaaten Van Aandelen (A) Koninklijke KPN N.V. (A)* Royal Dutch Petroleum Company (A) Norway - 1.44% Norsk Hydro ASA, ADR Singapore - 1.09% DBS Group Holdings Ltd. (A) See Notes to Schedule of Investments on page 71. Spain - 2.51% Amadeus Global Travel Distribution, S.A. (A) Banco Santander Central Hispano, S.A. (A) Enagas, S.A. (A) Switzerland - 12.84% Credit Suisse Group, Registered Shares (A) Holcim Ltd, Registered Shares (A) Nestle S.A., Registered Shares (A) Novartis AG, Registered Shares (A) Roche Holdings AG, Genussschein (A) Swiss Reinsurance Company, Registered Shares (A) UBS AG (A) Zurich Financial Services (A)* Taiwan - 0.50% United Microelectronics Corporation* United Kingdom - 18.58% BP p.l.c. (A) British Sky Broadcasting Group plc (A)* Diageo plc (A) GlaxoSmithKline plc (A) HBOS plc (A) HSBC Holdings plc (A) Lloyds TSB Group plc (A) Marks and Spencer Group plc (A) Reckitt Benckiser plc (A) Rio Tinto plc (A) Royal Bank of Scotland Group plc (The) (A) tesco plc (A) Vodafone Group Plc (A) WPP Group plc (A) TOTAL COMMON STOCKS - 89.75% (Cost: $173,883,488) See Notes to Schedule of Investments on page 71.
SHORT-TERM SECURITIES Repurchase Agreement - 8.00% J.P. Morgan Securities Inc., 0.96% Repurchase Agreement dated 6-30-03, to be repurchased at $15,098,403 on 7-1-03(C) United States Government Security - 4.23% United States Treasury Bill, 1.08%, 7-31-03 TOTAL SHORT-TERM SECURITIES - 12.23% (Cost: $23,090,800) TOTAL INVESTMENTS - 101.98% (Cost: $196,974,288) LIABILITIES, NET OF CASH AND OTHER ASSETS-(1.98%) NET ASSETS - 100.00%
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A)Listed on an exchange outside the United States.
(B)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the total value of this security amounted to 0.63% of net assets.
(C)Collateralized by $15,287,760 United States Treasury Bond, 7.5% due 11-15-16; market value and accrued interest aggregate $15,397,828.
See Note 1 to financial statements for security valuation and other significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and depreciation of investments owned for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL FUND
June 30, 2003
(In Thousands, Except for Per Share and Share Amounts)ASSETS Investment securities - at value (cost - $196,974) (Notes 1 and 3) Receivables: LIABILITIES Payable for investment securities purchased Payable to Fund shareholders Accrued shareholder servicing (Note 2) Accrued management fee (Note 2) Due to custodian Accrued distribution and service fees (Note 2) Accrued accounting services fee (Note 2) Other NET ASSETS Capital paid in Accumulated undistributed loss: Net asset value per share (net assets divided by shares outstanding): Capital shares outstanding: See Notes to Financial Statements.
STATEMENT OF OPERATIONS
INTERNATIONAL FUND
For the Six Months Ended June 30, 2003
(In Thousands)INVESTMENT INCOME Income (Note 1B): Expenses (Note 2) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1 AND 3)Realized net loss on securities Realized net loss on foreign currency transactions Unrealized appreciation in value of investments during the period *Not shown due to rounding.
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
INTERNATIONAL FUND
(In Thousands)DECREASE IN NET ASSETS Operations: Distributions to shareholders from (Note 1F):(1) Capital share transactions (Note 5) NET ASSETS Beginning of period End of period (1)See "Financial Highlights" on pages 75 - 79. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
INTERNATIONAL FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months endedNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return(3) Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Includes redemption fees added to capital.
(3)Total return calculated without taking into account the sales load deducted on an initial purchase.
(4)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
INTERNATIONAL FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months endedNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment loss to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
INTERNATIONAL FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months endedNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment loss to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
INTERNATIONAL FUND
Advisor Class Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:
six months
ended
year ended
December 31,
period from
8-31-00(3)
toNet asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)See Note 5 to financial statements.
(2)Advisor class shares were outstanding for the period from 1/1/02 through 6/11/02 and from 7/3/02 through 12/31/02.
(3)Commencement of operations of the class.
(4)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
INTERNATIONAL FUND
Class I Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:
months endedNet asset value, beginning of period $20.85 $26.35 $47.09 $41.21 $39.06 Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income to average net assets without reimbursement Portfolio turnover rate (1)See Note 5 to financial statements.
(2)Based on average shares outstanding.
(3)Annualized.
See Notes to Financial Statements.SHAREHOLDER SUMMARY OF INTERNATIONAL VALUE FUND
International Value Fund
GOALS
Seeks, as a primary goal, long-term capital growth. Consideration of current income is secondary to this principal objective.
Strategy
Ivy International Value Fund invests at least 80% of its net assets in equity securities (including common stocks, preferred stock and securities convertible into common stock) principally traded in European, Pacific Basin and Latin American markets.
WRIICO uses a disciplined value approach while looking for investment opportunities around the world (including countries with new or comparatively undeveloped economies). Some of the Fund's investments may produce income (such as dividends), although it is expected that any income realized would be incidental.
Founded1997
Scheduled Dividend FrequencyAnnually (December)
Performance Summary - Class A Shares
Per Share Data For the Six Months Ended June 30, 2003 Net asset value on 6-30-03 12-31-02 Change per share
Past performance is not necessarily indicative of future results.
SHAREHOLDER SUMMARY OF INTERNATIONAL VALUE FUND
Because of ongoing market volatility, the Fund's performance may be subject to substantial short-term fluctuation and current performance may be less than the results shown below. Please check the Ivy Funds website at www.ivyfunds.com for more current performance information.
Average Annual Total Return(A) Class A Class B Period
Load(B)
Sales Load(C)
CDSC(D)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(F)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data is based on deduction of 5.75% sales load on the initial purchase in the periods.
(C)Performance data does not take into account the sales load deducted on an initial purchase.
(D)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end of each of the periods.
(E)Performance data does not reflect the effect of paying the applicable CDSC upon redemption at the end of each of the periods.
(F)5-13-97 for Class A shares and Class B shares (the date on which shares were first acquired by shareholders).
Average Annual Total Return(A) Period
Class C(B)
Class(C) (D)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(E)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at the end of the first year after investment. Accordingly, these returns reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase.
(C)Performance data does not include the effect of sales charges, as Advisor Class shares are not subject to these charges.
(D)See Note 5 to financial statements.
(E)5-13-97 for Class C shares and 2-23-98 for Advisor Class shares (the date on which shares were first acquired by shareholders).
International investing involves special risks, including political, economic and currency risk.
SHAREHOLDER SUMMARY OF INTERNATIONAL VALUE FUND
Portfolio HighlightsOn June 30, 2003, International Value Fund had net assets totaling $41,426,813 invested in a diversified portfolio of:
82.76% Common Stocks 17.24% Cash and Cash Equivalents
As a shareholder of International Value Fund, for every $100 you had invested on
June 30, 2003, your Fund was invested by geographic region and by industry,
respectively, as follows:
Europe Pacific Basin Cash and Cash Equivalents Mexico $3.60 Canada $1.48 Scandinavia $1.17 South America $0.92 Middle East $0.57 Financial Services Stocks Cash and Cash Equivalents Utilities Stocks Energy Stocks $9.93 Consumer Goods Stocks $9.28 Capital Goods Stocks $6.88 Raw Materials Stocks $6.48 Health Care Stocks $5.93 Multi-Industry Stocks $4.93 Business Equipment and Services Stocks $2.95 Consumer Services Stocks $2.63 Technology Stocks $2.03 Retail Stocks $1.95
THE INVESTMENTS OF INTERNATIONAL VALUE FUND June 30, 2003 COMMON STOCKS Australia - 2.22% News Corporation Limited (The) (A) Westpac Banking Corporation (A) Austria - 1.39% Erste Bank der oesterreichischen Sparkassen AG (A) Belgium - 1.12% Fortis (A) Brazil - 0.92% Embraer-Empresa Brasileira de Aeronautica S.A. China - 0.91% China Telecom Corporation Limited (A)* Canada - 1.48% EnCana Corporation (A) France - 6.88% Sanofi-Synthelabo (A) Schneider Electric SA (A) STMicroelectronics N.V. (A) TF1 SA (A) Technip-Coflexip (A) TotalFinaElf, S.A. (A) VINCI (A) Germany - 8.03% BASF Aktiengesellschaft (A) Deutsche Bank Aktiengesellschaft (A) Deutsche Boerse AG (A) Deutsche Telekom AG, Registered Shares (A)* E.ON AG (A) Henkel Kommanditgesellschaft auf Aktien (A) Siemens AG (A) Hong Kong - 1.03% Hutchison Whampoa Limited, Ordinary Shares (A) 70,000 Israel - 0.57% Check Point Software Technologies Ltd.* See Notes to Schedule of Investments on page 86. Italy - 2.48% Banca Nazionale Lavoro S.p.A. (A)* Eni S.p.A. (A) Snam Rete Gas S.p.A. (A) Japan - 11.25% Canon Inc. (A) Honda Motor Co., Ltd. (A) Kirin Brewery Company, Limited (A) Nikko Cordial Corporation (A) Nippon Telegraph and Telephone Corporation (A) Nissan Motor Co., Ltd. (A) Nomura Holdings, Inc. (A) Secom Co., Ltd. (A) Shimano Inc. (A) Sumitomo Chemical Company, Limited (A) Takeda Chemical Industries, Ltd. (A) Korea - 4.94% KT Corporation, ADR POSCO (A) Samsung Electronics Co., Ltd. (A) Mexico - 3.60% Fomento Economico Mexicano, S.A. de C.V., ADR Grupo Financiero BBVA Bancomer, S.A. de C.V., Class B (A)* Telefonos de Mexico, S.A. de C.V., ADR Netherlands - 4.85% ABN AMRO Holding N.V. (A) Euronext N.V. (A) ING Groep N.V., Certicaaten Van Aandelen (A) Royal Boskalis Westminster nv, Certicaaten Van Aandelen (A) Royal Dutch Petroleum Company (A) Norway - 1.17% Norsk Hydro ASA, ADR Singapore - 1.06% DBS Group Holdings Ltd. (A) See Notes to Schedule of Investments on page 86. Spain - 2.02% Amadeus Global Travel Distribution, S.A. (A) Enagas, S.A. (A) Switzerland - 12.92% Credit Suisse Group, Registered Shares (A) Holcim Ltd, Registered Shares (A) Nestle S.A., Registered Shares (A) Novartis AG, Registered Shares (A) Roche Holdings AG, Genussschein (A) Swiss Reinsurance Company, Registered Shares (A) UBS AG (A) Zurich Financial Services (A)* United Kingdom - 13.92% BP p.l.c. (A) Diageo plc (A) HBOS plc (A) Lloyds TSB Group plc (A) Marks and Spencer Group plc (A) Reckitt Benckiser plc (A) Rio Tinto plc (A) "Shell" Transport and Trading Company, p.l.c. (The) (A) tesco plc (A) Vodafone Group Plc (A) TOTAL COMMON STOCKS - 82.76% (Cost: $32,910,358)
SHORT-TERM SECURITIES Repurchase Agreement - 9.66% J.P. Morgan Securities Inc., 0.96% Repurchase Agreement dated 6-30-03, to be repurchased at $4,001,107 on 7-1-03 (B) United States Government Security - 4.82% United States Treasury Bill, 1.08%, 7-31-03 TOTAL SHORT-TERM SECURITIES - 14.48% (Cost: $5,999,200) See Notes to Schedule of Investments on page 86. TOTAL INVESTMENTS - 97.24% (Cost: $38,909,558) CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.76% NET ASSETS - 100.00%
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A)Listed on an exchange outside the United States.
(B)Collateralized by $4,051,440 United States Treasury Bond, 7.5% due 11-15-16; market value and accrued interest aggregate $4,080,609.
See Note 1 to financial statements for security valuation and other significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and depreciation of investments owned for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES INTERNATIONAL VALUE FUND
June 30, 2003
(In Thousands, Except for Per Share Amounts)ASSETS Investment securities - at value (cost - $38,910) (Notes 1 and 3) $40,284 Receivables: 221 42,365 LIABILITIES Payable for investment securities purchased Payable to Fund shareholders Accrued shareholder servicing (Note 2) Accrued management fee (Note 2) Accrued distribution and service fees (Note 2) Accrued accounting services fee (Note 2) Due to custodian Other 38 938 NET ASSETS Capital paid in Accumulated undistributed income (loss): 1,401 Net asset value per share (net assets divided by shares outstanding): Advisor Class Capital shares outstanding:
See Notes to Financial Statements.
STATEMENT OF OPERATIONS INTERNATIONAL VALUE FUND
For the Six Months Ended June 30, 2003
(In Thousands)INVESTMENT INCOME Income (Note 1B): 31 666 Expenses (Note 2): 42 637 29 REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTES 1 AND 3)Realized net loss on securities Realized net loss on foreign currency transactions (21) (4,280) Unrealized appreciation in value of investments during the period 6,199 1,919 *Not shown due to rounding.
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS INTERNATIONAL VALUE FUND
(In Thousands)DECREASE IN NET ASSETS Operations: 6,199 (5,927) 1,948 (11,761) Distributions to shareholders from - - - - Capital share transactions (Note 5) (5,845) (18,836) NET ASSETS Beginning of period 45,324 75,921 End of period (1)See "Financial Highlights" on pages 90 - 93. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS INTERNATIONAL VALUE FUND
Class A Shares
For a Share
of Capital Stock Outstanding Throughout Each Period:
6-30-03Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return(3) Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Includes redemption fees added to capital.
(3)Total return calculated without taking into account the sales load deducted on an initial purchase.
(4)Annualized.See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS INTERNATIONAL VALUE FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
six
months
ended
6-30-03Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Net investment income Capital gains Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Annualized.See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS INTERNATIONAL VALUE FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
six months
ended
6-30-03Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Annualized.See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS INTERNATIONAL VALUE FUND
Advisor Class Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:
6-30-03
ended December 31,
period
from
2-23-98(2)
to
12-31-98Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income to average net assets without reimbursement Portfolio turnover rate (1)See Note 5 to financial statements.
(2)Commencement of operations of the class.
(3)Based on average shares outstanding.
(4)Annualized.See Notes to Financial Statements.
Pacific Opportunities Fund
GOALS
Seeks, as a primary goal, long-term capital growth. Consideration of current income is secondary to this principal objective
StrategyIvy Pacific Opportunities Fund invests at least 80% of its net assets in equity securities (including common stock, preferred stock and securities convertible into common stock) of companies such as those whose securities are traded mainly on markets in the Pacific region, organized under the laws of a Pacific region country or issued by any company with more than half of its business in the Pacific region. Examples of Pacific region countries include China, Hong Kong, Malaysia, Sri Lanka, Australia and India. Although it is permitted to invest in Japan, the Fund does not currently anticipate doing so.
The Fund's manager uses an investment approach that focuses on analyzing a company's financial statements and taking advantage of overvalued or undervalued markets. Some of the Fund's investments may produce income (such as dividends), although it is expected that any income realized would be incidental.
Founded1993
Scheduled Dividend FrequencyAnnually (December)
Performance Summary - Class A Shares
Per Share Data For the Six Months Ended June 30, 2003 Net asset value on 6-30-03 $6.50 12-31-02 5.96 Change per share $0.54
Past performance is not necessarily indicative of future results.
SHAREHOLDER SUMMARY OF PACIFIC OPPORTUNITIES FUND
Because of ongoing market volatility, the Fund's performance may be subject to substantial short-term fluctuation and current performance may be less than the results shown below. Please check the Ivy Funds website at www.ivyfunds.com for more current performance information.
Average Annual Total Return(A) Period
CDSC(D)
CDSC(E)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(F)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data is based on deduction of 5.75% sales load on the initial purchase in the periods.
(C)Performance data does not take into account the sales load deducted on an initial purchase.
(D)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end of each of the periods.
(E)Performance data does not reflect the effect of paying the applicable CDSC upon redemption at the end of each of the periods.
(F)10-25-93 for Class A shares and Class B shares (the date on which shares were first acquired by shareholders).
Average Annual Total Return(A) Period
Class(C) (D)1-year period ended 6-30-03 5-year period ended 6-30-03 10-year period ended 6-30-03 Since inception of Class(E)
(A)Performance data represents share price appreciation (depreciation), including reinvestment of all income and capital gains distributions. Performance data represents past performance and is no guarantee of future results. Share price, investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
(B)Performance data reflects the effect of paying the applicable contingent deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at the end of the first year after investment. Accordingly, these returns reflect no CDSC since it only applies to Class C shares redeemed within twelve months after purchase.
(C)Performance data does not include the effect of sales charges, as Advisor Class shares are not subject to these charges.
(D)See Note 5 to financial statements.
(E)4-30-96 for Class C shares and 2-10-98 for Advisor Class shares (the date on which shares were first acquired by shareholders).
International investing involves special risks, including political, economic and currency risk.
SHAREHOLDER SUMMARY OF PACIFIC OPPORTUNITIES FUND
Portfolio HighlightsOn June 30, 2003, Pacific Opportunities Fund had net assets totaling $12,298,258 invested in a diversified portfolio of:
83.12% Common Stocks
16.88% Cash and Cash Equivalents
As a shareholder of Pacific Opportunities Fund, for every $100 you had invested on
June 30, 2003, your Fund owned:
Financial Services Stocks Cash and Cash Equivalents Raw Materials Stocks Technology Stocks $9.71 Multi-Industry Stocks $6.91 Utilities Stocks $5.36 Retail Stocks $5.32 Consumer Services Stocks $4.22 Consumer Nondurables Stocks $3.51 Transportation Stocks $3.48 Capital Goods Stocks $3.11 Business Equipment and Services Stocks $3.05 Consumer Durables Stocks $2.54 Health Care Stocks $2.39 Shelter Stocks $2.33
THE INVESTMENTS OF PACIFIC OPPORTUNITIES FUND June 30, 2003 COMMON STOCKS Air Transportation - 1.99% Cathay Pacific Airways Limited (A) Qantas Airways Limited (A) Banks - 16.23% Australia and New Zealand Banking Group Limited (A) Dah Sing Financial Holdings Limited (A) DBS Group Holdings Ltd (A) Housing Development Finance
Corporation Limited (A)*HSBC Holdings plc (A) KASIKORNBANK PCL (A)* PT Bank Mandiri (A)(B)* Standard Bank Group Limited (A) Standard Chartered PLC (A) United Overseas Bank Limited (A) Westpac Banking Corporation (A) Beverages - 1.46% Foster's Group Limited (A) Business Equipment and Services - 3.05% Infosys Technologies Limited (A) Li & Fung Limited (A) Chemicals - Petroleum and Inorganic - 2.31% Formosa Plastics Corporation (A) LG Chem, Ltd. (A) Computers - Main and Mini - 1.88% BenQ Corporation (A) Quanta Computer Inc. (A) Construction Materials - 1.09% Cheung Kong Infrastructure Holdings Limited (A) Consumer Electronics - 5.42% Samsung Electronics Co., Ltd. (A) Electrical Equipment - 2.02% Johnson Electric Holdings Limited (A) See Notes to Schedule of Investments on page 100. Electronic Components - 4.46% Realtek Semiconductor Corporation (A) Taiwan Semiconductor Manufacturing Company Ltd. (A)* United Microelectronics Corporation (A)* Electronic Instruments - 3.37% Hon Hai Precision Industry Co., Ltd. (A) Health Care - Drugs - 2.39% Novogen LTD (A) * Ranbaxy Laboratories Limited (A) Insurance - Life - 1.34% AXA Asia Pacific Holdings Limited (A) Insurance - Property and Casualty - 1.53% QBE Insurance Group Limited (A) Mining - 4.42% BHP Billiton Plc (A) Rio Tinto Limited (A) Motion Pictures - 2.45% News Corporation Limited (The) (A) Motor Vehicles - 2.54% Hero Honda Motors Ltd. (A) Hyundai Motor Company (A) Multiple Industry - 2.79% Haw Par Corporation Limited (A) Hutchison Whampoa Limited, Ordinary Shares (A) Reliance Industries Limited (A) Publishing - 1.78% Singapore Press Holdings Limited (A) Real Estate Investment Trust - 2.33% CapitaLand Limited (A) Cheung Kong (Holdings) Limited (A) See Notes to Schedule of Investments on page 100. Retail - General Merchandise - 2.83% Woolworths Limited (A) Retail - Specialty Stores - 2.49% Esprit Holdings Limited (A) Steel - 4.05% POSCO (A) Tobacco - 2.05% ITC Limited (A) Trucking and Shipping - 1.49% Sinotrans Limited (A)* Utilities - Telephone - 5.36% China Mobile (Hong Kong) Limited (A) China Telecom Corporation Limited (A)* KT Corporation (A) SK Telecom Co., Ltd. (A) TOTAL COMMON STOCKS - 83.12% (Cost: $9,217,402)
Amount in
ThousandsSHORT-TERM SECURITY - 16.54% Repurchase Agreement J.P. Morgan Securities Inc., 0.96% Repurchase Agreement dated 6-30-03, to be repurchased at $2,034,054 on 7-1-03 (C) (Cost: $2,034,000) TOTAL INVESTMENTS - 99.66% (Cost: $11,251,402) CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.34% NET ASSETS - 100.00% See Notes to Schedule of Investments on page 100.
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A)Listed on an exchange outside the United States.
(B)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the total value of this security amounted to 1.33% of net assets.
(C)Collateralized by $2,056,909 United States Treasury Bond, 6.75% due 5-15-05; market value and accrued interest aggregate $2,073,362.
See Note 1 to financial statements for security valuation and other significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and depreciation of investments owned for Federal income tax purposes.
STATEMENT OF ASSETS AND LIABILITIES
PACIFIC OPPORTUNITIES FUND
June 30, 2003
(In Thousands, Except for Per Share Amounts)ASSETS Investment securities - at value (cost - $9.217) (Notes 1 and 3) Repurchase agreement - at value (cost - $2,034) Cash denominated in foreign currencies (cost - $10) Receivables: LIABILITIES Payable for investment securities purchased Due to Custodian Accrued shareholder servicing (Note 2) Payable to Fund shareholders Accrued management fee (Note 2) Accrued accounting services fee (Note 2) Accrued distribution and service fees (Note 2) Accrued administrative fee (Note 2) Other NET ASSETS Capital paid in Accumulated undistributed income (loss): Net asset value per share (net assets divided by shares outstanding): Capital shares outstanding: See Notes to Financial Statements.
STATEMENT OF OPERATIONS
PACIFIC OPPORTUNITIES FUND
For the Six Months Ended June 30, 2003
(In Thousands)INVESTMENT LOSS Income (Note 1B): Expenses (Note 2): REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1 AND 3)Realized net loss on securities Realized net loss on foreign currency transactions Unrealized appreciation in value of investments during the period *Not shown due to rounding.
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
PACIFIC OPPORTUNITIES FUND
(In Thousands)
months ended
June 30,
2003INCREASE (DECREASE) IN NET ASSETS Operations: Distributions to shareholders from net investment income (Note 1F):(1) Capital share transactions (Note 5) NET ASSETS Beginning of period End of period (1)See "Financial Highlights" on pages 104 - 107.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PACIFIC OPPORTUNITIES FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:Net asset value, beginning of period Income (loss) from investment operations:
income (loss)Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return(3) Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Includes redemption fees added to capital.
(3)Total return calculated without taking into account the sales load deducted on an initial purchase.
(4)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PACIFIC OPPORTUNITIES FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
months ended
ended December 31,Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in millions) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PACIFIC OPPORTUNITIES FUND
Class C Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
six months
ended
December 31,Net asset value, beginning of period Income (loss) from investment operations: Total from investment operations Less distributions from: Total distributions Net asset value, end of period Total return Net assets, end of period (in thousands) Ratio of expenses to average net assets with reimbursement Ratio of net investment income (loss) to average net assets with reimbursement Ratio of expenses to average net assets without reimbursement Ratio of net investment income (loss) to average net assets without reimbursement Portfolio turnover rate (1)Based on average shares outstanding.
(2)Annualized.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PACIFIC OPPORTUNITIES FUND
Advisor Class Shares(1)
For a Share of Capital Stock Outstanding Throughout Each Period:
six months
ended
December 31,
period
from
2-10-98(2)
toNet asset value, beginning of period $5.81 $6.59 $7.30 $9.03 $6.27 $7.89 Income (loss) from investment operations: 0.01 0.04(3) (0.02)(3) 0.12(3) 0.04 0.08 0.49 (0.82) (0.68) (1.82) 2.86 (1.62) Total from investment operations 0.50 (0.78) (0.70) (1.70) 2.90 (1.54) Less distributions from: (0.00) (0.00) (0.01) (0.03) (0.13) (0.08) (0.00) (0.00) (0.00) (0.00) (0.01) (0.00) Total distributions (0.00) (0.00) (0.01) (0.03) (0.14) (0.08) Net asset value, end of period $6.31 $5.81 $6.59 $7.30 $9.03 $6.27 Total return 8.61% -11.84% -9.58% -18.77% 46.29% -19.56% Net assets, end of period (in thousands) $65 $34 $3 $42 $313 $10 Ratio of expenses to average net assets with reimbursement 2.23%(4) 1.74% 2.03% 1.77% 1.79% 2.92%(4) Ratio of net investment income (loss) to average net assets with reimbursement 0.49%(4) 0.67% -0.31% 1.23% 1.42% 0.98%(4) Ratio of expenses to average net assets without reimbursement 2.49%(4) 3.05% 3.39% 2.71% 2.44% 3.48%(4) Ratio of net investment income (loss) to average net assets without reimbursement 0.23%(4) -0.64% -1.67% 0.29% 0.77% 0.42%(4) Portfolio turnover rate 80% 16% 82% 108% 23% 56% (1)See Note 5 to financial statements.
(2)Commencement of operations of the class.
(3)Based on average shares outstanding.
(4)Annualized.
See Notes to Financial Statements.NOTES TO FINANCIAL STATEMENTS
June 30, 2003
Note 1 - Significant Accounting Policies
Ivy Funds (formerly Ivy Fund (see Note 9)) (the "Trust") is 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 a diversified, open-end management investment company. The Trust issues eight series of capital shares; each series represents ownership of a separate mutual fund ("Fund"). The assets belonging to each Fund are held separately by the custodian. The capital shares of each Fund represent a pro rata beneficial interest in the principal, net income and realized and unrealized capital gains or losses of its respective investments and other assets. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America.
A. Security valuation - Each stock and convertible bond is valued at the latest sale price thereof on each business day of the fiscal period as reported by the principal securities exchange on which the issue is traded or, if no sale is reported for a stock, the average of the latest bid and asked prices. Bonds, other than convertible bonds, are valued using a pricing system provided by a pricing service or dealer in bonds. Convertible bonds are valued using this pricing system only on days when there is no sale reported. Stocks which are traded over-the-counter are priced using the Nasdaq Stock Market, which provides information on bid and asked prices quoted by major dealers in such stocks. Restricted securities and securities for which quotations are not readily available are valued as determined in good faith in accordance with procedures established by and under the general supervision of the Trust's Board of Trustees. Short-term debt securities are valued at amortized cost, which approximates market value. Short-term debt securities denominated in foreign currencies are valued at amortized cost in that currency. See Note 1C.
B. Security transactions and related investment income - Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Securities gains and losses are calculated on the identified cost basis. Premium and discount on the purchase of bonds are amortized for both financial and tax reporting purposes over the remaining lives of the bonds. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Interest income is recorded on the accrual basis. See Note 3 - Investment Securities Transactions.
C. Foreign currency translations - All assets and liabilities denominated in foreign currencies are translated into United States dollars daily. Purchases and sales of investment securities and accruals of income and expenses are translated at the rate of exchange prevailing on the date of the transaction. For assets and liabilities other than investments in securities, net realized and unrealized gains and losses from foreign currency translation arise from changes in currency exchange rates. The Trust combines fluctuations from currency exchange rates and fluctuations in market value when computing net realized and unrealized gain or loss from investments.
D. Forward foreign currency exchange contracts - A forward foreign currency exchange contract (Forward Contract) is an obligation to purchase or sell a specific currency at a future date at a fixed price. Forward Contracts are "marked-to-market" daily at the applicable translation rates and the resulting unrealized gains or losses are reflected in the Trust's financial statements. Gains or losses are realized by the Trust at the time the forward contract is extinguished. Contracts may be extinguished either by entry into a closing transaction or by delivery of the currency. Risks may arise from the possibility that the other party will not complete the obligations of the contract and from unanticipated movements in the value of the foreign currency relative to the United States dollar. The Trust uses forward contracts to attempt to reduce the overall risk of its investments.
E. Federal income taxes - It is the Trust's policy to distribute all of its taxable income and capital gains to its shareholders and otherwise qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. In addition, the Trust intends to pay distributions as required to avoid imposition of excise tax. Accordingly, provision has not been made for Federal income taxes. See Note 4 - Federal Income Tax Matters.
F. Dividends and distributions - Dividends and distributions to shareholders are recorded by each Fund on the business day following record date. Net investment income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are due to differing treatments for items such as deferral of wash sales and post-October losses, foreign currency transactions, net operating losses and expiring capital loss carryovers.
G. Repurchase agreements - Repurchase agreements are collateralized by the value of the resold securities which, during the entire period of the agreement, remains at least equal to the value of the loan, including accrued interest thereon. The collateral for the repurchase agreement is held by the Trust's custodian bank.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
NOTE 2 - Investment Management And Payments To Affiliated Persons
Waddell & Reed Ivy Investment Company ("WRIICO"), a wholly owned subsidiary of Waddell & Reed Financial, Inc. ("WDR"), serves as the investment manager for each Fund except for Ivy Global Natural Resources Fund. WRIICO provides advice and supervises investments for which services it is paid a fee. The fee is payable by each Fund at the following annual rates:
Fund Net Assets Breakpoints
RateCash Reserves
(formerly Money Market Fund
(see Note 9)All levels Cundill Global Value All levels Dividend Income Up to $1 Billion Over $1 Billion up to $2 Billion Over $2 Billion up to $3 Billion Over $3 Billion European Opportunities Up to $250 Million Over $250 Million up to $500 Million Over $500 Million Global Natural Resources All levels International Up to $2 Billion Over $2 Billion up to $2.5 Billion Over $2.5 Billion up to $3 Billion Over $3 Billion International Value All levels Pacific Opportunities All levels
Mackenzie Financial Corporation ("MFC") serves as the investment adviser for Ivy Global Natural Resources Fund and is responsible for selecting the Fund's portfolio investments. For these services, MFC receives a fee that is equal to, on an annual basis, 0.50% of the Fund's average net assets.
Peter Cundill & Associates, Inc. serves as subadvisor to Ivy Cundill Global Value Fund under an agreement with WRIICO and receives a fee that is equal to, on an annual basis, 0.50% of the Fund's average net assets.
Henderson Global Investors (North America) Inc. ("HGINA") serves as subadvisor to Ivy European Opportunities Fund under an agreement with WRIICO. Henderson Investment Management Ltd., under a subadvisory agreement with HGINA, serves as subadvisor to the Fund. HGINA receives a fee payable monthly at an annual rate of 0.45% of the first $100,000,000 of net assets and 0.40% thereafter of the portion of the Fund's average daily net assets managed by HGINA.
These fees accrue daily and are paid monthly.
Pursuant to a Master Fund Accounting Services Agreement, WRIICO provides certain accounting and pricing services for each Fund. As of March 18, 2003, WRIICO assigned its responsibilities under the Accounting Services Agreement to Waddell & Reed Services Company ("WRSCO"), an indirect subsidiary of WDR. Prior to July 1, 2003, as compensation for those services, each Fund paid a monthly fee plus out-of-pocket expenses as incurred. The monthly fee was based upon the net assets of each Fund, except Ivy Cash Reserves Fund, at the preceding month end at the following rates:
(in millions)
Rate for Each LevelFrom $ 0 to $10 From $10 to $40 From $40 to $75 $75 and Over
The monthly fee for the Ivy Cash Reserves Fund was 0.10%, on an annual basis, of that Fund's average net assets.
As of July 1, 2003, the accounting services fee for each of the Funds is a monthly fee of one-twelfth of the annual fee shown in the following table.
Accounting Services Fee Average
Net Asset Level
(all dollars in millions)
Annual Fee
Rate for Each LevelFrom $ 0 to $ 10 $ 0 From $ 10 to $ 25 $ 11,000 From $ 25 to $ 50 $ 22,000 From $ 50 to $ 100 $ 33,000 From $ 100 to $ 200 $ 44,000 From $ 200 to $ 350 $ 55,000 From $ 350 to $ 550 $ 66,000 From $ 550 to $ 750 $ 77,000 From $ 750 to $1000 $ 93,500 From and Over $110,000
In addition, for each class of shares in excess of one, each Fund will pay WRSCO a monthly per-class fee equal to 2.5% of the monthly base fee.
Under the Shareholder Servicing Agreement, with respect to Class A, Class B, Class C, Class I and Advisor Class shares, for each shareholder account that was in existence at any time during the prior month: Dividend Income Fund pays WRSCO a monthly fee of $1.5792; and Cundill Global Value Fund, European Opportunities Fund, Global Natural Resources Fund, International Fund, International Value Fund, and Pacific Opportunities Fund each pay the Agent a monthly fee of $1.5042. Cash Reserves Fund pays the Agent a monthly fee of $1.75 for each shareholder account that was in existence at any time during the prior month plus, for Class A shareholder accounts, $0.75 for each shareholder check processed in the prior month. For Class Y shares, each Fund pays the Agent a monthly fee at an annual rate of 0.15% of the average daily net assets of the class for the preceding month. Each Fund also reimburses WRSCO for certain out-of-pocket costs for all classes. Certain b roker-dealers that maintain shareholder accounts with each Fund through an omnibus account provide transfer agent and other shareholder-related services that would otherwise be provided by WRSCO if the individual accounts that comprise the omnibus account were opened by their beneficial owners directly. WRSCO pays such broker-dealers a per account fee for each open account within the omnibus account, or a fixed rate (e.g., 0.10%) fee, based on the average daily net asset value of the omnibus account (or a combination thereof).
Pursuant to an Administrative Services Agreement, WRIICO provides certain administrative services to each Fund. As of March 18, 2003, WRIICO assigned its responsibilities under the Administrative Services Agreement to WRSCO. Prior to July 1, 2003, as compensation for these services, each Fund (except with respect to its Class I shares) paid WRIICO a monthly fee at the annual rate of 0.10% of the Fund's average daily net assets. Each Fund with Class I shares paid WRIICO a monthly fee at the annual rate of 0.01% of its average daily net assets for the Class I shares. Class I shares were closed to further investment effective February 18, 2003. As of July 1, 2003, the administrative fee for each Fund is a monthly fee at the annual rate of 0.01% of the Fund's average daily net assets.
Outside of providing administrative services to the Trust, as described above, WRIICO may also act on behalf of Ivy Funds Distributor, Inc. ("IFDI"), a wholly-owned subsidiary of WRIICO, in paying commissions to broker-dealers with respect to sales of Class B and Class C shares of each Fund.
As principal underwriter for the Trust's shares, IFDI receives sales commissions (which are not an expense of the Trust) for Class A shares. A contingent deferred sales charge ("CDSC") may be assessed against a shareholder's redemption amount of Class B, Class C or certain Class A shares and is paid to IFDI. During the period ended June 30, 2003, IFDI received the following amounts in sales commissions and deferred sales charges
:
Cash Reserves Fund Cundill Global Value Fund Dividend Income Fund European Opportunities Fund Global Natural Resources Fund International Fund International Value Fund Pacific Opportunities Fund
With respect to Class A, Class B and Class C shares, IFDI pays sales commissions and all expenses in connection with the sale of the Trust's shares, except for registration fees and related expenses. During the period ended June 30, 2003, IFDI paid the following amounts:
Cash Reserves Fund Cundill Global Value Fund Dividend Income Fund European Opportunities Fund Global Natural Resources Fund International Fund International Value Fund Pacific Opportunities Fund
Under a Distribution and Service Plan for Class A shares adopted by the Trust pursuant to Rule 12b-1 under the Investment Company Act of 1940, each Fund, (except for Cash Reserves Fund) may pay a distribution and/or service fee to IFDI in an amount not to exceed 0.25% of the Fund's average annual net assets. The fee is to be paid to reimburse IFDI for amounts it expends in connection with the distribution of the Class A shares and/or provision of personal services to Fund shareholders and/or maintenance of shareholder accounts.
Under the Distribution and Service Plan adopted by the Trust for Class B shares and Class C shares, respectively, each Fund, (except for Cash Reserves Fund) may pay IFDI a service fee not to exceed 0.25% and a distribution fee not to exceed 0.75% of a Fund's average annual net assets attributable to that class to compensate IFDI for its services in connection with the distribution of shares of that class and/or the service and/or maintenance of shareholder accounts of that class. The Class B Plan and the Class C Plan each permit IFDI to receive compensation, through the distribution fee and service fee, respectively, for its distribution activities for that class, which are similar to the distribution activities described with respect to the Class A Plan, and for its activities in providing personal services to shareholders of that class and/or maintaining shareholder accounts of that class, which are similar to the corresponding activities for which it is entitled to compensation under the Class A Plan.
Under the Class Y Plan, Dividend Income Fund may pay IFDI a fee of up to 0.25%, on an annual basis, of the average daily net assets of the Fund's Class Y shares to compensate IFDI for, either directly or through third parties, distributing the Class Y shares of that Fund, providing personal service to Class Y shareholders and/or maintaining Class Y shareholder accounts.
WRIICO has agreed to reimburse a Fund's expenses, except for Dividend Income Fund, for the fiscal year ending December 31, 2003, and for the following eight years, to the extent necessary to ensure that the Fund's annual operating expenses, when calculated at the Fund level, do not exceed 2.5% (0.85% for Cash Reserves Fund) of the Fund's average net assets (excluding 12b-1 fees and certain other expenses.) During the period ended June 30, 2003, WRIICO reimbursed Funds' expenses as shown in the following table:
Cash Reserves Fund Cundill Global Value Fund Pacific Opportunities Fund
The Trust paid Directors' fees of $32,251, which are included in other expenses.
NOTE 3 - Investment Securities Transactions
Investment securities transactions for the period ended June 30, 2003 are summarized as follows:
Purchases of investment securities, excluding short-term and United States Government securities Purchases of United States Government securities Purchases of short-term securities Proceeds from maturities and sales of investment securities, excluding short-term and United States Government securities Proceeds from maturities and sales of United States Government securities Proceeds from maturities and sales of short-term securities
Purchases of investment securities, excluding short-term and United States Government securities Purchases of United States Government securities Purchases of short-term securities Proceeds from maturities and sales of investment securities, excluding short-term and United States Government securities Proceeds from maturities and sales of United States Government securities Proceeds from maturities and sales of short-term securities
Purchases of investment securities, excluding short-term and United States Government securities Purchases of United States Government securities Purchases of short-term securities Proceeds from maturities and sales of investment securities, excluding short-term and United States Government securities Proceeds from maturities and sales of United States Government securities Proceeds from maturities and sales of short-term securities
For Federal income tax purposes, cost of investments owned at June 30, 2003 and the related unrealized appreciation (depreciation) were as follows:
Cash Reserves Fund Cundill Global Value Fund Dividend Income Fund European Opportunities Fund Global Natural Resources Fund International Fund International Value Fund Pacific Opportunities Fund
NOTE 4 - Federal Income Tax Matters
For Federal income tax purposes, the Funds' distributed and undistributed earnings and profit for the fiscal year ended December 31, 2002 and the related Capital Loss Carryover and Post-October activity were as follows:
Net ordinary income Distributed ordinary income Foreign taxes paid deduction Undistributed ordinary income Realized long-term capital gains Distributed long-term capital gains Undistributed long-term capital gains Capital loss carryover Post-October losses deferred
Net ordinary income Distributed ordinary income Foreign taxes paid deduction Undistributed ordinary income Realized long-term capital gains Distributed long-term capital gains Undistributed long-term capital gains Capital loss carryover Post-October losses deferred
Internal Revenue Code regulations permit each Fund to defer into its next fiscal year net capital losses or net long-term capital losses and currency losses incurred between each November 1 and the end of its fiscal year ("post-October losses").
Capital Loss Carryovers are available to offset future realized capital gain net income for Federal income tax purposes. The following shows the totals by year in which the capital loss carryovers will expire if not utilized.
December 31, 2005 December 31, 2006 December 31, 2007 December 31, 2009 December 31, 2010 Total carryover December 31, 2003 December 31, 2004 December 31, 2005 December 31, 2006 December 31, 2007 December 31, 2008 December 31, 2009 December 31, 2010 Total carryover
NOTE 5 - Multiclass Operations
Each Fund within the Trust (other than Cash Reserves Fund which offers only Class A, Class B and Class C shares and Dividend Income Fund which offers Class A, Class B, Class C and Class Y shares) offered four classes of shares, Class A, Class B, Class C and Advisor Class, each of which have equal rights as to assets and voting privileges. Cundill Global Value Fund, European Opportunities Fund and International Fund also offered Class I shares. Advisor Class and Class I shares are no longer available for investment. As of July 24, 2003, each Fund (other than Cash Reserves Fund) offers Class Y shares. A comprehensive discussion of the terms under which shares of each class are offered is contained in the Prospectuses and the Statement of Additional Information for the Trust.
Income, non-class specific expenses, and realized and unrealized gains and losses are allocated daily to each class of shares based on the value of their relative net assets as of the beginning of each day adjusted for the prior day's capital share activity.
Transactions in capital stock for the fiscal period ended June 30, 2003 are summarized below. Amounts are in thousands.
Shares issued from sale of shares: Class A Class B Class C Advisor Class Class I Class Y Shares issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Class Y Shares redeemed: Class A Class B Class C Advisor Class Class I Class Y Increase (decrease) in outstanding capital shares *Not shown due to rounding. Value issued from sale of shares: Class A Class B Class C Advisor Class Class I Class Y Value issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Class Y Value redeemed: Class A Class B Class C Advisor Class Class I Class Y Increase (decrease) in outstanding capital *Not shown due to rounding.
Shares issued from sale of shares: Class A Class B Class C Advisor Class Class I Shares issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Shares redeemed: Class A Class B Class C Advisor Class Class I Increase (decrease) in outstanding capital shares Value issued from sale of shares: Class A Class B Class C Advisor Class Class I Value issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Value redeemed: Class A Class B Class C Advisor Class Class I Increase (decrease) in outstanding capital
Shares issued from sale of shares: Class A Class B Class C Advisor Class Shares issued from reinvestment of dividends: Class A Class B Class C Advisor Class Shares redeemed: Class A Class B Class C Advisor Class Increase (decrease) in outstanding capital shares Value issued from sale of shares: Class A Class B Class C Advisor Class Value issued from reinvestment of dividends: Class A Class B Class C Advisor Class Value redeemed: Class A Class B Class C Advisor Class Increase (decrease) in outstanding capital
Transactions in capital stock for the fiscal year ended December 31, 2002 are summarized below. Amounts are in thousands.
Cash
Reserves
FundCundill
Global Value
FundEuropean
Opportunities
FundShares issued from sale of shares: Class A Class B Class C Advisor Class Class I Shares issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Shares redeemed: Class A Class B Class C Advisor Class Class I Increase (decrease) in outstanding capital shares Value issued from sale of shares: Class A Class B Class C Advisor Class Class I Value issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Value redeemed: Class A Class B Class C Advisor Class Class I Increase (decrease) in outstanding capital *Not shown due to rounding.
Resources
FundShares issued from sale of shares: Class A Class B Class C Advisor Class Class I Shares issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Shares redeemed: Class A Class B Class C Advisor Class Class I Increase (decrease) in outstanding capital shares Value issued from sale of shares: Class A Class B Class C Advisor Class Class I Value issued from reinvestment of dividends: Class A Class B Class C Advisor Class Class I Value redeemed: Class A Class B Class C Advisor Class Class I Increase (decrease) in
outstanding capital*Not shown due to rounding.
Shares issued from sale of shares: Class A Class B Class C Advisor Class Shares issued from reinvestment of dividends: Class A Class B Class C Advisor Class Shares redeemed: Class A Class B Class C Advisor Class Decrease in outstanding capital shares Value issued from sale of shares: Class A Class B Class C Advisor Class Value issued from reinvestment of dividends: Class A Class B Class C Advisor Class Value redeemed: Class A Class B Class C Advisor Class Decrease in outstanding capital *Not shown due to rounding.
NOTE 6 - Options
Options purchased by a Fund are accounted for in the same manner as marketable portfolio securities. The cost of portfolio securities acquired through the exercise of call options is increased by the premium paid to purchase the call. The proceeds from securities sold through the exercise of put options are decreased by the premium paid to purchase the put.
When the Fund writes (sells) an option, an amount equal to the premium received by the Fund is recorded as a liability. The amount of the liability is subsequently adjusted to reflect the current market value of the option written. The current market value of an option is the last sales price on the principal exchange on which the option is traded or, in the absence of transactions, the mean between the bid and asked prices or at a value supplied by a broker-dealer. When an option expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the call option was sold) and the liability related to such option is extinguished. When a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has realized a gain or loss. For the Fund, wh en a written put is exercised, the cost basis of the securities purchased by the Fund is reduced by the amount of the premium received.
NOTE 7 - Futures
The Trust may engage in buying and selling interest rate futures contracts, but only Debt Futures and Municipal Bond Index Futures. Upon entering into a futures contract, the Trust is required to deposit, in a segregated account, an amount of cash or United States Treasury Bills equal to a varying specified percentage of the contract amount. This amount is known as the initial margin. Subsequent payments ("variation margins") are made or received by the Trust each day, dependent on the daily fluctuations in the value of the underlying debt security or index. These changes in the variation margins are recorded by the Trust as unrealized gains or losses. Upon the closing of the contracts, the cumulative net change in the variation margin is recorded as realized gain or loss. The Trust uses futures to attempt to reduce the overall risk of its investments.
NOTE 8 - Acquisition of Ivy Developing Markets Fund
On June 16, 2003, Ivy Pacific Opportunities Fund acquired all the net assets of Ivy Developing Markets Fund pursuant to a plan of reorganization approved by the shareholders of Developing Markets Fund on June 10, 2003. The acquisition was accomplished by a tax-free exchange of 551,715 shares of Pacific Opportunities Fund (valued at $3,533,026) for the 576,365 shares of Developing Markets Fund outstanding on June 16, 2003. Developing Markets Fund had net assets of $3,533,026, including $229,612 of net unrealized appreciation in value of investment and $12,504,526 of accumulated net realized losses on investments, which were combined with those of Pacific Opportunities Fund. The aggregate net assets of Pacific Opportunities Fund and Developing Markets Fund immediately before the acquisition were $9,010,093 and $3,533,322, respectively. The aggregate net assets of Pacific Opportunities Fund and Developing Markets Fund immediately following the acquisition wer e $12,543,119 and $0, respectively. Transactions in capital stock related to the exchange were as follows:
Class A shares Class B shares Class C shares Class Y shares Total
NOTE 9 - Name Change
On June 16, 2003, Ivy Money Market Fund changed its name to Ivy Cash Reserves Fund. On July 23, 2003, the Trust changed its name from Ivy Fund to Ivy Funds.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and
Shareholders of Ivy Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Ivy Cash Reserves Fund, Ivy Cundill Global Value Fund, Ivy Dividend Income Fund, Ivy European Opportunities Fund, Ivy Global Natural Resources Fund, Ivy International Fund, Ivy International Value Fund, and Ivy Pacific Opportunities Fund (collectively the "Funds") comprising Ivy Funds as of June 30, 2003, and the related statements of operations for the six-month period then ended, and the statements of changes in net assets and financial highlights for the six-month period then ended and the fiscal year ended December 31, 2002. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Funds for each of the periods presented in the four-year period ende d December 31, 2001 were audited by other auditors whose report, dated February 8, 2002, expressed an unqualified opinion on those statements and financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2003, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the respective Funds comprising Ivy Funds as of June 30, 2003, the results of their operations for the six-month period then ended, the changes in their net assets and their financial highlights for the six-month period then ended and the fiscal year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
August 8, 2003
SHAREHOLDER MEETING RESULTS (unaudited)
On June 10, 2003, a special shareholder meeting (the "Meeting") was held at the offices of Waddell & Reed Financial, Inc., 6300 Lamar Avenue, Overland Park, Kansas, 66202, for the following purposes (and with the following results):
Proposal 1: For shareholders of Ivy Bond Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy Bond Fund to, and the assumption of all of the liabilities of the Ivy Bond Fund by, the Waddell & Reed Advisors Bond Fund in exchange for shares of the Waddell & Reed Advisors Bond Fund and the distribution of such shares to the shareholders of the Ivy Bond Fund in complete liquidation of the Ivy Bond Fund.
For Against Abstain 3,257,281.407 94,762.496 145,628.813
Proposal 2: For shareholders of Ivy Developing Markets Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy Developing Markets Fund to, and the assumption of all of the liabilities of the Ivy Developing Markets Fund by, the Ivy Pacific Opportunities Fund in exchange for shares of the Ivy Pacific Opportunities Fund and the distribution of such shares to the shareholders of the Ivy Developing Markets Fund in complete liquidation of the Ivy Developing Markets Fund.
For Against Abstain 319,151.208 40,170.660 14,465.961
Proposal 3: For shareholders of Ivy Global Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy Global Fund to, and the assumption of all of the liabilities of the Ivy Global Fund by, the W&R International Growth Fund in exchange for shares of the W&R International Growth Fund and the distribution of such shares to the shareholders of the Ivy Global Fund in complete liquidation of the Ivy Global Fund.
For Against Abstain 326,001.256 13,725.875 16,896.893
Proposal 4: For shareholders of Ivy Global Science & Technology Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy Global Science & Technology Fund to, and the assumption of all of the liabilities of the Ivy Global Science & Technology Fund by, the W&R Science and Technology Fund in exchange for shares of the W&R Science and Technology Fund and the distribution of such shares to the shareholders of the Ivy Global Science & Technology Fund in complete liquidation of the Ivy Global Science & Technology Fund.
For Against Abstain 664,589.427 21,798.471 17,157.064
Proposal 5: For shareholders of Ivy Growth Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy Growth Fund to, and the assumption of all of the liabilities of the Ivy Growth Fund by, the Waddell & Reed Advisors Accumulative Fund in exchange for shares of the Waddell & Reed Advisors Accumulative Fund and the distribution of such shares to the shareholders of the Ivy Growth Fund in complete liquidation of the Ivy Growth Fund.
For Against Abstain 7,377,508.539 400,479.235 388,779.334
Proposal 6: For shareholders of Ivy US Blue Chip Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy US Blue Chip Fund to, and the assumption of all of the liabilities of the Ivy US Blue Chip Fund by, the W&R Core Equity Fund in exchange for shares of the W&R Core Equity Fund and the distribution of such shares to the shareholders of the Ivy US Blue Chip Fund in complete liquidation of the Ivy US Blue Chip Fund.
For Against Abstain 2,434,023.427 92,702.211 168,961.772
Proposal 7: For shareholders of Ivy US Emerging Growth Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy US Emerging Growth Fund to, and the assumption of all of the liabilities of the Ivy US Emerging Growth Fund by, the W&R Mid Cap Growth Fund in exchange for shares of the W&R Mid Cap Growth Fund and the distribution of such shares to the shareholders of the Ivy US Emerging Growth Fund in complete liquidation of the Ivy US Emerging Growth Fund.
For Against Abstain 1,085,306.521 28,419.214 43,382.116
Proposal 8: For shareholders of Ivy International Small Companies Fund, to approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Ivy International Small Companies Fund to, and the assumption of all of the liabilities of the Ivy International Small Companies Fund by, the W&R International Growth Fund in exchange for shares of the W&R International Growth Fund and the distribution of such shares to the shareholders of the Ivy International Small Companies Fund in complete liquidation of the Ivy International Small Companies Fund. Due to lack of sufficient votes from shareholders of Ivy International Small Companies Fund, the Meeting for these shareholders was adjourned until June 12, 2003. Following is the shareholder vote from that adjourned Meeting:
For Against Abstain 335,596.194 12,474.405 13,605.144 To all traditional IRA Planholders:
As required by law, income tax will automatically be withheld from any distribution or withdrawal from a traditional IRA unless you make a written election not to have taxes withheld. The election may be made on the distribution/withdrawal form provided by us which can be obtained from your financial advisor or by submitting Internal Revenue Service Form W- 4P. Once made, an election can be revoked by providing written notice to us. If you elect not to have tax withheld you may be required to make payments of estimated tax. Penalties may be imposed by the IRS if withholding and estimated tax payments are not adequate.
This page for your notes and calculations.
Ivy Funds
Ivy Asset Strategy Fund
Ivy Cash Reserves Fund
Ivy Core Equity Fund
Ivy Cundill Global Value Fund
Ivy Dividend Income Fund
Ivy European Opportunities Fund
Ivy Global Natural Resources Fund
Ivy High Income Fund
Ivy International Fund
Ivy International Growth Fund
Ivy International Value Fund
Ivy Large Cap Growth Fund
Ivy Limited-Term Bond Fund
Ivy Mid Cap Growth Fund
Ivy Money Market Fund
Ivy Municipal Bond Fund
Ivy Pacific Opportunities Fund
Ivy Science and Technology Fund
Ivy Small Cap Growth Fund
Ivy Tax-Managed Equity Fund
FOR MORE INFORMATION:
Contact your financial advisor,
or contact:
IVY
CLIENT SERVICES
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(800) 777-6472
Our INTERNET address is:
http://www.ivyfunds.comFor more complete information regarding any of the mutual funds in Ivy Funds, including charges and expenses, please obtain the Trust's prospectus by calling or writing to the number or address listed above. Please read the prospectus carefully before investing.
WRR3300SA (6-03)ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Registrant's Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, have concluded that such controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective and adequately designed to ensure that information required to be disclosed by the Registrant in its reports that it files or submits is accumulated and communicated to the Registrant's management, including the Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
(b) There were no significant changes in the registrant's internal controls over financial reporting that occurred over the registrant's last fiscal half-year that has affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit:
Not applicable.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)).
Attached hereto as Exhibit 99.CERT.
(b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)).
Attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Ivy Funds
(Registrant)
By /s/Kristen A. Richards
------------------------------
Kristen A. Richards, Vice President and Secretary
Date September 9, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/Henry J. Herrmann
------------------------------
Henry J. Herrmann, President and Principal Executive Officer
Date September 9, 2003
By /s/Theodore W. Howard
------------------------------
Theodore W. Howard, Treasurer and Principal Financial Officer
Date September 9, 2003